Final Reg Exam Questions Part II Flashcards
What is the difference between a donee beneficiary vs. a creditor beneficiary?
A donee owes NO DEBT, and NO DUTY owed.
Common Law Fraud suit - what are the 4 elements?
Material Misstatement
Loss has been suffered
Information was relied upon (justifiable)
Scienter / reckless misconduct
2018 and prior divorce - Alimony received + property settlement. How to tax?
Alimony - taxable
Property - not taxable
Child support NEVER taxable
1244 worthless: what goes on return as last date of holding?
Last day of current taxable year
Real estate contracts must be signed - what happens if only the offeror signs? Oral acceptance by offeree?
Contract enforceable only on offeror because they are the only one who signed.
What is the maximum amount of Social Security benefits to be included in gross income?
85%
ON the sale of a gift - use FMV at time of transfer OR donor’s original cost basis?
Donor’s original cost basis.
Can implied warranty of title be disclaimed?
Yes it can, but if a merchant simply says “any and all warranties disclaimed” it DOES NOT include the implied warranty of title. Needs SPECIFIC LANGUAGE disclaiming implied warranty of title.
In absence of election of an accounting period, a partnership would adopt:
a tax year of one or more partners with more than a 50% interest in profits and capital
What does a financing statement contain?
- Description of collateral
- Name/address of debtor
- Name/address of creditor
NO witness required
NO dollar amount
NO date of payment of debt
Depreciation recapture vs. total gain - which to recognize?
The lesser of the total gain realized or the accumulated depreciation.
If understatement is due to fraud to failure to file, the time period that the IRS has to assess additional taxes against the taxpayer is how long?
UNLIMITED
Regarding taxpayer penalty - you can either pay
___% of current year tax
___% of prior year liability
___% of prior year liability if PY AGI > $150,000
Regarding taxpayer penalty - you can either pay
90% of current year tax
100% of prior year liability
110% of prior year liability if PY AGI > $150,000
How many audits of public companies does a CPA firm registered with the PCAOB have to perform before it receives and annual inspection from the PCAOB?
More than 100 audits
Who must have capacity in order to form an agency relationship?
the principal must have capacity to give legal consent
Cases tried in what court have NO appeal?
Small Cases Division of the U.S. Tax Court
A party losing in the Federal U.S Federal Claims Court or U.S. Tax Court appeals where?
U.S. Court of Appeals
A party losing in the Federal DISTRICT Court may appeal where?
U.S. Court of Appeals for the Federal Circuit.
How can an award be non-taxable?
- Recipient selected without any action on their part
- Recipient performed no services
- Designated to a charity directly from awarding organization
Are public accounting firms allowed to provide bookkeeping services to audit clients?
YES, can’t provide bookkeeping, appraisal, valuation, actuarial, internal audit, etc.
However, they are allowed to provide those services to a NON-audit client.
After an S-corp’s status is revoked, how long must they wait to file again?
5 years
Person dies. What is the exception rule that applies to medical expenses?
If a waiver is filed, the medical expenses may be deducted on final 1040, even if the estate paid. (treated as paid by the decedent)
What are the owners of an LLC called?
members
Medicare portion of social security and self-employment taxes
are non-deductible
A medical expense incurred in prior years but paid in the current year, when is it deductible?
Deductible in the year that it is paid
Can a CPA disclose client information pursuant to an attorney’s solicitation request?
No, violation of confidentiality.
Valid subpoena
Peer review
or client consent
Does worker’s comp statutes cover pre-existing conditions that are aggavated?
YES
What is the % of AGI limit for an individual donating L-T capital gain appreciated property?
30%
What income is including in determining if a company is a PHC?
60% or more of the income has to be from passive sources
Passive: TAXABLE interest, dividends, rents, royalty income
Upon termination of a trust, who ordinarily receives the assets of a terminated trust?
Remainderman
Parole evidence rule prohibits the use of what kind of evidence?
prior oral or written agreements
Legislative Reenactment Doctrine presumes that a longstanding finalized regulation has
congressional approval if Congress has not amended that section of the IRC.
What is the “Pease limitation” and what did the TCJA do to it?
Pease - limitation of itemized deductions for wealthy individuals
TCJA suspended this limitation
Like-kind exchanges - don’t forget this about boot!
If debt relief (other party assume mortgage), ADD this to BOOT.
what kind of gifts do NOT reduce the unified credit?
Spouse
Charity
Church
Tuition
Is QBI claimed on Schedule C or Form 1040?
Form 1040
A partner’s BANKRUPTCY results in
disassociation from the partnership
One spouse works, other does not, under 50. How much IRA contribution?
12,000
A principal’s ratification relates to
the authorization of an agent’s UNAUTHORIZED ACTS
Personal property - MACRS depreciation
double declining balance
1/2 year depreciation is taken in the first year and 1/2 a year is taken in the year of sale
If an individual taxpayer has elected to amortize the premium on a bond that yields taxable interest…
the bond’s basis is reduced by the amortization. Permitted as a deduction and considered recovery of the basis of the bond.
An accuracy related penalty of 20% based on underpayment of tax due to what 3 things:
- Negligence or disregard of tax rules
- Substantial understatement
- Substantial valuation overstatement of liabilities
Original basis: $10,000
FMV at gift time: $12,000
Gifted person later sells for $14,000
Capital gain amount?
$14,000
Complete liquidation of a corp:
Asset basis: 660,000
Mortgage: 700,000 (assumed by shareholder)
FMV of property: 730,000
Gain for corp?
Use the greater of FMV or mortgage. If shareholder assume mortgage, rule says that the FMV must be at least that, or else why would the shareholder take it? But if mortgage is higher, use that, produces a higher gain for the corp and the FEDs are greedy.
What is the cap on the deduction of investment interest expense?
It is deductible UP TO the amount of investment income.
4 parts of negligence:
Duty of Care
Breach of Duty
Cause/Effect (justifiable reliance)
Damages
Under the unified transfer tax system, one transfer tax schedule is used to compute the gift tax as well as the estate tax. Transfers at death and lifetime taxable gifts are taxed on a __________basis.
cumulative
The income that is passed through to a beneficiary has the SAME/DIFFERENT tax attributes in the hands of the beneficiary as when it is received by the trust?
SAME
The basis of property donated to a trust is the donor’s carryover basis and holding period.
Gifted stock basis: 8,000
FMV at gift: 6,000
Sale price by gifted person: 7,000
*Note that the SALE PRICE is between BASIS and FMV.
6,000 - 7,000 - 8,000
Gain or loss amount?
$0
Section 1015(a) provides for two bases in the case of depreciated property acquired by gift. The basis for determining gain is the donors cost basis in the gifted property. The basis for determining loss is the lesser of (1) the donors cost basis or (2) the FMV of the property on the date of the gift. When the gifted property is sold for an amount that is between the gain and loss bases, then no gain or loss is recognized [Reg. §1.1015-2(a)(2)].
Difference in EXTREME duress vs SIMPLE duress when it comes to forming a contract?
Extreme Duress, i.e. duress through physical compulsion, would render the contract VOID, whereas a Simple Duress would render the contract VOIDABLE.
activities regularly conducted by a tax-exempt organization will result in unrelated business income?
Business activities RELATED to the organization’s tax exempt purpose are excluded when calculating Unrelated Business Income (UBI).
ULTRAMARES RULE: who will the accountant be liable to for negligence?
ONLY those with privity.
Ultramares = UltraNICE to accountants
WHen does gain or loss arise for a taxpayer?
- trade date
- settlement date
- date proceeds received
TRADE DATE
Is a personal residence considered a capital asset?
YES
Which TYPE OF PARTY is liable to REPAY an illegal distribution to a corporation?
A shareholder must repay illegal distributions from Corporation that was insolvent at the time of distribution, even though the shareholder was unaware of the illegality of the distribution.
Real estate offered for sale. Offeror dies. Offeree has not accepted. What happens to offer?
Terminated upon death.
However, it would be valid of the offeree had accepted prior to death.
Court cases tried in which court have NO APPEAL?
Cases tried in the Small Claims Division of the U.S. Tax Court
