REG Flashcards

Question

What is the partner's basis in a partnership when they provide a service in exchange for the interest?

Answer 1

The basis in the partnership interest is the amount of taxable service revenue provided by service provider.

Answer 2

The partnership inherits the holding period of the asset contributed. The exception of inventory- the holding period begins when contributed.

Answer 3

Tax treatment is the same as that of an individual taxpayer. However syndication fees are not deductible or amortized.

Answer 4

COGS Wages - except for partners Guaranteed payments to partners Business bad debt (if on accrual basis) Interest paid Depreciation (except section 179) Amortization (Startup costs; goodwill; etc)

Answer 5

Losses cannot be taken beyond a partner's basis in the partnership Losses in excess of basis are carried forward until basis is available

Answer 6

They appear in partner's income during the year in which the partnership's fiscal year CLOSES.

Answer 7

Health insurance; life insurance and other benefits paid on behalf of the partner are treated as guaranteed payments and are includable as self-employment income.

Answer 8

Partner's % share of ordinary income from partner's K-1 + Guaranteed payments - Partner's % share of section 179 expense from K-1 = Self-employment income (subject to SE tax)

Answer 9

Partner's basis is basis of goods exchanged or for services exchanged is FMV of partnership interest received. If purchased; purchase price less liabilities incurred = basis. For a gifted interest in a partnership; gift basis rules apply.

Answer 10

Foreign tax paid Investment interest expense Section 179 expense Charitable contributions Mnemonic: IFC179

Answer 11

Passive Income Portfolio Income 1231 Gain or Loss Mnemonic: PP1231

Answer 12

Beginning partnership basis + Capital contributions + Share of ordinary partnership income + Capital gains + Tax-exempt partnership income (DON'T FORGET!) = Ending partnership basis

Answer 13

Money distributed Adjusted basis of property distributed Partners's share of ordinary losses Partnership is relieved of a liability (considered a distribution)

Answer 14

Partnership getting a loan Capital contributions Ordinary income Capital gains Tax-exempt income

Answer 15

If the partnership gets a loan; this INCREASES basis. If partnership is relieved of a liability; this DECREASES basis.

Answer 16

They do not affect basis- they are already included in ordinary income; which affects basis.

Answer 17

1. Increase basis (all items; including tax-exempt income) 2. Distributions 3. Losses (limited to basis)

Answer 18

It must be the same as 50% of the partners and use the same tax year for 3 years once adopted.

Answer 19

The taxable year closes with respect to the decedent partner's interest ONLY.

Answer 20

1. They have inventories 2. Partnership is a tax shelter 3. Has a corporate partner 4. Gross receipts are $5 Million or more Exception: If gross receipts are $1 Million or LESS and Partnership maintains inventories; Cash method is ok.

Answer 21

When there is less than 2 partners (only one partner) When 50% of the partnership interests sell within a 12 month period- partnership IMMEDIATELY terminates.

Answer 22

Gain or Loss = Amount realized on sale - basis in partnership interest

Answer 23

Basis = Capital account + Liabilities assumed

Answer 24

As ordinary gain/loss. Items that fall into non-capital category would be unrealized receivables; appreciated inventory; and similar.

Answer 25

FMV of Assets (non-capital) - Adjusted basis of assets = Ordinary gain x Partner's % interest = Partner's share of gain Note: No gain or loss will be recognized by a partnership upon distribution of property.

Answer 26

1. Money distributed 2. Adjusted basis of unrealized receivables and inventory 3. Adjusted basis of other property Note: Only MONEY distributions will trigger a gain in a partnership distribution.

Answer 27

Only in a liquidating distribution.

Answer 28

1. Money was distributed 2. Unrealized receivables were distributed 3. Appreciated inventories were distributed Otherwise; no loss recognized.

Answer 29

Restricts a state's authority to tax interstate commerce

Answer 30

A state can't collect income tax on sales within its borders as long as the orders are filled and shipped outside of the state Applies to tangible property only Does not protect a Corporation in the state where incorporated Does not protect from taxes using metrics other than income (Ex: Sales Tax)

Answer 31

Uniform criteria for determining taxable income of multi-state corporations Also known as the Multi-State Tax Compact

Answer 32

Designed to ensure a company is not taxed more than once on its income Forces a corporation to segregate Business Income from Non-Business Income

Answer 33

Part of the corporation's regular course of business Includes acquisition of tangible and intangible property if such activities are part of the regular trade or business

Answer 34

Cash Basis. Note: This basis is NOT allowed for Corporations, Partnerships with a C-Corp partner, or for inventories.

Answer 35

*MSA/HSA contributions *Investment penalties for early withdrawal *Self-employed medical insurance premiums *Self-Employment Tax (approx. 50%) *IRA Contributions *Student loan interest (can't be another taxpayer's dependent) *Moving expenses *Alimony *Attorney fees in discrimination lawsuit

Answer 36

Investment interest expense in excess of investment income Charitable contributions Excess Section 179 Capital losses AMT Paid Passive Activity Losses

Answer 37

No carryback Can carry forward indefinitely

Answer 38

Carry forward to next year. Use in any year is limited to taxable income.

Answer 39

Indefinitely.

Answer 40

Can be carried forward 5 years.

Answer 41

It can be carried forward indefinitely. It may be applied against future *regular* income tax, but not against future AMT tax liability.

Answer 42

$3,000 net capital loss can be taken in each year, the rest is carried forward indefinitely. The loss retains its character (STCL or LTCL).

Answer 43

Corporate capital loss carryovers may be carried back 3 years and forward 5 years. Individual capital losses are carried forward indefinitely. Individual capital loss carryovers retain their character (STCL or LTCL). Corporate loss carryovers are carried forward as STCL only.

Answer 44

Gross Profit / Contract Price

Answer 45

Contract Price = Sales Price - Liability assumed by buyer

Answer 46

$1,000,000

Answer 47

$25 per person for gifts Service awards up to $400

Answer 48

They may only offset active business income. Note: W2 wages are considered active business income.

Answer 49

Only passive income such as rental income or limited partnership income. Note: Wages are ACTIVE (cannot be offset by passive) and Interest/Dividends are PORTFOLIO (cannot be offset by passive)

Answer 50

Neither. They are portfolio income.

Answer 51

Mid-year/Mid-quarter

Answer 52

For depreciation when 40% or more of all purchases occur in 4th quarter.

Answer 53

15 year straight line (S/L)

Answer 54

Up to $5,000 Amortized over 180 months Reduced dollar-for-dollar by amount over $50,000

Answer 55

On Schedule A: Amounts in excess of 10% of AGI may be deducted

Answer 56

Accident or disability insurance premiums are not deductible.

Answer 57

Must be a citizen of North America Must live with you, or if they do not, must be mother/father or a relative closer than a cousin. Benefactor must provide more than 50% support to the beneficiary.

Answer 58

Foreign INCOME and REAL ESTATE taxes are deductible. Foreign personal property taxes are NOT deductible. Foreign tax assessments are not deductible- they are added to the basis.

Answer 59

Gross investment income - investment expense in excess of 2% of AGI = net investment income Investment interest expense in excess of net investment income is deductible.

Answer 60

Investment interest expense on tax-free securities is not deductible.

Answer 61

They are deductible if they represent prepaid interest on purchase of a new home or improving a home. Refinance points are amortized over the life of the mortgage.

Answer 62

Deducted at fair market value (FMV), up to 30% of AGI

Answer 63

Deduction is taken for adjusted basis in the property, up to 50% of AGI.

Answer 64

No. It decreases the fair market value (FMV) of the property.

Answer 65

Take the lower of either A) Decrease in FMV or B) Basis in property (call this number GROSS LOSS) GROSS LOSS - insurance proceeds received - $100 - 10% of AGI = Deductible casualty loss

Answer 66

Deductible in excess of 2% of AGI Continuing Education - if required to keep your job Business travel 50% Meals and entertainment Union Dues Tax prep fees Legal fees to collect alimony Appraisal fees to value casualty loss of charitable contributions

Answer 67

Medical Casualty Gambling Investment Interest Expense

Answer 68

Must be resident of North America Under age 19, or under age 24 if a student

Answer 69

Must be citizen of North America Must live with you, unless mother/father or relative closer than a cousin You must provide more than 50% support to the individual

Answer 70

Child's unearned income - early withdrawal penalties - $1,050 - Greater than $1,050 or child's itemized deduction related to unearned income = Amount taxed at parents' rate

Answer 71

Yes, if they each own a small business. All non-business income is cash basis.

Answer 72

15.3% of net earnings from self-employment (Note: executor of an estate is NOT self-employment income)

Answer 73

A tax credit which takes the taxpayer's tax owed on the return below zero, resulting in a refund to the taxpayer. Earned Income Credit (EIC), American Opportunity Credit and the Additional Child Tax credit. Note: the REGULAR child tax credit is NOT refundable.

Answer 74

American Opportunity Credit - per student Lifetime Learning Credit - per taxpayer Note: The American Opportunity Credit is refundable.

Answer 75

The lesser of: 90% of current year's total tax 100% of prior year's total tax 110% of prior year's total tax (if AGI is $150,000 or more)

Answer 76

Deductible: Costs incurred to PRESERVE soil/water Non-deductible: Costs incurred to drain wetlands or prep for irrigation (i.e. improve land)

Answer 77

3 years, generally 6 years if 25% or more of gross income was omitted The clock starts on the LATER of the due date or the filing date of the return. There is NO STATUTE OF LIMITATIONS for either fraud or failure to file a required return.

Answer 78

Refunds must be claimed within 3 years of the return due date or within 2 years of being paid, whichever is later.

Answer 79

Premiums paid by an employer for coverage in excess of $50,000 per employee are includable in income.

Answer 80

When they are not in return for services rendered, AND The money is used *only* for tuition and books Note: Scholarships for room and board are includable in income.

Answer 81

State & municipal bond interest US EE Savings Bond interest (note: HH bond interest is taxable)

Answer 82

S-corporation (actually distributions) Life insurance

Answer 83

Payments made to make you whole are NOT taxable (i.e. to pay for losses of property, body parts or earning ability) Any payments for punitive damages ARE taxable.

Answer 84

No - similar to an award for damage to make a person whole.

Answer 85

Alimony IS taxable. Child support and divorce property settlements are NOT taxable.

Answer 86

NO, they are not deductible. However tax benefits are available through the adoption CREDIT.

Answer 87

2nd Year: (3rd year - 2nd year - $15,000) 1st Year: 1st Year Alimony Paid - Avg alimony paid in 2nd & 3rd years - $15,000 - Recapture from 2nd year =1st Year Alimony Recapture Total Recapture = 1st Year Recapture + 2nd Year Recapture

Answer 88

Can be carried back 2 years If any left, can be carried forward 20 years.

Answer 89

Traditional IRA = deductible Roth IRA = not deductible

Answer 90

They must be married at the end of the year. If one spouse dies, they must be married at the end of the year.

Answer 91

Must have a dependent child Must provide more than 50% of the child's support Must live with them more than 50% of the year

Answer 92

Must have a dependent child. Essentially gets MFJ status for the year of death + 2 tax years

Answer 93

Property transferred while taxpayer is living

Answer 94

$14,000 per year per spouse to each individual In order to get the exclusion, the recipient must immediately acquire a present interest in the property and get unrestricted access to the property and all of its benefits

Answer 95

If the Gift is an annuity, use Present Value to determine the gross Gift

Answer 96

Gross Gifts - 1/2 of Gifts (treated as given by spouse) - Total # of donees x $14,000 exclusion = Taxable Gift

Answer 97

Recipient must gain ownership and all rights to property to get the annual exclusion. If recipient merely gains a future ownership, then the present value of the Gift is 100% taxable to donor and cannot exclude from Gift tax calc

Answer 98

Tuition and medical expenses paid directly to the provider organization (note: NOT books or dorm fees) Political contributions Charitable Gifts Unlimited Gifts to spouse

Answer 99

If a loss on sale, basis is FMV on the date of the Gift If a gain on sale, basis is same as donor's basis No G/L if donor basis is less than sales price, and sales price is less than FMV @ Gift date

Answer 100

Calendar-year basis only Due April 15

Answer 101

Income distributions are optional Accumulation of income ok Charitable contributions ok Contributions using tax-exempt income are not deductible Allowed personal exemption of $100 Key Point: Distribution of Trust corpus (principal) ok

Answer 102

Income distributions mandatory Accumulation of income disallowed No charitable contributions Distribution of Trust corpus DISALLOWED Allowed personal exemption of $300

Answer 103

Trusts can have a Net Operating Loss Any unused NOL flows through to the beneficiaries

Answer 104

Expenses and fees from tax-exempt income are not deductible for either a Complex or Simple Trust

Answer 105

After the death of the donor

Answer 106

The First $5,430,000 is exempt with a 40% tax on amount above that

Answer 107

Medical expenses paid after death, but incurred within 1 year of death go on decedents personal tax return

Answer 108

Estates can have a Net Operating Loss Any unused NOL flows through to the beneficiaries

Answer 109

Cash and Property FMV at death, or alternate valuation.

Answer 110

When two non-spouses jointly own property FMV at death X % Ownership = Amount in Estate

Answer 111

1/2 of marital assets go to deceased spouses Estate

Answer 112

A, B, and C own property If A dies, FMV of As share goes to heirs

Answer 113

Property received through inheritance not income to recipient Property value is FMV at date of death or 6 months later If property is sold prior to 6 month date and the alternative date is used, FMV at date of sale is used to value property Basis in property automatically assumes LT holding period

Answer 114

DNI = Taxable Income Expenses (from income production) Trust beneficiaries only pay tax if earnings are distributed Estate beneficiaries pay tax on DNI, regardless if distributed

Answer 115

If a tax exempt organization has more than $1,000 of UBI, it must file a Form 990-T

Answer 116

Organized and Operated exclusively for exempt purposes No earnings can benefit an individual or private shareholder Cant attempt to influence legislation as a major part of its activities Cant campaign politically

Answer 117

Adjusted basis of property transferred + Gain recognized (if less than 80% ownership) - Boot received = Shareholder basis. If shareholders have 80% control after a property transfer, no taxable event occurs. If liabilities exceed basis on contributed property to a Corporation, a gain is recognized.

Answer 118

Transferor's basis + Gain recognized by shareholder = Basis OR FMV of Corporate Interest - Adjusted basis of property = Gain

Answer 119

They both use ADJUSTED BASIS, NOT FMV of property.

Answer 120

A loss on worthless stock is an ordinary loss.

Answer 121

Taxpayer must be original stock owner, and either an individual or partnership $50k (single) or $100k (MFJ) limit - remainder is a capital loss Must have been issued in exchange for money or property (not exchanged for services) Shareholder equity must not be in excess of $1 million Both common and preferred stock is allowed

Answer 122

Return is due regardless of income level Return is due 3/15 if on a calendar year basis, or 2 1/2 months after end of fiscal year An automatic six-month extension is available

Answer 123

Required if more than $500 in tax liability expected, or 100% current year liability 100% previous year liability Note: If Corporation had more than $1 Million in revenue the previous year, the first estimated payment must be based on the previous year and the remainder based on the current year.

Answer 124

``` Taxable Income +Tax Preference Items +/- Adjustments = Pre-ACE +/- ACE Adjustments = AMTI - 40,000 Exemption = Tax Base x 20% = Tentative Minimum Tax - Regular Tax Liability = AMT ```

Answer 125

Real Estate purchased between 1986 and 1999 using Straight Line Depreciation must depreciate over a useful life of 40 years Personal Property - use 150% MACRS, not 200% Construction must use % completion method

Answer 126

Municipal Bond Interest Life Insurance Proceeds 70% Dividends Received Deduction Organizational Expenditures must be capitalized, not amortized Note: AMT paid gets carried forward indefinitely, but never carried back

Answer 127

In year one In year two, if year one gross receipts were less than $5 Million In year three, if the average gross receipts for years 1 and 2 were less than $7.5 Million In year four and beyond, if the average from the previous 3 years is less than $7.5 Million

Answer 128

Corporations have no gain/(loss) from transactions involving their own stock, including Treasury Stock. If Corporation gets property in exchange for stock, there is no gain/(loss) on the transaction.

Answer 129

Amortization of costs begin the month the Corporation commences business activity If the Corporation doesn't amortize organization costs in year one, they can never be amortized Costs associated with offerings are neither deductible nor amortized

Answer 130

Sales -COGS= Gross Profit Gross Profit + Rent, Royalties, Gross Dividends, Capital Gains =Total Income Total Income - Deductions (No charitable contributions, Dividends Received Deductions (DRD), or NOL Carrybacks allowed) - NOL Carryforwards =Taxable Income before charitable contributions, DRD, NOL Carrybacks x 10% =Deductible Charitable Contributions

Answer 131

Excess charitable contributions get carried forward 5 consecutive years (No Carryback)

Answer 132

The Board of Directors can authorized charitable contributions up to 3/15 and have them count in the previous tax year

Answer 133

80% Interest = 100% DRD 20-79% = 80% DRD less than 20% = 70% DRD Only allowed if no consolidated return is filed. Qualified dividends from domestic Corporations only.

Answer 134

Only take DRD % x Taxable Income Note: If DRD brings a loss situation, then you can take the full DRD If Taxable Income remains after DRD, only a partial DRD (T.I.. x DRD %) is allowed

Answer 135

A loss on a sale to a Corporation where taxpayer owns a 50% or more interest is disallowed

Answer 136

Capital Losses are deductible only to the extent of Capital Gains

Answer 137

Net Short Term Capital Gains are taxed at ordinary income rates

Answer 138

Corporations can carry back losses 3 years and carry forward losses 5 years as a Short Term Capital Loss

Answer 139

Bad debt losses are classified as ordinary

Answer 140

No floor on Corporate casualty loss like there is with an individual taxpayer If destroyed, the loss is the property's basis (minus proceeds) Calculation: Adjusted basis - Proceeds from Insurance = Loss If partially destroyed, take the lesser of FMV or adjusted basis reduction (minus proceeds)

Answer 141

If loss includes NOL Carryforward, reduce the loss (add back the amount) to get the loss without the Carryforward Then, carry back the NOL 2 years starting with the earliest year and reduce the taxable income there and then move to the most recent year Any leftover NOL = This year's NOL

Answer 142

Unlike individual taxation, investment interest expense is not limited to investment income. Investment interest on tax-free investments are NOT deductible.

Answer 143

Schedule M-1 reconciles book to tax income before Net Operating Loss/Dividend Received Deduction Includes permanent differences (such as tax-exempt interest and non-deductible expenses) and temporary differences (accelerated depreciated tax depreciation, straight-line, etc.)

Answer 144

Reconciles beginning to ending retained earnings Beginning Unappropriated Retained Earnings + Net Income + Other Increases - Dividends paid - Other decreases = Ending Unappropriated Retained Earnings

Answer 145

Like M1, but for Corporations with $10M+ in assets

Answer 146

Consolidation election is binding going forward Dividends between them are eliminated, Advantage- Gains are deferred, Disadvantage- losses are deferred. One AMT exemption One accumulated earnings tax allowed Note: In order to consolidate, the parent must have 80% voting power and own 80% of the stock value

Answer 147

Distribution is a dividend to the extent of current accumulated earnings and profits (ordinary income) Then, remainder (if any) is a return of basis. Then, add'l remainder (if any) is a Capital Gain Distribution amount = FMV of Property + Cash - Liability Assumed Shareholder basis = FMV of Property + Cash received (basis not reduced by the attached liability)

Answer 148

1. Distribution is a dividend to the extent of current and accumulated earnings and profits 2. Shareholder basis is then exhausted 3. Remainder, if any, is a Capital Gain

Answer 149

Beginning Accumulated Earnings and Profits + Net Income + Gain on Distribution (if not already in book income) - Distribution (but cannot create a deficit) - NOL of prior years = Ending Accumulated Earnings and Profits

Answer 150

If Capital Property, then Capital Gain If Non-Capital Property, then Ordinary Income Gain characterization is the same for both the Corporation and the shareholder

Answer 151

Corporation: Depends on if property is capital in nature, otherwise ordinary loss Individual: capital loss only

Answer 152

No G/L to parent company

Answer 153

Consented by the Board of Directors but not yet paid Treat as if distributed by the end of the year

Answer 154

No banks or financial institutions can be PHCs 5 or fewer individuals own more than 50% of the stock 60% of the PHC's income must be from passive means PHC tax is self-assessing - 20% tax rate on undistributed PHC Income

Answer 155

Not Self-Assessing like a PHC

Answer 156

Take greater of $250,000 ($150,000 for Service Corps) or the legitimate balance based on future needs (i.e. purchasing a building)

Answer 157

Only individuals, estates and trusts can be shareholders Domestic only, no international S-corps or foreign shareholders Up to 100 shareholders allowed, and only one class of stock allowed Calendar tax year only

Answer 158

Election for S Corp status must be made by 3/15 and counts as being an S Corp since the beginning of the year To make election, 100% of the shareholders must consent

Answer 159

To terminate election, 50% of the shareholders must consent No S Corp election allowed for 5 years after termination S Corp termination effective immediately following an act that terminates status

Answer 160

These items are included on Schedule K, not in ordinary income: ``` Foreign Taxes paid deduction No Investment Interest expense Section 179 Deduction 1231 Gain or Loss Charitable Contributions Portfolio Income (dividends or interest) ```

Answer 161

Beginning Basis +Share of Income Items (including non-taxable income!) -Distributions (cash or property) -Non-deductible expenses -Ordinary Losses (but don't take income below zero) = Ending basis

Answer 162

FMV of Assets @ S-Corp Election Date - Adjust. Basis of Assets = Built-in Gain x 35% Corporate Rate

Answer 163

Secured interest must be supported by consideration given. Debtor must actually own the rights to the collateral or have possession. Secured interest much be recorded

Answer 164

Gets higher priority over others claiming rights to collateral after the perfection takes place Attachment must take place BEFORE perfection

Answer 165

By filing a financing statement By possessing the collateral

Answer 166

Store sells a consumer good on credit - Store retains security interest A bank finances the purchase of a consumer good - Bank retains security interest

Answer 167

If two parties are perfected; then the first one to file wins If neither party is perfected; then the first one to attach wins

Answer 168

Creditor holds priority over claims to collateral vs. unperfected security interests Beats perfected security interests filed after lien attachment Exceptions: Purchase money security interest; which has a 10 day grace period to be filed Buyers purchasing in the ordinary course of business are immune from security interests held by merchants

Answer 169

Only sales of goods are covered under the UCC.

Answer 170

Offer - You offer to sell something at a price Acceptance - the other party accepts Consideration - Something of value has been exchanged for the goods Note: The UCC only covers sales of goods.

Answer 171

You offer to sell something at a price and keep that offer open for a set period of time 3 months max Only merchants can make firm offers Must be in writing and signed

Answer 172

If value of goods sold is > $500; sales contract must be in writing Exceptions: Merchants can enter into oral contracts for > $500 items. Oral contracts are binding for special or uniquely-made items (i.e. custom cabinets or custom furniture that could not be sold if buyer reneged)

Answer 173

If terms are: FOB shipping point: Title transfers at point of shipment (i.e. when loaded on truck) FOB destination: Title and risk transfers once item is delivered

Answer 174

The seller has the right to sell the good and no one else can stake claim to that good

Answer 175

This good will do its intended purpose Can be disclaimed

Answer 176

This good is the right choice for you based on the seller's expert opinion Can be disclaimed

Answer 177

Manufacturers of goods cannot disclaim that their products will be safe Can be liable if negligent

Answer 178

Buyer can reject some or all of the shipment if the seller didn't perform as agreed and ship what was expected Must give notice Must give seller a chance to remedy the situation

Answer 179

Buyer must sue to recover damages within 4 years.

Answer 180

Land, Buildings fixed to the land, and Property under/above the land.

Answer 181

``` Must be in writing Signed Description of Property Delivered Recorded ```

Answer 182

Must be in writing Signed Description of property Delivered

Answer 183

No writing required if

Answer 184

Tangible property; such as cars; equipment; etc. Intangible property such as patents; trademarks; copyrights; etc.

Answer 185

Intent for it to be a gift Delivery of the gift Acceptance of the gift

Answer 186

Lost property - Finder's rights to property are less than Owner's Abandoned property - Finder's rights to property are greater than Owner's

Answer 187

Undivided interest in a portion of the property Upon death; property goes to decedent's heirs

Answer 188

Undivided interest in entire property Upon death; property goes to other joint tenants

Answer 189

This engagement helps the client be more efficient with personnel and resources in order to accomplish their goals.

Answer 190

Competence; Due Professional Care; Planning; Supervision; Obtain Sufficient Data; Serve Client Interest; Agreement: Written or Oral; Communicate w/ Client; Objectivity NOT REQUIRED: Independence

Answer 191

Express: Contract specifies what accountant will do Implied: Accountant performs without negligence

Answer 192

DUTY - DAMAGES - RESULT Duty - Accountant must have had duty to perform with due care exercised by an average accountant. Damages - The client experienced actual damages. Result/Causation - The damages were as a result of the negligence.

Answer 193

It is not the accountant's job to find fraud and they are not normally liable for not detecting it

Answer 194

When a normal audit following GAAS would have detected the fraud. When an accountant agrees to take on more responsibility than what is required under a normal audit. When accountant words the audit report to indicate this greater responsibility.

Answer 195

Misrepresentation - Accountant misrepresents MATERIAL fact(s) Scienter - Accountant commits scienter Damages - Client has actual damages. Reasonable Reliance - Client reasonably relied on the misinformation.

Answer 196

To report something knowing it is false. Characterized by reckless disregard for truth Intentionally conceal facts

Answer 197

Lack of privity defends against contract breach and negligence. NOT a defense against fraud.

Answer 198

Accountants are not liable to third parties unless the third party was an intended beneficiary of the engagement AND the accountant knew they would be relying on the financial statements.

Answer 199

Regular fraud Misrepresentation of Material Fact Scienter Damages Reasonable Reliance

Answer 200

Gross Negligence - reckless disregard for truth CPAs usually not liable for simple negligence; but Gross Negligence (aka Constructive Fraud) opens the CPA up to be liable to third parties.

Answer 201

Accountant must report discovered illegal activity to Audit Committee or Board of Directors If material in public company; BOD has *1 DAY* to notify SEC.

Answer 202

NO Federal Accountant-Client privilege for non-disclosure of private conversations to a court unless a particular state recognizes such a privilege. If your client tells you Yeah; I cheated on my taxes; a court could force an accountant to testify about that conversation.

Answer 203

1. Can be subpoenaed 2. Can be looked at by another CPA doing peer review 3. Property of the accountant who created them Note: Source documents supplied by client must be returned to client if they request them back; even if there is a billing dispute.

Answer 204

Accountants have no way of auditing individual's personal finances and are not required to do so when preparing a return

Answer 205

If a past error is found; accountant should inform client of this error. Contacting the IRS is NOT required. If client won't fix it; then the accountant should reconsider whether they want to do business with the client

Answer 206

Accountant must prepare the return in good faith and ask for more information if something is missing When recommending a tax position; the accountant should realistically believe that it would stand up under the scrutiny of a court

Answer 207

$1 Billion

Answer 208

General Solicitation and Advertising now allowed

Answer 209

Reg. A Capital ceiling raised from $5M to $50M

Answer 210

Governs Initial Public Offerings (not subsequent sales). Covers registration statements and accompanying information filed with SEC. Information must include audited financial statements & a prospectus. Note: Even if a company is exempt from registering under the 1934 Act; they still must adhere to the anti-fraud provisions of the Act

Answer 211

Banks; Commercial Paper; Farmers; Co-ops; Charities; Governments Also exempt: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can't occur within 9 months to interstate parties.

Answer 212

Issuer can issue $50M of securities per year and be exempt if they file a notice with the SEC Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt

Answer 213

Rule 504- Max Amount per year: $1M; Max Investors: Unlimited Rule 505 - Max Amount per year: $5M; Max Investors: 35 Unaccredited or Unlimited Accredited Rule 506 - Max Amount per year: Unlimited; Same as 505; but Unaccredited investors must be sophisticated

Answer 214

S-1 - Long Form or S-2 and S-3 - Less Detailed and preferred by issuers

Answer 215

``` Stocks Stock Options Stock Warrants Limited Partnership Interests - General Partnerships not allowed Bonds ```

Answer 216

Purchasers of securities only

Answer 217

Damages & Material Misstatements Only o Reliance on financial statements are not a requirement unless purchased more than a year after the security is registered Proving negligence is not a requirement

Answer 218

Accountant used Due Diligence Accountant followed GAAS Damages weren't caused by accountant's work Plaintiff knew of the material misstatements

Answer 219

The trading/selling of securities after the IPO

Answer 220

Form 10-K Annual Report - Must be audited Form 10-Q Quarterly Report - Must be reviewed; but not audited Form 8-K - A notice of a material event; Must be filed within 4 days of event

Answer 221

Purchases and Sellers of Securities

Answer 222

Damages Material Misstatements Reliance on financial statements Scienter or reckless disregard for the truth

Answer 223

Accountant must have procedures in place to: Determine if Going Concern is an issue Determine if any material related party transactions occurred Determine if material illegal acts occurred

Answer 224

Officers; Directors and 10% Owners

Answer 225

Proxy must give shareholders audited balance sheets from 2 most recent years o Requirement holds true even if one class of stock

Answer 226

An employer-paid tax. Must file return and pay even if only one employee works there. Deductible to company - Not deductible by the employee. Allows employers to credit the FUTA liability by the amount of State Unemployment Tax (SUTA) they pay.

Answer 227

Paid by Employer AND Employee - Employer withholds from employee's paycheck and must pay tax matching employee's withholding If employer under-withholds; they are required to make up the difference Self-employed individuals must pay both the employer and the employee share; which is Self Employment Tax People drawing Social Security may have their benefits reduced if they go back to work and earn an income

Answer 228

Employees injured on the job get protection; even if they messed up and caused the injury themselves Exception: If the employee intentionally harmed themselves; there is no Workman's Compensation

Answer 229

They protect people ages 40 and above at companies where at least 20 people are employed

Answer 230

Employers should promote a safe workplace and environment for their employees to work in Injury records must be kept Penalties can be both o Civil - $1;000 fine per day o Criminal - Could include imprisonment Employer can require a search warrant for OSHA to investigate their facilities

Answer 231

Sex Race Religion National Origin

Answer 232

EPA has the power to assess civil penalties for violating environmental laws like the Clean Air Act The EPA can sue violators Citizens can sue violators States can sue violators Citizens can even sue the EPA to force enforcement For hazardous waste sites: owners; operators; transporters; and lenders associated with the site can be held liable

Answer 233

The Dodd-Frank Wall Street Reform Act of 2010

Answer 234

Banking Institutions maintain healthy capitalization ratios

Answer 235

Limits banking institutions from owning more than 3% of a hedge fund's total ownership interest Limits banking institutions from owning interests in hedge funds that exceed 3% of their Tier 1 Capital (Common Stock + Retained Earnings + non-redeemable; non-cumulative Preferred Stock)

Answer 236

Relationships with hedge funds must be fully disclosed to regulators

Answer 237

Offer, Acceptance, Consideration, Proper form (oral or written), Legal subject matter, 2 Competent parties

Answer 238

Can be written or oral Must be in the form/method required by offeror Must be mirror image - i.e. no changes in terms

Answer 239

Must be accepted by intended party (offeree) Acceptance can only be made by a party who knows an offer has been made and has all of the facts - AKA a meeting of the minds They must intend to accept

Answer 240

It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree

Answer 241

If offeror dies or becomes insane before acceptance; offer is void. Contract is binding if acceptance occurs before death/insanity.

Answer 242

Offeror revokes and offeree receives revocation Offeree finds out prior to acceptance that offeror has sold the item In the case of an Option; offeror cannot revoke until the time of the option has elapsed Initial rejection by offeree doesn't void the option.

Answer 243

Some amount of consideration (like money) is put forth by offeror to keep the offer open for a stated period of time

Answer 244

These are contracts where someone becomes the exclusive provider of something in exchange for consideration Companies can't get locked in to one and then have market conditions force them to sell something at what has become an unreasonable price

Answer 245

Promises to donate are legally enforceable Basically; you can't tell a charity; Hey; if you buy this $100;000 piece of land; I'll pay for the building that will go on it; and then renege on your promise

Answer 246

Fraud in the execution Formed under extreme duress - extreme Illegal

Answer 247

Fraud in the inducement Party not competent to contract Formed under SIMPLE duress Undue influence

Answer 248

The contract is unenforceable. Example: Person signs a contract to pay $500.00 to have their lawn re-seeded but due to clerical error; it actually reads $5000.00

Answer 249

They must be in writing.

Answer 250

o Cannot be completed within one year o Involves the purchase of real estate o $500+ Sale of Goods o Co-signing and guaranteeing the debt of another

Answer 251

Prevents one party to a written contract from coming in after the fact and claiming that a certain conversation took place that conflicts with what is agreed upon in the written contract It also prevents using an oral argument to read into the meaning of what is written on paper If it's on paper; it trumps what was agreed-upon orally prior to the written contract Note: does not negate oral agreements made AFTER the contract or disallow oral words from clarifying ambiguous contract language.

Answer 252

Contracts are assignable to a third party beneficiary; but must be done so in good faith Obligations may be assignable- Assignor is still liable Assignor may be released from liability if other party grants a novation

Answer 253

Party under contract is bankrupt Party under contract dies or is incapacitated Party cannot physically complete the contract (i.e. They are in prison so can't finish building your house)

Answer 254

A promise to pay a specific amount. There are two parties involved - maker and a payee. It can reference other transactions without harming the instruments negotiability. Example: Bank Certificate of Deposit (CD)

Answer 255

A commercial paper involving three parties- a drawer; a payee and a drawee A drawer orders a sum to be paid to a payee by the drawee May be payable on demand or in the future

Answer 256

A check is a type of draft that is payable ON DEMAND; payable to order of drawer or bearer Drawer - person writing the check Payee - person being paid Drawee - the bank

Answer 257

A check is payable on demand; even if post-dated. A negotiable time draft is not payable until the date designated for payment.

Answer 258

Seller extends credit to Buyer Buyer agrees to pay Seller - Buyer has primary liability Seller is both Drawer and Payee - Seller has Secondary Liability

Answer 259

Transfers ownership to another party

Answer 260

Must be in writing Signed by drawer/maker Be without conditions for payment (other than limitations on payment sources) Amount of money must be stated Payable to order or bearer

Answer 261

An additional promise is stated in addition to the promise to pay (like the option to purchase Real Estate) The promise to pay occurs after some action by another party or an event; it cancels negotiability Cannot allow for an alternative such as payment or some other action by the maker Note: a stated amount of payment plus a stated % of interest is OK

Answer 262

Must have delivery and endorsement If paper is exchanged for value; transferor must give an UNQUALIFIED endorsement

Answer 263

Blank - Doesnt name a new payee; transforms into a bearer paper Special - Names a new payee; transforms into an order paper Restrictive - Adds restrictions; doesnt stop further negotiation Qualified - Payment not guaranteed; without recourse added to endorsement

Answer 264

Within 7 days

Answer 265

Written amount supersedes the numerical dollar amount. For example; if the words say One hundred dollars and the numerical amount states $1000.00; the value of the paper will be $100.00.

Answer 266

First in line to pay on the note/draft Maker of a Promissory Note has primary liability and must pay according to terms of the note With a Check; no party has Primary Liability Exception: Drawee (your bank) is primarily liable to pay if they certify - i.e. promise to pay

Answer 267

Drawers are Secondarily Liable if Drawee fails to pay a Draft Endorsers (the payee) are secondarily liable Holder in due course can hold Endorser liable Exception: Endorsed Without Recourse

Answer 268

Guarantees payment of a liability

Answer 269

Occurs when you negotiate commercial paper By signing; you warrant to all future parties By not signing; you warrant to current party only

Answer 270

Warranty of Title No defense will stand against it No material alteration No knowledge of bankruptcy proceedings All signatures are legitimate

Answer 271

Holding a negotiable instrument Taking instrument in Good Faith - Even if you buy a stolen note and you dont know that its stolen; youre still an HDC Having no knowledge of defenses again instrument; i.e. problems with the instrument Giving a *present value* for the instrument (a future value doesnt count)

Answer 272

An HDC takes an instrument free of Personal Defenses (LOSE vs. HDC) Lack of consideration/value given Breach of contract/warranty Duplicate payments Fraud (in the inducement only) Voidable contracts

Answer 273

A holder in due course takes an instrument subject to Real Defenses (WIN vs. HDC) Material alterations to the instrument Forgery Bankruptcy Maker not competent to Contract Fraud in the execution

Answer 274

Must have two or more partners. Must intend to engage in business for profit. Life of partnership is of limited duration in most cases. Agency/fiduciary relationship is created. Partnership interest is always considered personal property.

Answer 275

Yes; corporations and other partnerships can become partners of a partnership

Answer 276

Agreement can be very informal - either ORAL; IMPLIED or WRITTEN Intent is to make a profit

Answer 277

Must be WRITTEN if partnership activity falls within Statute of Frauds: A. Can't be completed in 1 year B. Even if partners reside in different states; not necessary unless within Statute of Frauds C. Neither dollar amount of transactions nor purchasing of real estate has bearing on whether partnership agreement must be in writing

Answer 278

Profit sharing is equal by default A. Unless partnership agreement says otherwise B. Unless specified; sharing of losses follows same pattern as sharing of profits

Answer 279

Joint Liability - Partners are collectively liable for debts/torts Several Liability - Partners are individually liable for debts/torts

Answer 280

Creditors must go after partnership assets first before suing partners individually

Answer 281

General Partners have joint control over the management of the partnership and its affairs Unanimous vote needed to change the structure of the partnership Each partner has full right to inspect partnership accounting and business Partner has the authority to assign their interest to another partner

Answer 282

1. Other party gets that partner's share of the profits and/or capital contribution. 2. Does NOT give assignee authority to vote on partnership business 3. Assignee does NOT have right to inspect partnership books 4. Assignor still maintains liability 5. Partner does NOT have the right to assign their interest in partnership property or allow partner's creditors to attach a lien.

Answer 283

Has authority to bind the partners to a contract.

Answer 284

A third party reasonably believes partner has authority to bind partnership to contract Cannot use apparent authority to add a new partner Cannot use apparent authority to sell or bind partnership assets

Answer 285

Partner not liable assuming notice given. Notice must be given to nullify apparent authority People who had knowledge of their role must be personally notified Public must be notified

Answer 286

Old partners: Jointly and severally liable unless creditors grant novation New partners: Only capital account at risk on preceding debts. For subsequent debts; they are joint and severally liable.

Answer 287

Partner's estate gets share of partnership profits and capital account Estate does NOT get any partnership assets Remainder of partners own partnership assets Heirs of decedent are not added as partners unless remaining partners unanimously agree

Answer 288

1. Creditors get paid; Partners can also be creditors 2. Distributions in arrears get paid 3. Partners get return of Capital accounts 4. Any remaining distributions Note: NO documents need to be filed with state to dissolve general partnership.

Answer 289

Governed by state L.P. laws Must file L.P. certificate with Sec. of State Only General Partners must be listed Future additions or subtractions of G.P. require certificate to be updated with state

Answer 290

Unlike G.P.; L.P. profits/losses are split according to capital contributions by default

Answer 291

True. A Limited Partner; however; cannot also be a General Partner and maintain limited liability.

Answer 292

No. Limited Partners are do not have a fiduciary responsibility to Limited Partnership

Answer 293

1. Right to inspect records of the business. 2. Can still vote on partnership business without losing limited liability 3. Can consult and advise partnership without losing limited liability (assuming they don't actually make the decisions)

Answer 294

1. They have no authority as an agent to bind the partnership 2. They can't participate in management decisions and maintain limited liability.

Answer 295

Limited partners are liable to the extent of their capital contributions only Exception - A Limited Partner (who cannot participate in management decisions) becomes involved with management decisions Becomes liable to third parties *IF* they knew of their involvement

Answer 296

Automatically happens 1. Once final General Partner leaves 2. Time specified in certificate lapses 3. Event specified in certificate happens 4. Unanimous consent by partners 5. Illegal activity

Answer 297

1. Majority vote required to form LLP 2. Articles of LLP filed with Secretary of State 3. Governed by laws of that State 4. Limited Liability Partnership must be in name 5. No General Partners - each LLP partner has limited liability - Exception: Negligence of partner or those under partner's supervision

Answer 298

Members can participate in management and retain limited liability Members don't own any interest in LLC property Members can assign interest; but not transfer it Members divide profits equally unless otherwise stated

Answer 299

Similar to a General Partnership; except generally; a JV is for a single business activity Example: two companies promote a concert Ability to bind other JV partners is limited JV partners still have a fiduciary responsibility to JV No state filings or paperwork necessary

Answer 300

Shareholders have limited liability to the extent of their capital contribution C Corporations have a perpetual life and continue even after shareholder death Corporations are a separate legal entity from their owners and can own property; sue; be sued Corporations must file Articles of Incorporation in state of governance

Answer 301

Ability to raise capital Limited liability - unless actions occur that pierce the veil Ease of ownership transfer

Answer 302

Commingling of assets Fraud Under-capitalization

Answer 303

Board adopts Corporate Bylaws to govern company business

Answer 304

Name; purpose; powers of Corporation Name of registered agent & incorporators Stock share classes authorized; par values Name of corporate officers NOT required

Answer 305

Double taxation

Answer 306

Promoter issues prospectus; arranges capital; and is a fiduciary of the corporation. A promoter may profit from work performed if the corporation is aware of it.

Answer 307

Promoter personally liable unless third party agrees to a novation and releases Promoter from liability; UNLESS the corporation adopts.

Answer 308

Corporations are only incorporated in one state Become adomestic corp. in that state Become aforeign corp. in any other state they do business in

Answer 309

Dividends are NOT a shareholder right Once declared; dividends become a liability to corporation

Answer 310

No voting rights Get first rights to dividends and liquidation Cumulative Preferred Stock dividends that go undeclared accumulate and Corporation must pay it before issuing dividends to Common Stockholders Participating Preferred Stock gives shareholder right to dividends in addition to what they get as Preferred Stockholders

Answer 311

Valid consideration must be given for shares Cash; property; or services performed No promises to pay or perform services

Answer 312

No Gain/Loss recognized on Treasury stock Have no voting rights Can be re-purchased below par Cannot produce dividends

Answer 313

An offer to buy shares of stock Must be accepted by corporation to be valid Offer cannot be revoked for 6 months Subscriber becomes liable once accepted

Answer 314

If committed within the normal scope of the employee's job Even if they were disobeying orders Per respondeat superior

Answer 315

Appointed by the Board of Directors Act as Agents Owe a fiduciary duty to the corporation Can have legal fees paid by corporation for defense in lawsuit brought on them from carrying out their normal duties (exception- suit brought against officers by shareholders)

Answer 316

Elected by shareholders Owe fiduciary duty to corporation Must act in good faith to avoid being liable for bad judgment Good faith is NOT a defense for negligence

Answer 317

Corporation management acting beyond what the Articles of Incorporation allow Shareholders can sue for Ultra Vires

Answer 318

Shareholders can inspect Board minutes and records only if request is in good faith

Answer 319

Boards must approve Shareholders must approve by Majority Disapproving shareholders can get an appraisal and get their stock back at current market price Merger does NOT need creditor approval

Answer 320

Shares owned only by licensed professionals (CPAs; attorneys; etc.) Limited Liability for debts Personal Liability for negligence

Answer 321

CAN be owned by Estates; Trusts; and Individuals CANNOT be owned by a C-Corporation

Answer 322

Avoidance of Double Taxation

Answer 323

No more than 100 shareholders allowed One class of stock allowed Shareholders must be US Citizens/Residents

Answer 324

Bankruptcy gives creditors protection from their creditors and stops them from either permanently (Chapter 7) or temporarily (Chapter 11 or 13) collecting a debt. The filing halts collection activity; grants automatic stay (with certain exceptions), and stops creditors from suing debtor.

Answer 325

``` Student Loans Income taxes from previous 3 years Alimony & Child Support Debts/judgements resulting from drunk driving Pension obligations Debts relating to SOX violations Debts arising from illegal activities Debts not listed in the bankruptcy filing ```

Answer 326

It doesn't; because the corporation is a separate legal entity. Under bankruptcy; corporations are dissolved Under bankruptcy; individuals are discharged

Answer 327

If a debtor fails to keep good records or falsifies documents; a discharge will be denied

Answer 328

Discharges all non-exempt debt Can only be filed every 8 years from previous Chapter 7 filing Voluntary or involuntary filing Certain businesses are disallowed from Chapter 7 bankruptcies - Railroads; Banks; Insurance companies; Savings & loans (think: 7th inning RBIs)

Answer 329

Must pass means test Your income must be below the median income for your state (Note - median; i.e. middle; not mean; i.e. average) Credit card companies made it harder for people to declare Chapter 7 when they lobbied Congress in 2005

Answer 330

In some cases; your creditors can force you into Chapter 7 or Chapter 11 BK Creditors must be able to prove that they are not being paid on time (i.e. debtor is insolvent) or that within the past 120 days the debtor assigned a custodian of the secured property If 12+ unsecured creditors - at least 3 must file; claims must be in excess of $15325 If less than 12 unsecured creditors - only 1 must file; claim(s) must be in excess of $15325 Upon filing; a judge will declare an order for relief unless the debtor protests

Answer 331

Charities Farms

Answer 332

If the debtor pays the court-assigned bond to keep a property in an involuntary BK; they can reclaim possession of their property from the interim BK trustee

Answer 333

Allows a business a reprieve from creditors Creates a payment plan for the debt Business remains in operation At least 2/3 of each debt class of creditors must consent to reorganization Ch. 11 Involuntary petitions are allowed

Answer 334

Similar to Chapter 11; but for individuals Gives individuals a reprieve from creditors Creates a payment plan for the debt Ch. 13 Involuntary petitions are not allowed

Answer 335

Represents the bankruptcy estate Can sue or be sued Oversees bankruptcy and watches for preferential creditor payments Oversees priority transfer of assets to creditors

Answer 336

Optional - Creditors decide Can be elected by creditors or can be appointed by the court

Answer 337

Trustee can void payments on antecedent (past) debts that occur within 90 days of a BK filing A Trustee cannot void a payment made to a creditor that is an even swap (contemporaneous exchange) and for new value A voidable preference must be on an old debt where the debtor is basically picking and choosing which creditors they send money to (AKA a voidable preference)

Answer 338

Made within One Year of BK to insider - Corporate officers/directors; Partners; Relatives Made within 3 Months of BK non-insider Creditor receives larger payment than BK liquidation would have granted

Answer 339

Superior to claims of other types of creditors Can take either collateral or cash proceeds from the sale of an asset If collateral doesn't satisfy amount owed; Secured Creditors become a general creditor for the difference.

Answer 340

1. Court Costs and Fees 2. Child Support & Alimony 3. Expenses from ordinary course of business during bankruptcy proceedings 4. Wages owed to employees 5. Retirement contributions within last 6 months 6. Consumer deposits for undelivered goods 7. Taxes 8. Other general unsecured claims

Answer 341

The bankruptcy trustee can act in the best interest of the creditors and assign the leases under contract to the creditors The trustee has 60 days to assume leases on equipment after bankruptcy is granted or the leases will be rejected

Answer 342

The pool of assets available to creditors until liquidation

Answer 343

Social security Disability payments Unemployment; Child Support; Alimony; Wages; Pensions; Annuities to the extent that they provide reasonable support for debtor and dependents

Answer 344

Inheritance/Insurance payments received within 180 days of filing for a Chapter 7 bankruptcy become part of the BK Estate

Answer 345

Court allows a creditor to garnish or take a portion of the debtor's paycheck

Answer 346

Lien on real property to secure payment for a repair/improvement done to the house A contractor builds an addition to your house and you won't pay. They can't repo your house; so they get a Mechanics Lien that sticks until you sell your house and they get paid

Answer 347

Applies to personal property like a car If the dealership does $500 in repairs to your car; you don't get the car back until you pay

Answer 348

A third party agrees to be liable for a loan Example: A parent co-signs on their child's car loan

Answer 349

A surety is primarily liable Surety can be released from liability if the creditor behaves in a way that increases the risk that they initially agreed to Surety can be released from liability if the debtor changes the loan agreement in a way that materially increases the surety's risk

Answer 350

Two sureties are guaranteeing the same debt Proportionately liable - If one cosurety is released from their obligation; then the remaining cosureties have their proportionate share reduced by the released party's percentage If one surety pays more than their proportionate share of the risk; then the other sureties must compensate them for the difference; which is called Right of Contribution

Answer 351

Similar to surety; but a guarantor is secondarily liable

Answer 352

Basically - your creditors have the right to collect from you; but not abuse you or embarrass you The can't contact you once you're represented by an attorney They can call other people to find out where you are; but they cannot identify themselves as collectors They must stop calling you at work if you send them a certified letter that says my employer doesn't allow me to take calls at work. They must call you only at reasonable hours of the day - according to your time zone; not theirs

Answer 353

Agency Law deals with someone's ability to bind you to a contract with a third party

Answer 354

Both parties must consent to the relationship and intend for an Agency relationship to exist Agent owes Principal fiduciary duty Principal doesn't owe Agent fiduciary duty A contract is NOT required and an Agency agreement is not based on Contract Law; Exception - If duties cannot be performed within a year; a signed writing is required

Answer 355

Actual Authority is what is expressly granted or is implied by the duties you expect the Agent to perform and is necessary to carry them out

Answer 356

When authority is expressly granted; it is implied that the agent has the authority to carry out the duties Does not include authority to sell or alter a business

Answer 357

Apparent Authority is based on the third party's perspective - they believe that the Agent has the authority to enter into a contract based on: * Prior dealings with agent * Agent's title leads the third party to believe they can enter into a contract * The Principal hires the Agent to carry out duties that normally carry with them the rights to enter into contracts

Answer 358

* Both Agent and Principal agree to terminate * Principal fires Agent * Agent fires Principal * Agent breaches their contract by doing something like violating their obligation to act as a fiduciary to Principal

Answer 359

* Let the public know * Let the people or entities that the Agent previously interacted with know * In cases of death; or Principal is otherwise not competent to contract; ALL authority is revoked

Answer 360

Agent acquires an ownership interest in the Agency Can only be terminated early (before the interest expiration date) by the Agent Unless the Agency has a specific time limit spelled out in a contract; the Agent's authority is irrevocable by the Principal

Answer 361

Employees are agents while acting within the scope of their duties. For employees who injure third parties while acting within the scope of their duties; both Employee and Employer are liable

Answer 362

Agents are liable for torts (civil wrongs) committed whether they had authority or not

Answer 363

Agents who act outside of their authority will be liable for the act Exception - Principal ratifies the contract which relieves Agent of liability In order to ratify; Principal must know all of the facts and must ratify before third party cancels agreement If Principal keeps the benefits of the contract; ratification is implied Contract must be 100% ratified or there is no contract

Answer 364

* Agent liable to third party even if acting within authority * Third party can sue both Principal and Agent if Principal becomes disclosed * Agent can then sue Principal

Answer 365

Must be in writing Must be signed by person granting the POA Ends upon death of Principal General POA - Agent authorized to handle all affairs Special POA - Agent authorized to handle only specific affairs