REG 2.0 Flashcards
How many creditors must join in filing a petition to commence an involuntary bankruptcy
If the debtor has 12 or more creditors, at least 3 creditors with unsecured claims at least $18,600
If the debtor has less than 12, then at least one creditor that has $18,600 of unsecured claims
What is the mailbox rule
Contract is effective when the offeree sends the contract back to the offeror
What are the surety’s rights against the principal
Exoneration - right to compel principal to pay
Subrogation - enforcement of creditors rights against principal
Reimbursement - right to receive from principal after surety pays
What is the parol evidence rule
Basically states that prior or contemporaneous oral statement’s and prior written statements to adjust the terms of a contract are inadmissible
What are the elements of a legally enforceable contract
CO AXL
Capacity (competent and adult)
Offer
Acceptance
X-change consideration
Legal
What are the types of defenses used by the defrauded
DUMIS
Duress
Undue Influence
Mutual mistake or Misrepresentation
Intoxicated
Statute of frauds or limitation
What contracts under the statute of frauds are supposed to be in writing
MY LEGS
Marriage
Year (contracts that can’t be performed within a year)
Land contracts
Executor contracts
Goods (sale of $500 or more)
Surety (to act as)
What defenses render contracts void?
FAPI
Fraud in the execution
Adjudicated incompetency
Physical duress
Illegality
What are express contracts, implied contracts, and quasi-contracts
Express contracts: any contract formed by words - written or oral
Implied contracts - when parties’ assent is inferred by their conduct
Quasi-contract: technically not a contract, but more of a remedy to prevent unjust enrichment
What are the exceptions to the rule that prohibits an accountant from showing workpapers to a third party without client permission
In response to a subpoena
to a prospective purchased of the CPA’s practice
to a state CPA QC review panel
in defense of a lawsuit brough on by a client
in defense of an investigation conducted by the AICPA
When GAAP requires disclosures of such information in the financial statements
What is the difference between fraud and constructive fraud
Constructive fraud is not intentional and is synonymous with Gross Negligence
What are the five elements of fraud
MAIDS
Misrepresentation of material fact
Actual and reasonable reliance by the defrauded party
Intent to induce reliance
Damages
Scienter
What are the elements of negligence
The defendant owed a duty of care
The defendant breached that duty by failing to act with due care
The breach caused plaintiff’s injury and damages
The CPA is liable to the client or foreseeable class of persons the CPA knows will rely on their work unless the the jurisdiction practices ultra mares
What are the standards to consider when disclosing information on a taxpayer’s tax return
Reasonable standard, at least 20% of success
Substantial Authority Standard > 40% of success
More Likely Than not Standard > 50% of success
What are the penalties for: Failure to file, failure to pay, negligence penalty with respect to unsubstantial understatement, and substantial penalty
Failure to file - 5% for each month up to 25% of unpaid tax
failure to pay - 0.5% for each month up to 25% of unpaid tax,
negligence penalty with respect to unsubstantial understatement - 20% of unpaid tax
substantial penalty - 20% of unpaid tax
What is the appeals process
If you don’t agree with the results of the audit,
First, the taxpayer will receive a 30 day letter notifying the taxpayer of the right to appeal. He/she has 30 days to request an appeal from the appeals officer
Second, if agreement has not been reached, the taxpayer will receive a 90 day letter which will state the taxpayer has 90 days to pay or file a petition with the U.S. Tax Court
If the taxpayer wished to litigate, they can take the case up to the U.S. District Court or the U.S. Court of Federal Claims , but they’re dues must have been paid to the IRS prior to doing so.
Remember that the U.S. District Court is the only court to have a jury.
What are the methods used to select a tax return for an audit
Statistical Models - picks them based on which returns are most likely to possess errors
Random Selection
PY audit yielded negative results
Information return discrepancy (W2 or 1099s don’t match the income on the return)
Deductions exceed established thresholds
What are the only situations before the IRS when a tax practitioner may charge a contingent fee?
IRS Examination (audit)
claim solely for a refund of interest and/or penalties
judicial proceeding
What are the different percentages used to to calculate the dividend-received deduction
If ownership of the corporation is:
Less than 20%, then use 50%
In between 21%-79%, use 65%
If greater than 80% use 100%
Note> this deduction is limited to the lesser of the Dividend*Ownership % or Taxable Income prior to DRD * Ownership %
Note 2> The DRD does not apply if it creates a a NOL
How are charitable contributions treated by corporations?
Can only take up to 10% of taxable income before charitable contributions, DRD, and capital loss carryback
What is the individual income tax formula
Step 1: Gross Income - Adjustments = Adjusted Gross Income
Step 2: AGI - the larger of Standard Deduction or Itemized Deduction = Taxable Income before Qualified Business Income Deduction
Step 3: Taxable Income Before QBI - QBI deduction= Taxable Income
Step 4: Taxable Income - Tax Credits + other taxed - payments = Tax due or refund
What is the criteria to be considered a qualifying child?
Qualifying Child - CARES
C - Close Relative
A - Less than 19 yos or 24
if a full-time college student
R - Residency: person must live with the taxpayer for at least half the taxable year
E - Eliminates the Gross Income test
S - Support greater than 50% is provided by the taxpayer
***ALL THE CRITERIA MUST BE MET FOR EACH RESPECTIVE DEPENDENT STATUS TO QUALIFY
What is the criteria to be considered a qualifying relative?
Qualifying Relative - SUPORT
S - Support test (see above)
U - under $4.7k of gross income
P - Prevents dependent as filing a joint return unless the MF J or Single would result in zero liability
O - Only citizens of U.S. or residents of U.S., Mexico, or Canada
R - Must be a relative OR
T - Taxpayer lives with individual (IF NON RELATIVE) for the whole year
What are the limitations of QBI and their criteria
Limitation based on Taxable Income
-Category 1: Taxable income is <= $182,100 (Single) or >= $364,200 (Married)
-Category 2: Taxable income is >$232,100 (Single) or > $464,200 (Married)
Limitation based on Qualified Trade or Business (QTB) vs Specified Service Trade or Business (SSTB)
-Category 1: Same as category 1 found in taxable income
-Category 2: Taxable income is >$232,100 (Single) or > $464,200 (Married)
***Taxable Income categories and category 1 of QTB or SSTB are multiplied by 20%
**If flowthrough proceeds come from SSTB, then the QBI deduction is $0
