REG 1 Flashcards
Tax Penalties for Individual tax payers
Late Filling - 5%/month up to 25% unpaid taxes
Fraudulent failure to file - 15%/month up to 75% unpaid taxes
Late payment: 0.5% tax due/ month up to 25%
Understatement Penalties: 20%
Substantial understatement of income tax: greater of 10% of tax or $5,000
What is considered substantial understatement for individual tax
10% of tax
Individual tax - Belief requirement for reasonable cause related to tax position
Undisclosed position—“Substantial authority” (≥40% chance)
Disclosed position—“Reasonable basis” (≥ 20% chance)
Tax shelter position—“More likely than not” (>50% chance)
Individual tax - No underpayment penalty limit
No underpayment penalty if the total tax payments are at least 90% of the current year’s tax or 100% of the PY Tax
110% of PY tax if AGI > $150,000
Individual taxpayer accuracy-related penalties
20% to underpayment attributable to negligence/disregard, and substantial understatement (10% or $5,000)
40% for Gross misvaluation
75% civil penalty for fraud + 50% interest due on the underpayment
Exception of parol evidence rule
(1) to show invalidity of the contract due to a lack of contractual capacity or reality of consent, and
(2) to show the existence or failure of a condition precedent.
Purchase money security interest - Perfected
Usually, the first security interest to be perfected has top priority.
There is an exception, though, for a purchase money security interest. A purchase money security interest in noninventory collateral has priority if it is perfected before the debtor takes possession or within 20 days thereafter.
Chapter 7 bankruptcy
Straight bankruptcy.
Voluntary or involuntary petitions
will be held responsible if do not qualify under the means test
Not eligible for railroads, domestic insurance, credit unions, saving and loans, and banks
Chapter 11 bankruptcy
reorganization of a business debtor to pay debts
voluntary and involuntary petitions
must be court approved
Chapter 12 bankruptcy
adjustment of debts of a family farmer and family fisherman
only voluntary petitions
Chapter 13 bankruptcy (wage earner’s plan)
adjustment of debts of an individual with regular income
Permits only voluntary petitions
Less than $465,275 in unsecured and less than $1,395,875 in secured debt
Requirements for creditors’ involuntary petitions of a debtor into bankruptcy
-12 or more unsecured creditors with noncontingent claims: must be signed by three or more of these creditors whose aggregate claims are $18,600 or more
-less than 12 unsecured creditors with noncontingent claims: requires only one (more can sign) of these creditors with an aggregate debt of $18,600 or more to sign the involuntary petition.
Elements for all voidable preference transfers by debtors to creditors i n bankruptcy
A transfer of debtor’s property to a creditor;
For an antecedent or preexisting debt;
Made within 90 days of the filing of the petition;
Made while the debtor was insolvent (insolvency presumed for any transfer made within 90 days of the petition being filed).
Elements for all insider voidable preferences
An insider is an individual or business, that has a close relationship with the debtor.
A transfer of debtor’s property to an insider;
For an antecedent or preexisting debt;
Made within one year from date of the filing of the bankruptcy petition;
Made while the debtor was insolvent.
Order or Debtor’s estate distribution
Perfected Secured Parties
Claims for Domestic Support Obligations such as child support and alimony
Administrative Costs
Claims Arising in the Ordinary Course of Business
Employee Wages
Contributions to Employee Benefit Plans
Claims of Farm Producers and Fishermen
Consumer Creditors
Claims of Governmental Units for Various Taxes
Claims for Death or Personal Injury
All General Unsecured Creditors
If any Amount is Left, it Goes to the Debtor
