June 6 Wrong Answers

Question 1

Normally a majority of shareholders of each corporations must…

Answer 1

Approve the merger

Question 2

If a contract violates a regulatory licensing statute, it will be…

Answer 2

Unenforceable by either party

Question 3

The main function if a regulatory licensing statute is to…

Answer 3

Protect the public against unskilled or dishonest persons

Question 4

Violation of a revenue seeking statute is…

Answer 4

Enforceable

Question 5

The purpose of a revenue seeking statute is to…

Answer 5

Gain revenue for governmental unit issuing the license

Question 6

When a lease is treated as a capital lease…

Answer 6

Title passes when the company receives the leased goods

Question 7

The issuer of a note payable must pay…

Answer 7

A holder in due course

Question 8

Cumulative voting gives the shareholder…

Answer 8

One vote for each share owned times the number of directors being elected

Question 9

Cumulative voting gives minority shareholders an opportunity to get some representation on the board by…

Answer 9

Voting all shares for 1 or 2 directors

Question 10

It is improper for the bank to refuse to honor the check in this case since it is…2

Answer 10

1 At fault in misdirecting the funds and

2 therefore has duty to pay the check

Question 11

A creditor may choose to proceed immediately against the surety for full payment of a loan instead of…

Answer 11

Against the principal debtor or the collateral

Question 12

A cosurety is not released from his obligation to perform merely because…

Answer 12

His cosurety refuses to perform

Question 13

Upon full payment of the obligation, the cosurety can…

Answer 13

Demand a pro rata contribution from his nonperforming cosurety

Question 14

Under the Bankruptcy Code, a trustee has the power to set aside…

Answer 14

Preferential transfers made by debtor to creditors

Question 15

Enabling loan

Answer 15

Trustee does not have power to stop preferential transfer

Question 16

In an enabling loan, trustee does not have power to stop preferential transfers when a security interest is given by debtor to acquire property that is…

Answer 16

Perfected within 10 days after security interest attached

Question 17

Taxable gain on insurance proceeds, what is subtracted from total insurance proceeds?

Answer 17

Lesser of FMV or Adjusted basis of destroyed property

Question 18

Unified transfer tax rate schedule applies the same tax rates on cumulative basis to…

Answer 18

Both life and death transfers

Question 19

A unified rate schedule does not…

Answer 19

Apply different rates for gift tax and estate tax

Question 20

Tax payers who aid and abet federal tax evasion are subject to…

Answer 20

injunction prohibiting them from acting as tax preparers

Question 21

Notifying clients that the accountants are providing their confidential information to outsourcing firms for processing is…

Answer 21

Not required by law

Question 22

When a stockholder sues a CPA for common law fraud based on false statements, what is the CPA’s best defense?

Answer 22

False statements were immaterial

Question 23

When a partnership interest does not exceed 50% and a partner sells stock (that was held long term) to the partnership for a capital loss, how is the loss treated?

Answer 23

The entire loss is recognized as a longterm capital loss

Question 24

If a partner dies during a fiscal year, how are the earnings and profits allocated?

Answer 24

Allocated to partner for months he is living

And his estate for months after death

Question 25

Donee’s adjusted basis of gift tax, what is the fraction in the calculation?

Answer 25

((FMV - adjusted basis)/(FMV - exclusion))

Question 26

Depreciation deduction for nonresidential real property, placed in service after 1986 under MACRS?

Answer 26

Straight line method over 39 years

Question 27

A self employed tax payer can deduct…

Answer 27

100% of health insurance premiums

Question 28

Generally no gain or loss is recognized on the transfer of property to a partnership in…

Answer 28

Exchange for partnership interest

Question 29

Generally no gain or loss is recognized on the transfer of property to a partnership in exchange for a partnership interest. As a result the basis of partnership interest is equal to…

Answer 29

Basis of property transferred

Question 30

The merger of 2 corporations requires…

Answer 30

Approval from the board of directors of both merging corporations