R6 Flashcards
What is Unrelated business taxed as?
Unless the organization is taxable as a trust, the UBI is subject to reg corp taxes
What are the damages imposed against an accountant who breaches contract for professional services, duties owed to a client?
Money damages(compensatory)
What type of penalty can be assessed to a CPA for not performing proper inquiries?
CPA can be charged with a tax return preparer penalty
What is the difference between a simple and complex trust?
Complex can distribute from principal while simple cannot
What is the threshold of gross income in order to file a 1041?
$600
What is the Charitable contribution deduction for estates?
Unlimited if expressed in the will
Which entity can elect a calendar yea?
Estates can elect, Trust are required
When are ordinary and necessary admin expenses deductible?
To deduct admin expenses, statement must be filed with the income tax return stating that those deductions have not been taken on the decedents estate tax return
If the DNI is less than the distributions, how do you calc the individual distributions?
Pro rata distributions
- add up total distributions
- take % of trustees distribution to 1
- multiple percentage * DNI
What is the rule of waving medical expenses for decedent?
if the waiver is filed, medical expenses paid for the decedent by their executor within one yr of her death can be deducted on the decedents final income tax return
What are some valid deductions from a decedents gross estate?
outstanding debts of decedent, Claims against the estate , funeral costs, Certain taxes
What entity/organization is applicable to the unlimited exclusion for gifts?
- Payments made directly to edu institution
- Payments made directly to healthcare provider for Medical Care
- Charitable gifts (church)
- Marital deduction
How many years is imputed interest subjected to?
imputed interest on an interest-free loan is subject to gift tax for each year the loan is outstanding
What is the threshold for unrelated business income in order to be taxed?
An exempt organization is not taxed on unrelated business income of less than $1k
What is the qualification in order to not be an exempt organization?
To qualify as an exempt organization: applicant must not be a private foundation organized and operated exclusively to influence legislation
What entity cannot file for a 501c3 exemption?
A partnership
What does a CPA do when the IRS requests them to provide client records that the CPA does not have?
Notify the IRS of the identity of any person who, to the CPA’s knowledge, could have the records
What is not an example of written advice?
electronic communication
How long does a CPA have to retain tax returns for?
CPA must retain completed copy of each return for 3 years after the close of the return period
What are acceptable circumstances for disclosures of tax return information?
Computer processing, Peer review, Administrative order
What is the Penalty for failure to file?`
5% per month or fraction of tax due
What are some examples of civil fraud?
Civil fraud penalties require conduct that transcends negligence or stupidity.
ex) Maintaining false records and reporting fictitious transactions
How many judges are on the US district Court?
One
Define the majority rule
Accountants are liable to anyone in a class(potential lenders or investors) of 3rd parties whom the CPA knows will rely on the opinion of the financial statements
Define the Ultramers rule`
Ultramares rule limits the accountant’s liability for negligence to :
- parties in privity and
- intended 3rd party beneficiaries; parties who are merely “foreseen” cannot recover
What is the difference between Actual and Constructive fraud?
Constructive fraud only requires reckless disregard for truth or falsity
Actual fraud requires intent in making a material misstatement, upon plaintiff justifiably relies and suffers damages
** THE difference is that Constructive does not require intent”**
What are the elements of negligence?
duty of care
breach
causality
injury
What are the 5 elements of fraud?
Misrepresentation of material fact, intent to deceive Actual and justifiable reliance intent to induce that reliance damages
What is the standard deduction for a trust/estate in income tax?
0 idiot
How is the tax year determined for Estates?
An estate can elect calendar year or fiscal year
How may the professional fees be communicated to the taxpayer?
What is an accuracy related-related penalty applied to?
Applied to portion of tax underpayments attributable to negligence or disregard of tax rules and regulations as well as to any substantial understatement of income tax
Under common law negligence, what is the minimum one must prove?
failed to exercise due care
What are the elements of negligence?
Duty of care
Breach(lack of due care)
Casualty
Injury
When are annual filings for public service charitable entity?
they arent required idiot
What is the penalty to the IRS for a CPA making an error in calculating the return?
none stupid
What are S corp dividends distributions taxed as?
taxed as unrelated business income at corp rates
How many judger are at the District court level?
One judge, not panel
