FINAL MCQ

Question 1

WHAT IS THE THOUGHT PROCESS WITH AGENCY AND PRINCIPAL QUESTIONS?

Answer 1

1) DETERMINE IF THEIR IS AN AGENCY RELATIONSHIP, WHETHER THEIR IS ACTUAL, APPARENT, OR NO AUTHORITY
2) DETERMINE IF THE PRINCIPAL IS DISCLOSED, PARTIALLY DISCLOSED OR UNDISCLOSED

Question 2

WHAT IS ACTUAL AUTHORITY?

Answer 2

(I.E., EXPLICIT AUTHORITY)

ACTUAL AUTHORITY INCLUDES,
A) EXPRESS AUTHORITY: WRITTEN OR ORAL AGREEMENT THAT IS EXPLICIT
B) IMPLIED AUTHORITY: AN AGENTS POWER TO ACT ON BEHALF OF A PRINCIPAL, THE PRINCIPAL WOULD HAVE NOT GIVEN THE ASSIGNMENT TO THE AGENT HAD HE NOT HAVE ACTUAL AUTHORITY

Question 3

HOW IS AN AGENCY CREATED THROUGH APPARENT AUTHORITY?

Answer 3

THE PRINCIPAL TAKES ACTION OR INACTION THAT CREATES THE APPEARANCE TO THIRD PARTIES THAT THE AGENT HAS CERTAIN AUTHORITY

Question 4

HOW IS AN AGENCY CREATED THROUGH RATIFICATION?

Answer 4

WHEN THE AGENT DOES NOT HAVE EXPRESS, IMPLIED, OR APPARENT AUTHORITY, BUT STILL ENTERS INTO A CONTRACT ON BEHALF OF A PRINCIPAL. THE PRINCIPAL IS NOT BOUND BUT CAN USE THE PROCESS OF RATIFICATION TO RETROACTIVELY APPROVE THE TRANSACTION.

Question 5

WHAT CONSTITUTES TERMINATION IN AN AGENCY AND PRINCIPAL?

Answer 5

TERMINATION ENDS THE AGENCY RELATIONSHIP, THE AGENT NO LONGER HAS ANY AUTHORITY TO ACT ON BEHALF OF THE PRINCIPAL,

IF THE AGENT ACTS WITH NO AUTHORITY ONLY THE AGENT WILL BE LIABLE.

ACTUAL AND CONTRUCTIVE NOTICE IS REQUIRED TO THIRD PARTIES EXCEPT WITH OPERATION OF LAW.

Question 6

ULTIMATELY HOW IS LIABILITY DETERMINED IN AN AGENCY?

Answer 6

LIABILITY IS ULTIMATELY DETERMINED BY TWO FACTORS,
1. THE TYPE OF AUTHORITY
2. WHETHER THE PRINCIPAL IS DISCLOSED

WITH FULL DISCLOSURE THE PRINCIPAL IS LIABLE FOR ANY CONTRACTS THE AGENT ENTERS INTO. HOWEVER IF THE AGENT ACTS WITH APPARENT AUTHORITY HE IS LIABLE TO THE PRINCIPAL

WITH PARTIALY AND NONDISCLOSED PRINCIPALS, BOTH THE AGENT AND THE PRINCIPAL ARE LIABLE TO THE THIRD PARTY, AND IF THE THIRD PARTY HOLDS THE AGENT LIABLE THE PRINCIPAL MUST INDEMNIFY. NOTE THAT APPARENT LIABILITY IS IMPOSIBLE FOR PARTIALLY AND NONDISCLOSED PRINCIPLE

Question 7

IN TERMS OF AN AGENT COMMITTING TORTS SUCH AS INJURING A PEDESTRIAN BY RUNNING A RED LIGHT WHILE HEADING TO THE BANK TO DEPOSIT A CHECK FOR THE EMPLOYER WHO IS LIABLE?

Answer 7

RESPONDENT SUPERIOR

ANY THIRD PERSON INJURED BY AN EMPLOYEE (AGENT) WHEN COMMITTED WITHIN THE COURSE OF EMPLOYMENT, CAN PROCEED AGAINST EITHER THE EMPLOYEE OR EMPLOYER.

Question 8

WHAT IS THE THOUGHT PROCESS WITH CONTRACT MCQ’S

Answer 8

• FIRST DETERMINE WHETHER UCC OR COMMON LAW APPLIES
• DETERMINE IF THEIR A VALID CONTRACT (DEFENSES IN THE FORMATION)
• DETERMINE IF THE SOF APPLIES

Question 9

WHAT ARE THE MAIN DIFFERENCES BETWEEN UCC AND COMMON LAW WITH REGARDS TO AN OFFER, ACCEPTANCE AND CONSIDERATION?

Answer 9

• UCC ARTICLE 2 APPLIES TO THE SALE OF GOODS
• OFFER AND ACCEPTANCE CAN HAVE MINOR CHANGES AND STILL BE ENFORCEABLE.
• CONSIDERATION IS REQUIRED FOR FORMATION, BUT NOT FOR CHANGES
• COMMON LAW APPLIES TO REAL ESTATE AND SERVICES.
• OFFER AND ACCEPTANCE MUST BE EXACT (I.E., MIRROR IMAGE RULE)
• CONSIDERATION IS REQUIRED FOR BOTH FORMATION AND CHANGES

Question 10

WHAT CONSTITUTES TERMINATION OF AN OFFEROR?

Answer 10

THE IMPORTANT THING TO KNOW IS THAT THESE OPTIONS ARE AVAILBLE TO AN OFFEROR (THE PERSON PROVIDING THE OFFER), AND AN OFEREE

AN OFFEROR HAS THE RIGHT TO REVOKE AN OFFER
PRIOR TO ACCEPTANCE OTHERWISE YOU HAVE A VALID OFFER.

AN OFFEREE HAS THE RIGHT TO REJECT AN OFFEROR.

Question 11

WHAT IS THE MAILBOX RULE?

Answer 11

THE MAILBOX RULE IS THE TIMING RULE FOR DETERMINING WHEN AN ACCEPTANCE TAKES EFFECT AND A CONTRACT IS FORMED.

A CONTRACT IS FORMED WHEN THE OFFEREE DELIVERS THE ACCEPTANCE.

THE MAILBOX RULE PROVIDES THAT WHEN THERE IS A PROPER STIPULATED.AUTHORIZED METHOD OF ACCEPTANCE USED , THE ACCEPTANCE IS EFFECTIVE WHEN IT IS SENT.

IF A MEANS OF ACCEPTANCE IS SPECEFIED IN THE CONTRACT AND THE OFEREE (THE PERSON RESPONSIBLE FOR ACCEPTING THE OFFER) USES IN ALTERNATIVE MEANS OF ACCEPTANCE (LETTER VS EMAIL) THEN THAT CONSTITUES A COUNTEROFFER/REJECTION AND IS IN VIOLATION OF THE TERMS.

Question 12

WHAT ARE THE RIGHTS OF A BUYER?

Answer 12

A BUYER HAS A RIGHT TO,
1) INSPECT
2) REJECT
WHEN GOODS ARE NONCONFORMING FOR WHATEVER REASON (NONMATERIAL) THE BUYER HAS THE RIGHT TO REJECT.

*IN A DESTINATION CONTRACT, IF THE BUYER RIGHTFULLY REJECTS ACCEPTED GOODS (NONCONFORMING), THEN THE TITLE TO THOSE GOODS REVERT BACK TO SELLER,

IN SHIPPING CONTRACT IF GOODS ARE NONCONFORMING THEN THE TITLE AND RISK OF LOSS STAYS WITH THE SELLER UNTIL THE GOODS ARE ACCEPTED OR CURED.

Question 13

WHAT IS AN ASSIGNMENT WITH REGARDS TO A CONTRACT?

Answer 13

GENERALLY ANY CONTRACT RIGHT AND DUTY MAY BE ASSIGNED TO A THIRD PARTY. HOWEVER THEIR ARE CERTAIN REASONS IT MIGHT NOT BE ASSINGABLE.

1) EXPLICITLY MENTIONED IN THE CONTRACT
2) PROHIBITED BY LAW
3) MATERIALLY ALTERS RIGHTS AND RESPONSIBILITIES

WHEN IT COMES TO AN ASSIGNMENT OF RIGHTS THE NEW PERSON ASSIGNED (ASSIGNEE) BECOMES LIABLE ON THE CONTRACT, IN ADDITION THE INITIAL OBLIGOR (NOW THE ASSIGNOR) REMAINS LIABLE IF THE THE NEW PERSON ASSIGNED DOES NOT PERFORM HIS DUTIES. (I.E. BOTH OF THEM ARE LIABLE)

LET SAY THE INITAL OBLIGOR HAS A CONTRACT AND IS OBLIGATED TO BUILD A HOUSE, BUT NO LONGER CAN DO SO BECAUSE HIS TOOLS WERE STOLEN, THEREFORE HE ASSIGNS HIS RIGHTS TO A NEW PERSON. THE NEW PERSON IS NOW LIABLE TO BUILD THE HOUSE,

THE IMPORTANT THING TO KNOW IS THAT THE INITAL OBLIGOR REMAINS LIABLE EVEN THOUGH HE ASSIGNED HIS OBLIGATION, THE ONLY WAY TO REMOVE HIMSELF IS BY A NOVATION, WHERE ALL THREE PARTIES AGREE ABOUT THE SUBSTITUTION.

Question 14

WHAT ARE THE EXCEPTIONS TO GENERAL PRIORITY RULES OF SECURED CREDITORS UNDER ARTICLE 9.

Answer 14

A PMSI IN CONSUMER GOODS PERFECTED AUTOMATICALLY GIVES PERFECTED SECURED STATUS TO THE CREDITORS AGAINST ALL OTHER SUBSEQUENT PARTIES EXCEPT BUYERS OF CONSUMER GOODS NOT IN THE ORDINARY COURSE OF BUSINESS.

TO REPOSSES THE GOOD THE PERFECTED AUTOMATIC PMSI MUST ADDITIONALLY BE FILLED TO PROTECT AGAINST A BUYER NOT IN THE ORDINARY COURSE OF BUSINESS.

NOT IN THE ORDINARY COURSE OF BUSINESS EXAMPLE, “A NEXT DOOR NEIGHBOR”

IF PERFECTiON FOR PMSI OCCURS WITHIN 20 DAYS, A PMSI IS RETORSPECTIVE TO THE DATE OF ATTACHMENT.

ALTHOUGH PERFECTION DOES NOT HAPPEN AUTOMATICALLY FOR A PMSI IN EQUIPMENT GOODS, THE FILLING OR POSSESSION TO PERFECT A SECURITY IS RETROSPECTIVE OT THE DATE OF ATTACHMENT (WITHIN 20 DAYS)

PERFECTION CAN OCCUR BY POSSESSION, THEREFORE IF POSSESSION OCCURS DURING ATTACHMENT ATTACHMENT AND PERFECTION OCCUR CONCURENTLY

Question 15

WHAT IS A VOIDABLE PREFERENCE?

Answer 15

A PAYMENT FOR VALUE RECEIVED WHEN PAID RATHER THAN FOR A PRE-EXISTING DEBT IS NEVER CONSIDERED PREFERENTIAL.

DEBTORS ATTEMPT TO CONCEAL PROPERTY THROUGH TRANSFERS. THESE TRANSFERS MUST BE RETURNED TO THE TRUSTEE. A TRUSTEE MUST PROVE THAT THE TRANSFER ALLOWED THE CREDITOR TO RECEIVE MORE THAN SHE/HE WOULD HAVE UNDER A CHAPTER 7 LIQUIDATION PROCEEDING.

VOIDABLE PREFERENCES CAN ALSO OCCUR WHEN CREDITORS ARE GIVEN A HIGHER STATUS THAN THEY WOULD HAVE HAD IN BANKRUPTCY (E.G., GIVING A SECURITY AGREEMENT COVERING A PREVIOUS DEBT WITHIN 90 DAYS

A PAYEMENT IN THE ORDINARY COURSE OF BUSINESS IS NOT A VP

THERE ARE TWO TYPES OF VOIDABLE PREFERENCE
1) TRANSFERS FROM THE DEBTOR TO THE CREDITOR
2) TRANSFERS BY THE DEBTOR TO INSIDERS OF A BUSINESS

Question 16

WHAT IS THE CHILD TAX CREDIT/FAMILY TAX CREDIT?

Answer 16

2K CHILD TAX CREDIT AKA FAMILY TAX CREDIT FOR EACH QUALIFYING CHILD UNDER THE AGE 17 WHO IS CLAIMED AS A DEPENDENT,

THE CREDIT IS REDUCED BY 50$ FOR EACH 1K OF EXCESS AGI,
THE PHASE OUT BEGINS AT 400K

Question 17

WHAT IS THE CHILD AND DEPENDENT CARE CREDIT?

Answer 17

APPLICABLE IF THE TAXPAYER REQUIRES CARE FOR A CHILD UNDER THE AGE 13 OR A DISABLED DEPENDENT. SMALLEST OF DEPENDENT CARE EXPENSE, EARNED INCOME OF THE LOWEST PAID SPOUSE), OR 3K (6K FOR MULTIPLE DEPENDENTS) ONCE AGI EXCEED 43K THE CREDIT IS LIMITED TO 20% OF THE LESSER OF THE 3 LISTED SCENARIOUS ABOVE.

Question 18

WHAT IS THE EARNED INCOME CREDIT?

Answer 18

ENACTED TO ENCOURAGE LOWER-INCOME TAXPAYERS SEEK EMPLOYMENT

TO BE ELGIBLE FOR EIC, AN INDIVIDUAL MUST HAVE EARNED INCOME AND GENERALLY MUST MAINTAIN A HOUSHOLD FOR MORE THAN HALF THE YEATR FOR A QUALIFYING CHILD. MFS ARE DISQUALIFIED.

Question 19

WHAT IS THE TREATMENT OF RECOURSE AND NONRECOURSE LIABILITY FOR INCREASING A PARTNERS BASIS.

Answer 19

BOTH RECOURSE AND NONRECOURSE DEBT INCREASES THE BASIS OF THE GENERAL PARTNER,

THE PROPRTIONATE SHARE OF RECOURSE DEBT IS ADDED TO THE BASIS OF PARTNER, (THIS APPLIES IF YOU ARE NOT PROVIDED A K1)

THIS IS IN ADDITION TO THE INCREASE OR DECREASE IN PARTNERSHIP LIABILITIES THROUGHOUT THE YEAR.

IF AFTER DISTRIBUTIONS YOU NOTICE YOU DO NOT HAVE SUFFICIENT BASIS TO ABSORB A LOSS THE LOSS IS LIMITED BY YOUR AT RISK AMOUNT WITH THE REMAINDER CARRIED FORWARD.

IF YOU HAVE SUFFICEINT BASIS TO ABSORB THE LOSS THEN THE AT RISK IS NOT APPLICABLE,

LIMITED PARTNERS HAVE LIMITED LIABILITY THEREFORE ONLY NON RECOURSE DEBT IS ADDED,

*IF A PARTNER CONTRIBUTES PROPERTY THE BASIS IS THE ADJUSTED BASIS MINUS ANY ANY LIABILITY ASSOCIATED WITH THE PROPERTY, HOWEVER ITS PROPORTIONATE SHARE OF LIABILITY IS ADDED TO THE BASIS

Question 20

WHAT ARE THE ASSIGNOR’S (THE INDIVIDUAL WHO ASSIGNS HIS RIGHT IN A CONTRACT) IMPLIED WARRANTY TO THE ASSIGNEE? (THE INDIVIDUAL WHO NOW HAS TO PERFORM)?

Answer 20

1) THE ASSIGNMENT IS ALLOWED
2) THE CONTRACT HAS NOT ALREADY BEEN ASSIGNED TO SOMEONE ELSE
3) THE ASSIGNOR DOES NOT KNOW OF ANY DEFENSES THAT WOULD PREVENT PERFORMANCE
4) THE ASSIGNOR WILL NOT DO ANYTHING TO INTERFERE WITH THE ASIGNEE’S RIGHTS

Question 21

WHAT IS THE MAIN DIFFERENCE BETWEEN A SALE ON APPROVAL VS A SALE OR RETURN

Answer 21

A SALE ON APPROVAL IS A,
“CONDITIONAL SALE” “TRY BEFORE YOU BUY”

TITLE ANS RISK OF LOSS REMAIN WITH THE SELLER UNTIL THE GOODS HAVE BEEN ACCEPTED BY THE BUYER OR THE APPROVAL PERIOD HAS ELAPSED

A SALE OR RETURN IS A, “ACQUIRING FOR RESALE”
TITLE AND RISK OF LOSS REST WITH THE BUYER UNTIL THE GOODS ARE RETURNED TO THE SELLER.

Question 22

IN ADJUSTMENTS FOR AGI, WHAT IS THE RENTAL DEDUCTION?

Answer 22

WHEN COMPUTING AGI PASSIVE LOSSES ARE DEDUCTIBLE UP TO PASSIVE GAINS, THEIR ARE TWO EXCEPTIONS,

THE REAL ESTATE EXCEPTION ALLOWS LOSSES TO BE TREATED AS ORDINARY BUSINESS LOSSES AND THUS ALLOWED TO BE DEDUCTED AGAINST ORDINARY INCOME.

THE ACTIVE PARTICIPATION EXCEPTION, FURTHERMORE, IF A TAXPAYER ONLY ACTIVELY PARTICIPATES IN THE RENTAL ACTIVITY AND OWNS AT LEAST 10% INTEREST IN THE ACTIVITY, THEY MAY DEDUCT UP TO 25K OF LOSSES AGAINST ORDINARY INCOME EACH YEAR.

Question 23

WHAT ARE INTENDED AND INCIDENTAL BENEFICIARIES?

Answer 23

AN INTENDED BENEFICIARY (RECEIVES BENEFIT BECAUSE THEY ARE SPECIFICALLY NAMED) HAS THE RIGHT TO ENFORCE THE CONTRACT WHILE THE INCIDENTAL BENEFICIARY DOES NOT.

THERE ARE TWO TYPES OF INTENDED BENEFICIARY,
1) DONEE BENEFICIARY: RECEIVES THE BENEFIT GRATUITOUSLY AND THEREFORE CAN ENFORCE THE CONTRACT ONLY AGAINST THE PARTY CHARGED WITH DELIVERING THE BENEFIT.

2) CREDITOR BENEFICIARY: RECEIVES THE BENEFIT AS SETTLEMENT OF A DEBT AND CAN ENFORCE THE CONTRACT AGAINST BOTH PARTIES.

Question 24

DOES A TAX PREPARER NEED TO BE ENROLLED TO PRACTICE BEFORE THE IRS?

Answer 24

A TAX RETURN PREPARER DOES NOT HAVE TO BE ENROLLED TO PRACTICE BEFORE THE IRS,

GENERALLY, ENROLLING TO PRACTICE BEFORE THE IRS IS RESERVED FOR INDIVIDUALS WHO ARE NOT CPA’S OR ATTORNEY’S

HOWEVER TAX RETURN PREPARER’S REQUIRE A PTIN.

Question 25

IN TERMS OF LOSS LIMITATIONS WHAT IS THE EFFECT OF A DISTRIBUTION WITH THE DEBT BASIS OF AN SCORP?

Answer 25

DISTRIBUTIONS DO NOT EFFECT THE DEBT BASIS OF AN SCORP SHAREHOLDER