Exam 4 Flashcards
How should we think of property?
As a bundle of rights recognized and enforced by society.
What is real property?
The earth, land, and anything attached to it.
Tangible property
Physical property
Intangible property
An idea or something abstract such as an idea or computer software
When would a person not own the property they make or produce?
Through a contract. Ex. an Employment Arrangement
Adverse Possession
A way to own property just by possessing it.
Adverse Possession requirements
- Notorious
- Continuous
- Hostile to the owner
- For statutory period of time (20 years in GA w/o Color of Title)
What are the requirements for a Gift?
- Intent
- Delivery
- Acceptance
What does Inter Vivos mean
Between the living
What is a Testamentary Gift?
A gift made at death
What is a Causa Mortis gift?
A gift in anticipation of death. Surviving automatically revokes the gift.
Accession
Increasing the value of property owned
Bailment
Delivery of property from one person to another for a temporary amount of time with the intent to have the property returned.
What are the Bailee duties in a Bailment?
Duty of care and duty to return
What’s the difference between a Bailment and a Lease?
In a Lease, the owner gives a right in property in exchange for some consideration (ex. the right of possession for rent)
Fixtures
Become a part of real property. Main exception is the “Trade Fixture Exception”
Fee Simple
Recognized as maximum ownership rights
What is a Life Estate?
Ownership of property for the life duration. After death, the ownership reverts to the remainder person.
Can the life in a Life Estate increase or change?
No, it is tied directly to the owner
Can the person named the Remainder in a Life Estate convey their remainder?
Yes
Easement
The right to use (Affirmative) or refrain from using property (Negative).
What are the 2 types of Joint Ownership?
- Joint Tenants in Common - each owner has an undivided interest and can transfer their right with a will.
- Joint Tenants with Right of Survivorship - When one dies, the right goes straight to survivor.
Where does the idea of ownership come from in the U.S.?
The right to conquest
How was property distributed when Natives were forced out of NW GA?
Lottery system
What are 2 types of Conveyance Deeds?
- Warranty - “I claim I own it”
- Quick Claim - “I don’t know if I own it”
Abstract of Title
Opinion of ownership rights generated by investigating deed records.
Leasehold
Right to possession of the property between a Landlord and a Tenant
Testator
Person who makes a will
Bequest
Will made at death
Ademption
Testator no longer owns property granted in the will (Ex. selling a granted vehicle)
Who are a person’s issue?
Their children
What does Per Capita and Per Stirpes mean?
- Per Capita - divided equally among group.
- Per Stirpes - if a member of group deceased, their share is distributed to their children.
Codocil
Amendment to will
Intestate
Death without a will
What is the age requirement in GA to make a will?
14 years old
What are the requirements of Testamentary Capacity?
- Of age
- Know the object of one’s bounty
- Know the characteristics of one’s property
- Express wishes regarding disposition of property
What are the formal requirements of a will?
- In writing
- Signed by Testator, or at their direction
- Signed in the presence of 2 uninterested witnesses
What is Years Support?
A GA specific law that prevents disinheriting the spouse or minor children
Advance Directive?
Appoints a health care agent and defines treatment preferences in the event of being incapacitated.
What is a Power of Attorney?
Document that appoints an agent to handle financial and legal decisions.
Who are heirs?
People who would inherit the estate if you had no will
Who are beneficiaries?
People who inherit the estate. A will can change beneficiaries
How are heirs determined?
By State statute
What is Probate?
Process to prove a will is the actual last will of the Testator and is valid. Involves adminstration
What is the administration of the estate?
Process of marshalling the assets, paying debts, and asset distribution
Who is the personal representative?
Refers to the executor (with will) or administrator (no will).
What are the papers issued by the Probate Court?
- Letters Testamentary (with Will)
- Letters of Administration (No Will)
Who are the parties to a Trust?
- Grantor (Trustor/Settlor)
- Beneficiaries
- Trustees
What is the property of a Trust called?
Corpus
What is an Inter Vivos Trust? A Testamentary Trust?
- Created while Grantor is alive
- Created at the moment of death (ex. in will)
What is a revocable Trust?
Can be revoked or changed by the Grantor
What is an irrevocable Trust?
It cannot be changed once created
What is a Spendthrift provision?
Prevents creditors from anticipating distribution to beneficiaries. Prevents creditors from forcing Trustee to make a distribution because the Beneficiary owes money to someone.
Who has a broad authority to tax under the Constitution?
Congress.
Ad Valorem taxes
According to value. Applies to real property.
Milage Rate
Equal to 1/10th of 1%. (Ex. 15.48 is the same as 1.548%)
At what level of government are Real Property taxes collected?
State and Local
What are other property taxes?
- Vehicles
- Equipment
- Inventory
What is FICA?
Federal Insurance Contributions Act
Who pays the payroll taxes?
The employer and the employee
What are the two types of payroll taxes?
- Medicare
- Social Security
At what levels of government are Income tax collected?
Federal and State
At what level are Sales Tax collected?
State and Local
At what level(s) in the supply chain are Sales Taxes collected?
Only collected once at the Retail level (The last time the item is sold)
What are other names for Duties?
Tariffs, Customs, or Imports
How is the Tariff tax calculated?
Tax Rate x Value and depends on 2 factors:
- Country of origin
- Class of good
What are the three transfer taxes?
- Estate tax
- Gift tax
- Generation-skipping tax
What is the Annual Exclusion?
A small gift under this annual number, you would not have to report to the IRS.
What is the Lifetime Exclusion?
The threshold before you would have to pay taxes on a gift/transfer. Applies upon death.
How is the value of a gift calculated?
Fair Market Value
What are some examples of licenses and Occupational Taxes?
Fees paid to the government.
1. Medical license
2. Parking fees
3. Toll fees
4. Fireworks permit
How are income taxes paid?
Paid through estimates throughout the year and on April 15, reconcile estimates.
When are final taxes due each year?
April 15
What are Capital Gains?
Monetary gains from the purchase and later sale of property.
Gain = Amount Realized - Basis
What is a tax “basis”?
Basis is what you paid for the property plus improvements
What is included from the term “Income from whatever source derived”? Where is it located in the 1040?
Any income. It is not written on the 1040 and not reported to the IRS
What are exclusions?
Things that are subtracted from Income from whatever source derived. Figures out the Gross Income.
Examples of exclusions in reporting Income Tax?
- Life insurance proceeds
- Gifts
- Inheritances
- Bond interests
- Injury comp. lawsuits
- Worker’s comp.
- Scholarships
- Employment benefits
What are Adjustments?
“Above the line deductions.” Reduce the tax shown on income and not subject to standard deduction.
What are some important Adjustments?
Retirement contributions
Health savings accounts contr.
Moving expenses
Student loan interest
Tuition and Fees
Business Expenses
What are Deductions?
“Below the line deductions.” Taken in alternative to the standard deduction. Take either the Standard Deduction or Below the Line deductions, whichever is greater.
What are important deductions?
Out-of-pocket medical expenses (>7.5% AGI)
SALT deduction (State and Local Taxes)
Foreign taxes
Mortgage interest
Charitable contributions
Casualty and Theft losses
What is a Marginal tax rate?
The top tax bracket you are in
What is an Effective tax rate?
Take total tax paid and divide into taxable income.
What are Credits?
Come at the end and are dollar for dollar reductions in tax.
Under what UCC article is commercial paper covered?
Article 3
What types of negotiable instruments covered?
- Checks (Drafts)
- Notes
- CDs
What is a Draft?
An order to pay (ex. Check). Also called order paper.
Which of these are orders and which are promises?
- Checks (Drafts) are orders
- Notes and CDs are promises
Who are the parties to a Note?
- Maker
- Promisee
What is a Balloon payment?
At the end of a term of a promissory note, the full balance becomes due.
What is meant by Negotiability?
Idea that commercial paper is a near-substitute for money that is easily transferrable.
What does it mean to negotiate a check?
To legally transfer from one holder to another or cash the check with a bank.
What are the requirements for a check to be negotiable?
- In writing
- Signed by Drawer
- Unconditional promise to pay certain sum
- Payable on demand or at certain time to person.
- No other conditions for payment
Who is a Holder of a Draft?
Person who possesses the draft and right to negotiate the draft further
Order paper vs Bearer paper?
- Order paper - payable to the order of a specific person
- Bearer paper - anyone who has the paper can negotiate it (cash it).
What is Indorsement?
Signing the check.
What is a Special Indorsement?
Names a new holder, keeping the status of Order Paper
What is a Holder in Due Course?
Holder who accepts a negotiable instrument in good faith, without reason to doubt its legitimacy, in exchange for some value.
What is a Blank Indorsement?
Signing a check without naming a specific person, creating Bearer Paper.
What is the benefit of being a Holder in Due Course?
You can treat a check as cash. Right to negotiate the check.
What is the difference between secured and unsecured credit?
Secured credit has collateral
What problem exists for unsecured creditors?
Risk. Judicial Action is the sole remedy.
Higher or lower interest rates for unsecured creditors? Higher or lower loan amounts?
Higher interest rates and lower loan amounts
What is a Security Interest in property?
A right in property to obtain the property if the underlying owner fails to pay obligation.
Mortgage
Deed to Secure Debt (GA)
How does a lender take collateral for a Secured Loan?
Foreclosure
Under what article of the UCC are secured transactions for personal property covered?
Article 9
What does it mean to perfect a Security Interest?
Makes security interest publicly available and world has notice of security interest.
How are mortgages perfected?
File Deed of Trust/Deed of Secure Debt in GA
What is the process of Foreclosing on real property in GA?
Give Debtor notice
Accelerate the Loan
Publish/Advertise Foreclosure sale for 4 weeks
Hold an Auction to sell property
How are Security Interests perfected under the UCC?
Filing a UCC Financing Statement (UCC-1)
How long do UCC Security Interests last and how are they renewed?
Valid for 5 years and renewed by filing Continuation Statement
How does Debt priority work?
If an inferior lien holder forecloses, they have to take the property subject to superior liens.
What are the goals and purposes of bankruptcy laws?
- Protect creditors from unfair actions of the debtor
- Protect honest Debtors from overbearing Creditors.
- Give Debtors more time to work through Debt
- Give Debtors a fresh start
Who are the parties in a Bankruptcy?
- Creditor
- Debtors
- Trustee
What are the common types of bankruptcy proceedings?
Liquidations or Reorganizatons
Under which Chapter of the Bankruptcy Code do most consumer liquidations fall?
Chapter 7
How does a bankruptcy commence?
Filing of a petition
What is the Automatic Stay and when does it occur?
As soon as a petition filed, this is enforced. No creditors or debtors can take further actions (ex. perfecting liens, lawsuits, collecting debt, paying debt)
What is a Meeting of the Creditors?
Key steps to Bankruptcy. Trustee sits down with Debtor and creates plan to administer Bankruptcy Estate. Creditors have opportunity to cross examine the Debtor.
What is a Proof of Claim and who must file one?
Required for Unsecured Creditors to provide in Bankruptcy.
What is a preference? What time periods apply to preferences? What exception applies?
A preferential payment, signaling preference for one Creditor over another.
Time period:
- 90 days before filing
- Insiders = 1 year
Exceptions:
- Transactions in the ordinary course of business (ex. paying Bills)
