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MCQ Flashcards

1
Q

Statute of limitations for individuals

  • Regular
  • more than 25%
  • fraudulant
A
  • 3 yrs
  • 6 yrs
  • no statute of limitations

Statute of limitations does not begin running until a return is filed.

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2
Q

Capital Assets

Examples of capital asset

A

are properties specified in the tax law that give rise to capital gain or loss.

Investment property such as land held as an investment

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3
Q

When is a small case request appropriate?

A

When the tax case is not more than 25,000

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4
Q

What is the max amount of capital losses in excess of capital gains that a C Corp may deduct in a year

A

0

C Corp is only able to deduct losses to the extent that they have capital gains

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5
Q

Duress

A

Generally implies a “forced” type of transaction, which arguably could result from a close relationship but generally results from an involuntary result being “forced” upon the otherwise nonconcenting party. Ex: contract at gunpoint

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6
Q

Fraud in the inducement

A

occurs when a contract is formed based upon the false or misleading statements or actions of another party.

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7
Q

Unconscionability

A

a contract is so one-sided and unfair to the disadvantaged side that it is against public policy

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8
Q

Undue influence

A

Assent or inducement to contract arises from special or close relationships between the parties. One party’s views are usually overcome by the other bc of this close relationship

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9
Q

Tax preference items for computing AMT are

A

Depletion, accelerated dep, and certain tax-exempt interest, Intangible drilling costs, 7% of excluded gain on qualified small business stock

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10
Q

Warranty of Title

A

Guarantees that “the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge

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11
Q

How is the capital losses that are carried forward in corp tax?

A

Treated as ST loss. It does not retain its original identity.

Carryback 3 years, Carryforward 5 years

Capital losses can only offset cap gains

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12
Q

Phaseout of itemized deductions for high income tp

A

Items not subject to phaseout– medical, investment interest, casualty losses, and gambling losses

Higher income tp may have to reduce their remaining itemized ded, including charitable contributions, by the lesser of 3% of the excess of AGI over a certain amt or 80% of the amt otherwise allowable for the taxable year.

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13
Q

Section 1231 assets

A

are depreciable assets and real estate used in a trade or business and held for more than one year

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14
Q

Section 1245

A

Are assets consisting of equipment used in a trade or business, and some specified real property, subject to the provisions of Section 1245 of the tax law

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15
Q

What amount of wages are subject to federal unemployment tax

A

If they exceed 1000 per quarter, aggregating wages paid to all employees

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16
Q

LLC

A

is a business structure that has the operational flexibility and tax status of a general partnership but with the limited liability for the owners (members) of a limited partnership or corp. Unlike limited partnership, owners can participate in the mgt and control of the organization. An LLC is dissolved if all the owners consent to the dissolution

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17
Q

Securities Act of 1933

Regulation D Rule 505

A

Allows some companies offering their securities to have those securities exempted from the registration req of the federal securities law. To qualify - a company…

  • can only offer and sell up to 5 mil of its sec in any 12-mth period
  • May sell to an unlimited number of “accredited investors” and up to 35 other persons who do not need to satisfy the sophistication stds associated with other exemptions
  • Must inform purchases that they receive “restricted” secturities, meaning that the sec cannot be sold for 6mth or longer w/o registering them and (cannot use general solicitation or advertising to sell the securities)

An issuer must file a new notice with the SEC for each new offering of sec no later than 15 days after the “date of the first sale” of sec in the offering.

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18
Q

Registration Statement

A

is the end result of the registration process that contains the material financial and other information concerning sec offered for public sale. It includes specific forms that are filed with the SEC and released to the investing public prior to the sale of sec by the issuing company

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19
Q

What are the 3 types of the IRS Examinations

A
  • Correspondence examinations - if only a few items are under investigations
  • Office Examinations - to examine more complex issues
  • Field Examinations - to investigate even more complex issues
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20
Q

Unilateral Contract

A

is formed when, by the terms of the offer, acceptance is given by performance. When performance was rendered, the contract was accepted, and therefore is enforceable.

21
Q

Unjust Enrichment

A

Refers to a theory that permits a court to redress a situation where one party has performed some act for the benefit of another and should receive compensation in the name of justice

22
Q

Public Policy

A

Refers to a justification that will sometimes use when there is no specific law or prior case dealing with the same set of facts, but where court action can be justified on the basis of common sense interpretation of when the general consensus might be over what a court should do

23
Q

Quasi Contract

A

a theory under which courts will apply a contractual remedy when there was actually no formal offer or acceptance (and therefore no legal contract)

24
Q

Security

A

is the evidence of a debt or ownership or related right. Sec can include stock options and warrants in addition to debt(bonds, notes, loans, mortgages) and stock

25
Q

Guaranty

A

Is a promise from a 3rd party to pay the defaulted debt of the principal debtor to the creditor. The guaranty must be in writing and signed by the guarantor.

26
Q

Fraudulent Transfer

A

Is a transfer made by a debtor within 2 years prior to the date of bankruptcy in which the debtor did not receive FV in exchange for the asset.

27
Q

What costs must be included in capitalization inventory?

A
  • All Direct Cost of the property
  • Indirect Cost (such as off-site storage cost)

Never include selling, marketing, advertising and distribution expenses

28
Q

FASB

A

is independent of all other business and professional organizations. It is part of a larger structure that helps to achieve consistent standards and improve fin acct stds

29
Q

Blank Endorsement

A

is a transferor’s signature along

30
Q

Qualified Endorsement

A

is a notation and signature on the reverse side of a negotiable instrument by which the transferor disclaims contract liability on the instrument

31
Q

Restrictive Endorsement

A

is a notation and signature on the reverse side of a negotiable instrument that includes additional words that add qualifications

32
Q

Special Indorsement

A

is a notation and signature on the reverse side of a negotiable instrument that includes reference to a specific person as the indorsee to who or to whose order the instrument becomes payable

Ex: Pay Smith, Signature

33
Q

IRA distributions qualify as made for first-time homebuyer expenses if:

A
  • Homebuyer is the tp, spouse, child or grandchild of either, or ancestor of either
  • the home is used as principal residence by homebuyer
  • the homebuyer (and if married, the hombuyer’s spouse) has not had a present ownership interest in another principal residence in 2 years
  • the distribution is used within 120 days to pay for qualified acquisition expenses
34
Q

Implied Warranty: Fitness for Particular Purpose

A

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are acquired and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is, unless excluded or modified under the next section, an implied warranty that the goods shall be fit for such purpose.

35
Q

A C corporation net operating loss in 2015 is carried back and carried forward for how many years?

A

Back: 2; Forward: 20

36
Q

A tax communication should include:

A
  • a brief statement of the facts,
  • each tax issue listed,
  • a separate conclusion for each tax issue, and
  • where the conclusions came from, e.g., the authority.
37
Q

How many audits of public companies per year does a CPA firm that is registered with the Public Company Accounting Oversight Board (PCAOB) have to perform before it receives an annual inspection from the PCAOB?

A

100

38
Q

Rescission

A

To cancel a contract and to restore the parties to their original positions before the contract

39
Q

Novation

A

Is a 3rd party agreement whereby the creditor agrees to release the debtor and take some 3rd party substitute debtor

40
Q

Mileage for charity 2015

A

14cents

41
Q

Fraud in the inducement

A

is a false representation of a material fact intentionally made and relied upon, causing injury to the other party. Contracts resulting from such fraud are voidable

42
Q

In order to have a contract, four elements must be present:

A
  1. Agreement
  2. Consideration
  3. Legal Purpose
  4. Competent Parties
43
Q

Private Placement

A

Rule 506 of Reg D permits the issuance of unregistered sec by private placement. However, the sec issued under this regulation are considered “restricted,” meaning that they are for personal investment only and generally cannot be sold to the public w/o registration

44
Q

Exemption Amount for simple trust and complex trust

A

Simple: 300
Complex: 100

45
Q

Ultramare Rule - who will the accountant be liable for negligence

A

They will be reliable to parties in privity of contract

46
Q

IRC Section 1231 Assets

A

Are depreciable assets and real estate used in a trade or business and held for more than one year.

47
Q

Reimbursement or Indemnity

A

get the principal debtor to the pay the guarantor or surety for the amount the guarantor or surety had to pay the creditor.

48
Q

Subrogation

A

When the guarantor or surety discharges the principal debtor’s obligation to the creditor, the guarantor or surety gets all the creditor’s rights regarding the obligation

49
Q

Exoneration

A

A term applying to suretyship, – is the right of the sureties to compel the principal debtor to make payment to the creditor if he possibly can

REG (7 decks)

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