Reg

Question 1

A CPA is liable for common law fraud when there is MIJI

Answer 1

1-Misstatement or omission of material fact
2-Intent to deceive (this is likely scienter)
3-Justifiable reliance on the misstatement by the injured party
4-Injury

Question 2

Scienter is
IKI

Answer 2

frame of mind or motivation behind the action.
1-Intentionally disregards truth
2-Knowledge of fraud
3-Intends to gain monetarily by concealing fraud

Question 3

Agent duty to a principal
Lo
Ob
In
Ac

Answer 3

Duty of Loyalty
Duty of Obedience
Duty to Inform
Duty to Account

Question 4

Principal contractual duty to an agent. CRI

Answer 4

Duty to Compensate
Duty to Reimburse
Duty to Indemnify

Question 5

Casualty loss effect on Basis for depreciation: RD

Answer 5

Reduce the basis - can be
Deducted on income tax return

Question 6

What is the effect of the legal fees defending asset title on the adjusted Basis on asset

Answer 6

they are capitalized - increase the basis on the assets

Question 7

The following assets are section 197 intangibles and must be amortized over 180 months:

Answer 7

1-Goodwill
2-Going concern value
3-Workforce in place
4-Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers
5-A patent, copyright, formula, process, design, pattern, know-how, format, or similar item
6-A customer-based intangible
7-A supplier-based intangible
8-Any item similar to items (3) through (7)
9-A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals)
10-A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business
11-Any franchise, trademark, or trade name, and
12-A contract for the use of, or a term interest in, any item in this list.

Question 8

determine gain or loss of sale of a gift from a related party

Answer 8

If sales price is between fmv and donor basis - no gain nor loss is recognized

Question 9

Dependent has to file a return because of income when this 3 conditions are met:
Unearned incom >
Earned income >
Gross income >

Answer 9

If ANY of this conditions are met
1-Un earned income > 1,100
2-Earned income > 12,550
3-Gross income> (1,100 or Earned+350)

Question 10

To determine if father meets dependency test of Gross Income, What kind of income is NOT considered:

Answer 10

Tax exempt income, like social security (with limitations) municipal bonds, etc

Question 11

Income requirement for claim a dependant does not apply if

Answer 11

children under 19 or under 24 if full time student for at least 5 months

Question 12

Section 1250 gain is the difference between
AC
SL

Answer 12

ACRS and staightline depreciation

Question 13

Types of limitation on business losses for individual taxpayers - in order
BR
ARL
PA
EBL

Answer 13

1-the basis rules,
2-the at-risk limitations,
3-the passive activity limitations, and
4-the excess business loss limitations.

Question 14

Passive activity income does not include portfolio income like:

Answer 14

(interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business).