Mid June Quizzes Flashcards
Section 1231 net gains are treated as…
2) what can they do?
1 long term capital gains
2 can offset against long term capital loss
In a complete liquidation, $12,000 fair market value of inventory with a basis of $8,000 distributed to a shareholder results in a…
$4,000 LT capital gain
In a complete liquidation, equipment distributed to a shareholder where FMV exceeds basis results in…
A long term capital gain
In a complete liquidation of an 80% owned corporation, the liquidation qualifies under…
Section 332 as nontaxable liquidation
Sec. 332 is a nontaxable liquidation of…
A controlled subsidiary into its parent
In section 332 liquidation sale, with liquidating corporation, how are distributions to shareholders owning less than 80% recognized?
1 Gains are recognized
2 losses are not recognized
In section 332 liquidation sale, with liquidating corporation, how are distributions to shareholders at least 80% recognized?
No gain or loss is recognized
Salaries and wages paid, where does it go on the partnership return?
Form 1065 only
Work opportunity credit, where does it go on the partnership return?
Schedule K and schedule K-1
If a SIM doesn’t specify other than the partners have equal interest in profit and loss, how are guaranteed payments divided up on schedule K-1?
Multiply by 50%
On form 1065, is amortization of the permanent liquor license allowed for tax purposes? Why or why not?
No allowed
Because license is renewable for an indefinite period
If a partnership has depreciation of $110,000 and elects to expense $100,000. How much depreciation can be deducted on form 1065?
$10,000 ($110,000 - $100,000)
Health insurance premiums are treated as…
Guaranteed payments
On a simulation market insurance premiums would appear on what forms of a partnership return?
1065, sch. k and sch. K-1
With $14,000 of contributions to a defined pension benefit plan (Keogh), where $8,000 was paid on behalf of the partner’s, where does this go on the partnership return?
Form 1065 = $6,000 (14k-8k)
Form K = $8,000
Form K-1 = $4,000 (8k X 50%)
On a SIM that deals completely with expenses, do not use…
Paratheses
Under the Negotiable Instruments Article of the UCC, which of the following defenses generally may be used against all holders of negotiable instruments?
Minority of the maker
Minority of the maker is a…2
1 Real defense
2 assertable against any party
Voluntary bankruptcy is available to debtor’s whose…
Income does not exceed monthly limits
A tenant may be evicted from an apartment if he…
Uses it for illegal purposes (counterfeiting money)
In deciding whether consideration necessary to form a contract exists, a court must determine whether…
There is mutuality of consideration
Mutuality of consideration, means that each party is bound to…
Give consideration in exchange for the consideration given by
Other party to contract
State taxes of a corporation have a higher priority than…
Legal fees owed to law firm for services unrelated to bankruptcy
What provision contained in an otherwise negotiable instrument will cause it to be nonnegotiable?
It grants holder an option to purchase land
If an instrument contains a promise to do any act in addition to payment of money it is…
Nonnegotiable
When repossessed collateral is sold, the first obligations that are paid are…
The expenses that the 3rd party has incurred relating to
repossession and sale of collateral
A surety may exercise the defenses against the seller of…2
1 fraud committed against the debtor
2 fraud committed against the surety
In a situation where the seller refuses to sell a warehouse that the had agreed to sell in the contract, what damages is the plaintiff entitled to? 2
2) Is the plaintiff entitled to both?
Either specific performance or compensatory damages
2) no
Machinery is what kind of property?
Section 1245 property
When machinery that cost $20,000 and has an adjusted basis of $14,000 is destroyed in a fire. If insurance proceeds received are $30,000 and a new machine is bought for $25,000. What is the ordinary income resulting from the involuntary conversion?
$6,000 gain recognized (limited to depreciation recapture)
Taking of a negotiable instrument for future consideration will not constitute value in determining whether…
Person is a holder in due course
Under the Revised Model Business Corporation Act, a stockholder has the right to…
Inspect the books and records with 5 days notice
Any transfer for value of an order instrument gives the transferee the right to obtain…
An unqualified endorsement from the transferor
Karr transferred a negotiable instrument payable to his order to Watson for value. Karr did not endorse the instrument. As a result of the transfer, Watson is…
Entitled to an unqualified endorsement by Karr
Under the position taken by a majority of courts, to which third parties will an accountant who negligently prepares a client’s financial report be liable?
Any foreseen or known third party who relied on the report
Pertaining to the CPE requirements, state boards typically require that the candidate…
Attest to their jurisdiction that they have completed the
requirements for continuing education
The term “loan” includes which 3 items?
1 guarantee of loan
2 letter of credit
3 line of credit
Loss on sale of a building depreciated on the straight line basis and gain on sale of land are…
Section 1231 net gains
What is a work product doctrine (AKA Work product rule)?
Doctrine that protects work product from detection
Under Section 11 of the Securities Act of 1933, which of the following standards may a CPA use as a defense?
GAAP
Where can a candidate find information that will allow him or her to maintain licensure records and view requirements for multiple jurisdictions?
NASBA tools for accounting compliance
The method used to depreciate partnership property is an election made by…2
1 the partnership
2 may be method approved by IRS
When a nontaxable stock dividend is distributed, you should multiply the ratio of shares by…
Original stock basis
In a nonliquidating distribution…
No loss is recognized
Lease improvements are not…
Not reported in rental income (only cash)
At risk limitation provisions of the IRC may limit…
A partner’s deduction for his or her distributive share of partnership losses
What refunds are and are not included in income in schedule 1040?
State refund included
Federal refund not included
A plaintiff does not have to prove reliance on materially misstated financial statements under…
Section 11 of Securities Act of 1933
While preparing a client’s individual federal tax return, the CPA noticed that there was an error in the previous year’s tax return that was prepared by another CPA. The CPA has which of the following responsibilities to this client?
Inform the client and recommend corrective action
Under the confidentiality rules, the tax practitioner is prohibited from discussing tax return information with anyone without…
Prior consent of the client
Where is student loan interest of up to $2500 deducted?
Deducted to arrive at AGI
When property is repossessed after an installment sale, the tax payer must…
Recognize gain or loss
Regulation Rule 504 of Reg D: information furnished to investors
Does not require specific info be furnished to investors
The first purchaser, who doesn’t record the deed and a subsequent purchaser who knew the first purchaser didn’t record.
Who wins under the notice statute?
First purchaser, they bought in good faith
The first purchaser, who doesn’t record the deed and a subsequent purchaser who records and who knew the first purchaser didn’t record.
Who wins under the race statute?
Second purchaser
The first purchaser, who doesn’t record the deed and a subsequent purchaser who records and who knew the first purchaser didn’t record.
Who wins under the race-notice statute? Why?
First purchaser
Second purchaser was aware other purchaser didn’t record, so they
We’re not a good faith purchaser
The Sales Article of the UCC applies to…
The sale of goods
Although certain provisions apply only to transactions between merchants, the general scope of the UCC sales Article extends to…
Sales between no merchants as well
1 Loss on sale of building depreciated on the straight line basis
2 gain on sale of land used in the business
3 loss on sale of investments in securities
What do they have in common?
Included in both taxable income and book income
When is a stock redemption treated as a dividend?
When shareholders do not reduce their ownership percentage
Stock redemption is treated as capital gain when shareholders…
Have dramatically reduced percentage ownership
A corporation’s bad debts on the tax return is…
Limited to the amount written off that year
When can life insurance premiums be deducted?
When they don’t cover a high level employee
