REG 1 Flashcards
True or False: Worker’s Compensation is included in gross income
False: it is excluded
True or False: Interest on state government obligations is taxable
False: it is normally NOT taxable
True or false: a tax refund and its interest is taxable
False: only the interest on the tax refund is taxable
True or false: unemployment compensation is included in gross income
True
True or False: Property Settlements are taxable
False. Child support also is NOT taxable
True or false: Interest on federal and state municipal bonds is taxable
False
AGI limitation for charitable contribution
10%
AGI limitation for property contributed to charity
30% of AGI
Contribution limit for a church?
50% of AGI
True or false: interest on auto loans are deductible
False
True or false: Premiums on disability insurance to pay worker if injured or unable to work are deductible as medical expenses
False: premiums on disability insurance are not deductible since they are made to replace lost income
What is included in AGI: Salary, Alimony paid to former spouse, inheritance from grandparent, and proceeds of a lawsuit for physical injuries
Salary and alimony
True or false: contributions of appreciated property are deducted at the lesser of FMV or the property’s basis if held longer than a year
False: deducted at FMV; DEPRECIATED property uses the lesser of basis or FMV
True or false: Gambling losses up to the amount of gambling winnings are subject to the 2% floor
False
True or false: employee business expenses are subject to the 2% floor
True
True or false: Self employment tax is an itemized deduction
False: Self employment tax is an adjustment to arrive at AGI
What is the deduction for investment interest expense if investment income is 10K, noninterest investment expenses of 8K and investment interest expense of 5K?
10K-8K= 2K , lesser of 2K or 5K –> 2K is the correct answer
Which of the following credits can result in a refund even if the individual had no income tax liability?
A: child and dependent credit B: earned income credit C:elderly and permanently and totally disabled child D: credit for prior year minimum tax
True or false: child care credit and retirement savings contribution credit are nonrefundable
True
If gross income exceeds $150,000, which method is used to estimate the annual payment of tax?
the annualization method; otherwise, if GI does NOT exceed $150,000 then you can use the seasonal OR annualization method
True or false: if there is an understatement of 30% of GI, then the statute of limitations on assessing additional tax is 3 years
False: the statute of limitations is 6 years since 30% is greater than 25%; otherwise if less than 25%, then the statute of limitations is 3 years
True or false: the cost of merchandise and the business expenses other than the cost of merchandise are both deductible when calculating business income
False: the cost of merchandise is ONLY deductible
True or false: Intercompany dividends are taxable
False
In a tax free incorporation, what percentage qualifies as “control”?
80%
True or false: Nonshareholder bonuses are deductible
True: only when they are paid within 2 1/2 months after the close of the tax year
Which of the following credits CANNOT be claimed by corporations: earned income, alternative fuel production, foreign tax credit, general business credit
Earned income credit; this credit can only be claimed by INDIVIDUALS
Two requirements for a personal holding company are?
more than 50% of the value is owned by 5 or fewer individuals and at least 60% of its AGI for the year is investment-type income
Distributions from complete liquidation are treated as what?
Capital gains or losses; it is treated as full payment for stock
What is the dollar amount for the accumulated earnings credit?
$250,000; this amount is deducted in order to find the amount that will be subject to the accumulated earnings tax
True or false: intangibles such as goodwill, licenses, franchises, trademarks, and covenants not to compete are amortized over 5 yrs using SL
False; 15 years!
True or false: intangible assets with indefinite lives are subject to amortization and an impairment test
False; only an impairment test; assets with FINITE lives are subject to both
True or false: Business gifts are deductible up to a maximum of $15 per recipient per year
False; deductible up to $25
True or false: Tax free income (municipal) increases basis
True
Fill in the blank: The owner’s basis in a S corp. is _____ by the owner’s share of profits and _______ by the owner’s share of losses
increased; decreased
Three characteristics of unrelated business income
derived from an activity that constitutes a trade or business, is regularly carried on, is not substantially related to the organization’s tax exempt purpose
True or false: using unpaid volunteers makes unrelated business income related
True
True or false: when you sell stock for a higher price than the related party’s purchase price, you use the donor’s basis
True; use the basis instead of the price you purchased the stock from the related party
TF: Property acquired as a gift has a rollover cost basis
True; do NOT use FMV
Real property is:
land and everything permanently affixed to it
TF: An automobile for personal use is a section 1231 asset
False; CAPITAL ASSET
TF: Capital assets do not include property held by the TP for investment
False; they DO include
Gain realized equation w/ boot paid:
FMV of prop. received - boot paid (+ boot received) - adjusted basis of prop. given up (includes deduction of ADPR.)
G/L recognized equation:
lesser of realized gain or boot received
New basis equation:
adjusted basis of prop given up + boot paid (- boot received)+ gain recognized (if any)
TF: When liabilities are assumed, they are considered as boot received when calculating the G/L recognized
False; they are only considered as “boot paid” to calculate the REALIZED gain and the adjusted basis
TF: Liabilities relived of from the TP is boot paid
False; boot RECEIVED
TF: Liabilities assumed by the TP is boot received
False; boot PAID
TF: Marketable securities are classified as capital assets if the TP is a dealer
False; TP must NOT be a dealer
TF: Common stock and partnership interests are NOT included in like-kind exchanges
True
Section 1245 dpr. recapture:
Lesser of the depreciation taken or the gain recognized
TF: Real property (i.e. buildings) is subject to the mid month convention under MACRS
True
TF: Personal property (machinery and equipment) is subject to the half year convention under MACRS
True
TF: Nonresidential property is depreciated over 40 years using SL
False; 39 years
TF: In a nonliquidating distribution, the partner takes the partnership basis for assets distributed
True
TF: Charitable contributions, dividend income, and capital losses are NOT separately stated items
False; they are not deducted when calculating the partnership’s ordinary income
TF: Contracts are ordinarily assignable
True
TF: In a type b reorganization, the stock of the target corporation is acquired solely for the preferred stock of either the acquiring corporation or its parent
FALSE; voting
In a type b reorganization, the acquiring corporation must have control of the target corporation _____ after the acquisition
immediately
Almost all ______ policies are personal to the insured and cannot be assigned
insurance
TF: Taxes assessed against local improvements are deductible if they are of a nature that tends to increase the value of the property being assessed
FALSE; NOT
One of the requirements of a simple trust is that the trust not distribute ________.
principal (corpus)
TF: “Short swing” transactions are illegal.
True
Unrelated business income of charitable trusts is taxed at ____ rates.
trust
TF: When a capital loss is carried to another year, it is treated as a short-term loss
True
The 5-year class includes automobiles, general-purpose light trucks, computers, and ____ ______ (typewriters, calculators, copiers, etc.)
office machinery
TF: The 7-year class includes heavy, special-purpose trucks, and office furniture and fixtures (desks, filing cabinets, etc.).
True
TF: A CPA is not liable to third parties due to mere negligence
True
TF: A CPA is liable to third parties due to gross negligence or fraud
True
Maximum allowable deduction for Section 179 expenses is :
$25,000; reduced dollar for dollar for purchases/expenses over 200,000
TF: Ordinary income from a S corporation is not subject to self employment tax
True
TF: If a person files a Schedule H, he needs to also file Forms 940 and 941
False; does NOT need to file Forms 940 and 941
$14,000 is the exemption amount for gifts 2014
True
Nonliquidating distribution JE:
Debit to Retained Earnings, Credit assets that’s distributed
Depreciable property used in a business is a Section ___ asset
1231
Section ____ only applies to the sale of personal property at a gain
1245
Section ____ applies to the sale of real property at a gain.
1250
TF: Funeral expenses are deductible on an individual’s income tax return.
NOT deductible
TF: The basis of contributed property is not the same in the hands of the partnership as it was in the hands of the partner who contributed it.
False; IS the same
Hobby expenses are reported on Schedule A as __ ___`
itemized deductions
Rule ___ prohibits the retention of client records after the client has demanded them, even if the engagement is terminated prior to its completion
501
Only gifts of present interests are eligible for the ____ annual exclusion.
$14K
For alternative minimum tax purposes, unreimbursed medical expenses must exceed___ of adjusted gross income in order to be deductible.
10%
TF: Nonliquidating distributions of a corporation will not reduce the retained earnings of the corporation
False; WILL reduce; nonliquidating distributions are also taxable as a dividend when earnings and profits exist
TF: A nonliquidating dividend in excess of a stock’s basis will be taxable as a capital gain
True
the PCAOB includes a chairman who may be a CPA if the individual has not practiced as a CPA for____years.
five
The estate tax return (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) is due ___ months after the date of death of a taxpayer
nine
TF: If a seller is a merchant, risk of loss passes to the buyer when the merchant delivers the goods to the buyer
True
The FASB’s Mission Statement recognizes that their mission is to improve the accounting standards that apply to ___ ____
nongovernmental entities
If the return omits an amount of income greater than 25% of the gross income shown on the return, the statute of limitations is ___ years
six
A ___ trust does not distribute principal (corpus)
simple
TF: Any foreseen or known third party who relied on the report can hold the CPA accountable due to negligence
True
TF: Home mortgage interest is not deductible for two personal residences subject to certain limits.
False
Risk of loss passes to the buyer upon tender of delivery to the buyer if the seller is a ____
nonmerchant
Taxpayers may contribute (and deduct) up to _____ to a traditional individual retirement account (IRA), and this may equal up to 100% of their earned income
5,500
TF: When a trust instrument is silent regarding a trustee’s powers, the trustee has the implied power to lease trust property to third parties
True
A partner’s share of ordinary income from an investment in a limited partnership reported in Form 1065, Schedule K-1 should be reported in Schedule __, Supplemental Income and Loss.
E
TF: When it comes to items received by bequest from a deceased person, all capital gains are forgiven at the time of death
True
TF: When engaged in illegal activities, a TP may NOT deduct cost of goods sold
False; they must deduct the cost of merchandise (COGS)
Rule ___ prohibits the retention of client records after the client has demanded them, even if the engagement is terminated prior to its completion
501
TF: A child using Form 8615 may not be subject to the net investment income tax (NIIT)
False; is
The NIIT is a 3.8% tax on the lesser of___ ___ ___or the excess of the child’s modified adjusted gross income
net investment income
A child is taxed on unearned income greater than _____
$2000
UNICAP rules do not apply if average annual gross receipts do not exceed $__ million for the past three years.
10
What is the annual exclusion amount for MFJ?
$14,000
TF: Mortgage interest on a personal residence is an itemized deduction
True
For liquidation distributions, the basis of property received is the _____
adjusted basis LESS cash received
A personal exemption is allowed of $___ for a trust that is required to distribute all of its income currently (i.e., simple trusts).
300
TF: FOR TRUSTS: According to IRC Section 265, expenses that are not related to a particular type of income (indirect expenses) must be allocated proportionately between taxable and nontaxable income.
True
TF: A qualified personal service corporation is not allowed to use the cash basis of accounting
False; it is!
TF: A trade acceptance is a three party instrument
False; a draft is; a draft concludes with a drawer ordering a drawee paying a third party a sum of money
For a cash-basis taxpayer, gain or loss on a year-end sale of listed stock arises on the:
trade date
TF: When property that is owned by the taxpayer is transferred to his controlled corporation (80% owned immediately following the transfer of property to the corporation), NO gain or loss is recognized if the exchange is solely for stock.
True
If a child has interest, dividends, and other unearned income of more than $____, part of that income may be taxed at the parent’s tax rate instead of the child’s tax rate
2,000
For a liquidating distribution, if the FMV of the property is greater than the liability, then the gain calculated is equal to:
The FMV - Adjusted Basis
TF: All offerings made under Regulation A will be exempt from the full registration requirements of the Securities Act of 1933?
True;
Work Opportunity Credit requirements:
Must work 120 hours
__% of wages credit for employees that work 120 - 400 hours
__% of wages credit for employees that work over 400 hours
Target group (e.g. ex-felon)
Began work before Jan 1, 2014
25; 40
Section 1244 STOCK loss is treated as ____ loss
ordinary
TF: A subchapter C corporation pays taxes on profits at the entity level and can deduct dividends paid (distributions to shareholders) before calculating the taxable income. Shareholders then pay tax again on those dividends.
False; CANNOT deduct dividends paid
Contributions to Coverdell education savings accounts must be made before the account beneficiaries are __ years old
18
TF: S corp distributions are NOT taxable to the extent of accumulated earnings and profits (C corporation earnings),
False; they are!
TF: A 100% redemption of a shareholder’s stock is one of the categories of redemptions that qualify to be treated as a sale or exchange
True
TF: Moving expenses are not an adjustment to AGI
False; they ARE
TF: LT capital loss and charitable contributions are separately stated items
True
TF: Losses are allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%.
False; NOT ALLOWED
How is aggregate deferral calculated?
Based on the number of months from the partnership year-end to the partner’s year-end, multiplied by the partner’s ownership percentage.
TF: A beneficiary may also serve as an executor for the estate.
True
TF: A formula for sharing losses will be applied to sharing profits.
NOT
Deductible medical expenses are those that exceed __% of the taxpayer’s adjusted gross income.
10
TF: For the year 2014, the maximum Section 179 expense is $20,000
False; 25K; if over 200K, reduce the allowable deductions dollar for dollar
The FASB’s Mission Statement recognizes that their mission is to improve the accounting standards that apply to ______ entities
nongovernmental
TF: The estate is allowed a deduction for state death taxes paid.
True
TF: Moving expenses are an itemized deduction
False; NOT an itemized deduction
TF: Federal income taxes are deductible in determining taxable income
False; NOT deductible
TF: Beneficiaries can be taxed on amounts distributed that are greater than the DNI in the trust
False; amount distributed will NOT be taxed on amount greater than DNI
TF: To win a civil case under Section 11 of the Securities Act of 1933, the plaintiff does not have to prove that the defendant had intent to deceive nor that the plaintiff had relied on the registration statement
True
For a cash-basis taxpayer, gain or loss on a year-end sale of listed stock arises on the: trade or settlement date?
TRADE DATE
TF: There can be no deduction for losses as a result of passive activities.
True
TF: An accruable expense is one in which the services have been performed but has been paid for
False; has NOT been paid for
TF: Passive activity losses are deductible in the year the partnership is disposed of if there are any unused passive activity losses
True
TF: Interest expense on money borrowed to fund business activities is deductible as an item of ordinary business expense on Schedule F (or Schedule C)
True
TF: Roth IRA contributions are deductible contributions, and they are not reported on the personal tax return
False; NOT deductible
TF: For a nonqualified stock option, if there is an ascertainable value, the person will be taxed on that amount at the date of grant
True
AGI limit for donated property is:
30%
TF: Interest on auto loans is deductible
FALSE; NOT deductible
For Keogh plans, earned income is net self employment earnings reduced by the amount of the allowable Keogh deduction and _____
half of the self employment tax
TF: Employee business expenses are NOT subject to the 2% of AGI floor
False; they ARE
Medical expenses in excess of 10% of AGI are _____ deductions
itemized
State income tax is OR is not an itemized deduction
IS
The deduction for investment interest expense is limited to net taxable investment income, which is taxable investment income minus all related investment expenses (_____)
other than investment interest expense
Tf: Mortgage interest is not deductible on Schedule A
False; it is deductible; so are real estate taxes
Utilities are or are NOT a deductible personal expense
NOT
TF: The loss on Section 1244 stock (worthless) is available transferee of the stock
False; ONLY TO THE ORIGINAL OWNER
A personal holding company deducts net long term capital gains less related federal income taxes and ____
federal income taxes
TF: PHC’s are not liable for the accumulated earnings tax
True
TF: You can use the preceding year method if you have no tax liability in the prior year
False
What business credit combines several nonrefundable tax credits?
General business credits
When a corporation dissolves it ___ its liquidation expenses
deducts
Shareholders treat property received in a complete liquidation of a corporation as full payment for their ___
stock
Minimum accumulated earnings credit is:
250,000
TF: When a transferring shareholder in control of a corporation receives boot, he/she recognizes a gain/loss
True
An S corporation or a C corporation, which has the most flexibility when choosing a tax year?
C corporation
____ income is a separately stated item and NOT included in net business income
Dividend
TF: Annual information returns are required for all exempt organizations
False
Unrelated business taxable income must be derived from an activity that constitutes a trade or business that’s regularly carried on and is ____________________
NOT substantially related to the organization’s tax exempt purpose
TF: An S corporation may not deduct compensation of officers
False; MAY DEDUCT
TF: A company can use the 100% of the PY if they did NOT have a tax liability in the PY
False
Any payment made after the initial due date of the return is subject to the __________ penalty
failure to pay
What is the penalty for failure to pay percentage?
Half a percent for each month OR fraction of a month up to a MAXIMUM of 25%
All amounts paid after the initial due date are subject to interest so what is the interest percentage?
1% for each month OR fraction of a month
What is the tax basis for a SH when the basis in its property contributed is 10 and the cash distributed to the SH is 15?
The tax basis is 25; the B/S basis is the FMV of the property
The different between the life insurance proceeds where the corp is a beneficiary and the cash surrender value of the policy is _____ to current E&P
ADDED
The premium on a life insurance policy where the corporation is a beneficiary will be ____ from current E&P
subtracted
Real property not used in a trade or business is a ___ ____
capital asset
TF: A realized loss is recognized in like-kind exchanges
False
TF: The basis of property acquired by bequest or inheritance is the property’s ______
Fair market value on the date of the decedent’s death
Gift tax basis rule: when the sale price is ____ both the FMV and basis, then there is no G/L
in between
Real property (buildings) is subject to the _______ convention
mid month
Nonresidential realty is depreciated over ____ years
39
Under Section 1245 recapture rules, you take the LESSER of _____ and ____
depreciation taken; gain recognized
TF:Guaranteed payments are taxed on Form 1065 and flow through Schedule K1 as ordinary income
True
A partner’s adjusted basis of a partnership interest is the adjusted basis of the property contributed minus
the partner’s percentage multiplied by any liabilities assumed by other partners
To determine the tax basis of a partner’s basis in the partnership, you should subtract any cash received AND
subtract the adjusted basis of the property distributed
Unrealized receivables and appreciated inventory for a partner in a partnership are considered ____ assets
“hot”
In a complete liquidation of a partnership, a partner recognizes gain only to the extent that the MONEY received ____ that partner’s adjusted basis in the partnership immediately before the distribution
exceeds
Any gain resulting from the sale of a partner’s share of unrealized receivables and/or appreciated inventories is treated as _____ ____
ordinary income
TF: When unrealized receivables and appreciated property is present, the sale of a partnership’s interest gain is recognized to the extent of those items
True
Guaranteed payments are both an allowable deduction to the partnership AND ____ ___
separately stated on a partner’s K1
TF: Distributable net income is the minimum amount of income that a beneficiary has to include in income from a trust distribution
False; upper limit
The maximum amount that can be transferred pursuant to a death tax free is:
5,430,000
TF: Complex trusts distribute corpus
True
TF: An exemption of $300 is available for ___ trusts
simple
TF: The charitable contribution deduction on an estates fiduciary income tax return is allowable only if the decedent’s will specifically provides for the contribution
True
TF: An estate or trust is allowed a standard deduction in preparing the fiduciary income tax return
False; NOT allowed
TF: Trusts may use a fiscal year
FALSE; trusts must use a CALENDAR YEAR
The federal estate tax return is due ___ months after the decedent’s death
9
TF: Capital G/L are _____ and must remain with the estate or trust to be taxed at that level
principal
When the creator is treated as the owner of a trust, it is referred to as a ____ trust
grantor
The income distribution is the LESSER of the DNI or the _____ _____
actual distribution to the beneficiary
Inherited assets automatically receive ___ __ treatment
long term
Office furniture is ___ year property and use the half year convention
7
Computers are ____ year property and use the half year convention
5
Nonresidential real property is ___ year property and use the _____ convention
39; mid-month
TF: Section 179 deduction can be used to create a loss and when a loss is present
False
TF: MACRS depreciation basis carries from year to year
True
TF: Section 1250 recapture applies to both gains and losses
False; ONLY TO GAINS
Circular 230:
Prohibits a practitioner from endorsing or negotiating refund checks issued to the client
A ____ transaction is a tax avoidance transaction
listed
TF: IRS publications are considered primary authoritative sources
False; NOT considered primary
Under the Ultramares rule, the accountant is liable for negligence to _____
parties in privity
TF: A suit for common law fraud may succeed only if the accountant acted with scienter
True
Negligence has 4 elements: duty of care, breach (lack of due care), causality, and ____
injury
Constructive fraud does NOT require ____
intent; constructive fraud only requires reckless disregard for the truth or falsity
TF: A corporation registered under the 1934 Act must file quarterly reports and proxy solicitations by mgmt
True
TF: Intrastate security offerings are not exempt from the registration requirements of the Securities Act of 1933
False; they are
_____ provides an exception from the full registration requirements
Regulation A
Under Section 11, a plaintiff must prove a false stmt in the registration statement and nothing else
False; AND damages
TF: Municipal bonds are exempt from registration
True
TF: Under Section of the Securities Exchange Act of 1933, the plaintiff must prove that he/she acquired the stock
True
TF: A purchaser does NOT have the right to rescind under section 12 of the 1933 Act if the issuer fails to meet disclosure requirements
False; a purchaser has the right
____ is a defense against section 11 of the Securities Exchange Act of 1933
DUE DILIGENCE
TF: Scienter must be present for a plaintiff to succeed with Rule 10b5 under the Securities Exchange Act of 1934
True
Scienter is a requirement for ____ fraud
actual
Only monetary damages are available under section ___ of the ___Act
11; 1933
When is the statute of limitations for Section 11 of the Securities Exchange Act of 1933?
One year after discovery and three years from the offering date
TF: Regulation A only requires an offering statement
True
TF: Interest income does appear on Page 1 as part of ordinary income on the partnership tax return
False; does NOT; it’s only Schedule K
TF: Charitable contributions appear on page 1 of the partnership tax return
False; they appear on Schedule K
TF: Retirement plans for non partners are reported as part of ordinary business income not on Schedule K-1.
True
TF: Depreciation and the section 179 deduction are reported as part of ordinary business income not on Schedule K-1.
False; ONLY depreciation; section 179 IS reported on Schedule K1
TF: With a novation, the original parties are NOT released
False; one of the original parties is released
TF: The parol evidence rule does not bar the intro of prior written agreements
False; it does bar the intro of that evidence; it does NOT bar the subsequent oral agreements
___ ___ is when a person in a position of trust takes unfair advantage of the rltp such that the other party’s free will to contract is overcome
undue influence
An immaterial _____ mistake is not a defense to a contract
unilateral
TF: In a contract, consideration must be exchanged simultaneously by the parties
False; consideration must be legally sufficient
A mutual mistake of ___ ____ will make a contract voidable
material fact
TF: The Statute of Frauds requires the party to be charged to sign the agreement
True
The statute of frauds wants a contract of goods in excess of $500 to be in writing unless _____
S.W.A.P - specially mftg goods, written confirmation, admission in court, performance
What is a firm offer?
An offer that’s open with the absence of consideration
The Sales Article does not provide ____ damages
punitive
If the seller is NOT a merchant, risk of loss is with the _____
buyer upon tender of the goods
TF: Option contracts are revocable
False; NOT revocable
TF: With nonconforming goods, the risk of loss remains with the buyer
False; it remains with the seller; the seller makes a perfect tender which means the goods should be free from defect
When a seller ships nonconforming goods w/o notifying the buyer that nonconforming goods are being shipped, this is a __________
breach of contract; if the seller notifies the buyer, then it’s a counteroffer
The four elements of negligence are:
causation, damages, duty, and breach of duty
TF: Signing without recourse does NOT negate contract liability
False; DOES negate contract liability
A promissory note is a ____ party instrument
two
What type of endorsement would the following words imply? “For collection only” and “without recourse”
for collection: restrictive; without recourse: qualified
A certificate of deposit is a ____
promissory note; a.k.a promise to pay
Minority of the maker (infancy) is a ____ defense against holders in due course
real
When an endorser signs without recourse, he/she does what?
does NOT undertake the contract liability of an endorser
The defenses against a holder in due course are the following: fraud in the EXECUTION, adjudicated insanity, material alteration, infancy, illegality, duress, suretyship defenses, statute of limitations, and _____
discharge in bankruptcy
TF: A holder in due course has priority over a prior perfected security interest
True
Where a debtor has paid more than 60% of the price of consumer goods collateral and the creditor repossesses the collateral after default, the creditor must sell the collateral within ___ days unless the debtor agrees otherwise
90
A purchase money security interest has priority over all other security interests if it is perfected within ____ days of the debtor’s possession
20
TF: A purchase money security in CONSUMER goods is automatically perfected
True
The ___ agreement must be signed by the debtor
security
The 3 requirements for attachment are :
debtor has rights in collateral, value is given by creditor, and there’s an agreement of the parties
A security agreement need NOT include the ____
amount
After repossession and sale, the first thing paid is the:
expenses incurred to repossess and sale the collateral
If a person has fewer than ___ creditors any one or more of them with unsecured and undisputed claims that aggregate at least ___ more than the value of any collateral securing the claim may file the petition
12; 15,325
TF: Under Chapter 7 bankruptcy, a trustee is appointed
True; NOT ch 11
Distribution of the bankruptcy estate is: secured claims paid FIRST, then priority claims SECOND, and remaining assets are :
split proportionally among the UNSECURED CREDITORS who have timely filed a claim
TF: When there are fewer than 12 creditors, any one creditor who’s owed 15,325 in unsecured debt or more may file an involuntary petition in bankruptcy
True
TF: There is a requirement for liquidation in a reorganization
False; NO requirement
TF: Savings and loan corporations may participate in Chapter 11
False; may NOT
A party involuntarily petitioned into bankruptcy under Ch 7 with a dismiss of their case can recover: court costs and attorneys fees, compensatory damages, and ______
punitive damages
What companies may not go into bankruptcy voluntarily or involuntarily?
Insurance companies
TF: An individual engaged in the business of farming cannot be involuntarily petitioned into bankruptcy
True
Tax claims have an ___ priority
8th priority; tax claims are NOT treated as secured but they are paid before general creditors
If an instrument has a condition that is already satisfied it is not ____
negotiable; negotiability requires unconditional promises
Requirements for negotiability:
writing, signed, unconditional, money only, payable at definite time or on demand (acceleration and extension are OK), pay to order/bearer
Maker is associated with what financial instrument?
Note
A drawer is associated with what financial instrument?
Draft
TF: Restrictions on the face of a financial instrument destroys negotability
True
To be a HDC:
give value (no gifts), good faith, have a good instrument (no liens), negotiable
A drawer is ____ liable
secondarily
A maker is ____ liable
primarily
TF: A drawer is primarily liable after it accepts it
True
Endorsers are ___ liable
secondarily liable; only primarily liable if primary party does not provide payment and notice is given to the secondary party
A PMSI has priority over who?
Other creditors in the same collateral
Requirements for attachment include:
agreements (authenticated record signed by debtor or taking possession), rights in collateral, and value
Order of priority for debtor:
Buyers in ordinary course of business, PMSI, non-PMSI (you ARE perfected), unperfected (only attached), and debtor
A writ of attachment is:
an order by the court to SEIZE a person’s REAL or PERSONAL property
A writ of garnishment allows:
a creditor to collect money from a debtor’s wages
Convertible, municipal, official, and debenture - which of the following bonds are a type of surety bond?
OFFICIAL
For sureties: a promise to pay the debt or default of another must be evidenced by:
a writing signed by the surety
TF: A minor may serve as an agent
True
TF: An agent is NOT liable on contracts that the agent makes on the principal’s behalf whether the principal is disclosed or undisclosed
False; ONLY IF THE PRINCIPAL IS UNDISCLOSED WILL THE AGENT BE PERSONALLY LIABLE
FUTA taxes are paid by the employer and are deductible as ________
business expense; these are not withheld and not payable on ALL wages
Directors are treated as independent contractors so their income is subject to ______
self employment tax
The Taft-Hartley Act governs:
labor relations
Traveler’s checks between 3K and 10K trigger _____ requirements but not _____ requirements
record keeping; currency reporting
TF: Members of a limited liability company DO have management rights
True
TF: A limited liability company will not be dissolved upon death, withdrawal or bankruptcy of an owner
False; IT WILL DISSOLVE
A limited liability company is taxed like a ____
partnership
TF: A limited partnership has 1 general partner and 2 or more limited partners that has no personal liability
False; one or more of both general and limited partners; limited partners do NOT take part in management but still can inspect books and records
TF: Preemptive rights provide a shareholder with a right of first refusal to buy a share of newly issued shares sufficient to maintain the shareholder’s proportionate share of rights in any newly issued shares
True
A partnership or _______ can be formed without filing any documents with the state
joint venture
In a subchapter S corporation, the entity is taxed like a _____ but the shareholders have limited liability of the corporate form
partnership
TF: In a C corporation, the shareholders, directors and officers are not personally liable for the obligations of the corporation
True
TF: An S corporation can have a foreign shareholder
FALSE; CANNOT
For a LLC, what must be filed with the secretary of state?
articles of organization
TF: If a member in the LLC assigns his interest without the other members consent, the assignee is entitled to the assignor’s profits
True
TF: In a limited partnership, a general partner can be an unsecured creditor of the limited partnership
False; ONLY SECURED CREDITOR
A limited liability company can have ____ owner(s)
one
An unincorporated joint venture will be treated as a ________
partnership
When a taxpayer personally uses a home, then a rental loss is _________
disallowed
TF: Interest on US T- bonds is not taxable
False; it is included in gross income
Self employment tax and self employment health insurance are _________ from GI
adjustments; they are NOT deducted from self employment earnings
Is the payment of tax still April 15th when the return is extended?
Yes
What date determines the status of the taxpayer?
December 31; exception: if a spouse dies during the year, the taxpayer can file a joint return
TF: Exemptions are pro-rated
False; NOT prorated
Qualifying child mnemonic is CARES which stands for:
Close relative, Age Limit, Residency and filing requirements, Eliminate gross income test, and Support test changes
Qualifying relative mnemonic is SUPORT which stands for:
Support (over 50%), Under a specific amount of taxable gross income, Prevents dependent from filing an income tax return, Only citizens, Relative OR Taxpayer lives with individual for whole year
Which is taxable: unemployment compensation or workers compensation
unemployent compensation is TAXABLE
TF: Interest on a deferred payout for life insurance proceeds is not taxable
False; NOT taxable
Property settlements are or are not taxable
NOT
Renting a residence for less than ___ days will classify the residence as PERSONAL
15; so depreciation, utilities and repairs are NOT deductible
TF: Passive activity is any activity in which the TP does materially participate
False; does NOT
If a TP withdraws from a traditional IRS before the age of 59 1/2, there is a _____% penalty
10
A withdrawal from an IRA will not receive a penalty if it’s used for buying a first home. The max is ______
10,000
The “mom and pop” exception for passive activity losses has a _____ limited and a phase out between 100K and 150K
25,000
TF: When a TP uses a 1040 EZ, receiving a state income tax refund from the PY state income tax return is included in gross income
True; 1040 EZ does not let a TP itemize deduction
Roth distributions are ______ but earnings grow tax free
post tax
Distributions from a traditional IRS are or are not taxable
ARE TAXABLE
