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CPA Exam Review > REG > Flashcards

REG Flashcards

1
Q

Taxable Basis=

A

FMV

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2
Q

Nontaxable Basis=

A

NBV

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3
Q

Is interest on state and local bonds/obligations tax exempt?

A

YES

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4
Q

If deductions were itemized in the prior year, the state or local refund is what?

A

Taxable

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5
Q

If deductions were standard deductions in the prior year, the state or local refund is what?

A

Nontaxable

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6
Q

What are the 2 taxes on the net business income?

A

Income Tax and Federal Self-Employment Tax

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7
Q

Gifts and inheritances are ____ ____ to the recipient

A

tax free

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8
Q

If cash basis is used for farm income, inventories are what?

A

Expensed

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9
Q

If accrual method is used for farm income, inventories are what?

A

Used and maintained

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10
Q

If vacation home is rented 15 or more days, expenses must be what?

A

Prorated between personal and rental use

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11
Q

If annuitant lives longer than the factor, then further payments are what?

A

Fully taxable

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12
Q

If annuitant dies before the factor, the unrecovered portion of the investment in the contract is counted as what?

A

Miscellaneous itemized deduction

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13
Q

Rental use expenses are deductible only to the extent of what?

A

Rental income (No rental loss allowed)

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14
Q

Is unemployment or worker’s compensation tax free?

A

Worker’s compensation

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15
Q

Life insurance proceeds are _____, but the interest income on life insurance proceeds is ______

A

nontaxable, taxable

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16
Q

Interest on state government obligations is generally what?

A

Nontaxable

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17
Q

Child support and property settlements are what?

A

Nontaxable

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18
Q

Gain or loss on a year-end sale of listed stock arises on the ____ date

A

trade

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19
Q

Suspended losses can be carry forward but not back, until what?

A

Utilized (property is sold)

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20
Q

Gambling losses are included where?

A

Schedule A as an itemized deduction

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21
Q

Accruable expense for an accrual basis taxpayer is what?

A

Repair completed prior to year end but not invoiced

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22
Q

Are proceeds from a line of credit line items of gross income for a business?

A

NO

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23
Q

How much can be excluded from gross income of payments made by employer on behalf of an employee’s educational expenses?

A

$5,250

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24
Q

Life Insurance Premiums above the first _____ of coverage are taxable income to the recipient and normally included in W-2 wages

A

$50,000

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25
Q

Are payments made by employer or benefits received from qualified pension, profit sharing and stock bonus plans taxable?

A

Benefits Received

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26
Q

Series EE bonds are tax-exempt when?

A

Used to pay for higher education

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27
Q

Taxpayers may deduct up to _____ of net passive losses

A

$25,000

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28
Q

Incentive Stock Options and Employee Stock Purchase Plans for employees are what?

A

Not taxable as compensation and capital gain/loss when sold

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29
Q

Does an employer receive a tax deduction for Incentive Stock Options and Employee Stock Purchase Plans?

A

NO

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30
Q

Earned income credit=

A

refundable

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31
Q

A taxpayer is not permitted to deduct a contribution to an IRA when what two conditions are present?

A

Excessive AGI (Over $193,000) or In Retirement Plan

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32
Q

Gross self-employment income * 20%=

A

Maximum Allowable Deduction

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33
Q

What are the itemized deductions that are always 100% allowed?

A

Gambling losses, Investment interest expense, medical expenses, casualty and theft

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34
Q

What are the deductible state, local, and foreign taxes included in itemized deductions?

A

Real Estate Tax, Income Tax (Deduct in year paid), Personal Property Tax, Sales Tax

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35
Q

Investment Interest Deduction for Individuals is limited to what?

A

Net Taxable Investment Income

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36
Q

Educational Loan Interest is what?

A

Adjustment (Max is $2,500)

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37
Q

What is the maximum allowable deduction for property given to charity?

A

30% of AGI

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38
Q

How long can excess charitable contributions be carried for?

A

Five Years

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39
Q

Is a deduction attributable to an activity not engaged in for profit allowed?

A

NO

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40
Q

Examples of consumer interest that are not deductible are what?

A

Auto loan, life insurance loans, bank credit cards, personal note to a bank

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41
Q

Alimony payments to a former spouse are what?

A

Adjustments to arrive at AGI

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42
Q

Deductible medical expenses are limited to the amount that exceeds ___% of the taxpayer’s adjusted gross income

A

10

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43
Q

Credits that reduce tax, but produce no refund

A

Personal Tax Credits

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44
Q

Credits that reduce tax and create a refund

A

Refundable Credits

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45
Q

How may taxes paid by an individual to a foreign country be treated?

A

As a credit against federal income taxes due

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46
Q

Retirement savings contribution credit, child and dependent care credit, education credits, foreign tax credits and adoption credits are all what?

A

Nonrefundable

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47
Q

What tax preference items are always add-backs?

A

Private activity bond interest income, Percentage depletion, Pre-1987 Depreciation

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48
Q

Are charitable contributions an add back for AMT?

A

NO

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49
Q

The credit for prior year alternative minimum tax liability may be carried:

A

Forward indefinitely

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50
Q

Increase or Decrease Adjustments to AMT=

A

PANIC

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51
Q

Increase (Itemized Deductions) Adjustments to AMT=

A

TIMME

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52
Q

What tax credit is permitted as a credit to reduce the AMT?

A

Foreign Tax Credit

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53
Q

Statute of limitations applies in general three years from the LATER of what?

A

Due date of return or date the return is filed

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54
Q

Refunds for Individuals must be on what form?

A

1040X

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55
Q

For a 30% understatement of gross income (anything over 25%), the statute of limitations is how many years?

A

6

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56
Q

If taxpayer had AGI in excess of $150,000 in the prior year, ____% of the prior year’s tax liability is used to compute the safe harbor

A

110

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57
Q

When a tax return has not been filed, any claim for refund must be made within ___ years from the time the tax was paid

A

2

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58
Q

In determining whether to provide advice in oral or in writing, the tax preparer should consider what?

A

Tax sophistication of the client

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59
Q

The CPA cannot sign or prepare a tax return with a know _____ position

A

frivolous

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60
Q

Unreimbursed employee business expense=

A

Itemized Deduction

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61
Q

What insurance premiums are deductible as medical expenses?

A

Medical and Hospital Insurance

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62
Q

What type of interest is an itemized deduction NOT added back for AMT?

A

Home Mortgage interest

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63
Q

Basis of property assumed by corporation is greater of what?

A

Adjusted basis (NBV) plus any gain recognized and Debt Assumed by Corp.

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64
Q

Excess of Liabilities over NBV of assets=

A

Boot

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65
Q

Interest income, rental income and royalty income received in advance are all what?

A

Temporary Differences

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66
Q

Interest income from Municipal Bonds, Life Insurance Proceeds and Federal Income Taxes not deductible on the tax return are all what?

A

Permanent Differences

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67
Q

What are the Charitable Contributions for C Corps limited to?

A

10% of Adjusted Taxable Income

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68
Q

Casualty Losses for C Corps are what?

A

100% Deductible

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69
Q

What are the costs included for organizational expenditures and start-up costs for C Corps?

A

Legal Services, Accounting Services, Fees Paid to the State

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70
Q

How is goodwill treated for C Corps?

A

Amortized on a straight line basis over 15 Years

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71
Q

What taxes are deductible for C Corps?

A

State income, city income, federal payroll tax

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72
Q

How are capital loss carryover for C Corps treated?

A

3 back and 5 forward

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73
Q

All taxpayers who have inventory are required to use what basis of accounting for purchases and sales, tax shelters, and business with greater than $5 million gross receipts for 3 Years are required to use what basis of accounting?

A

Accrual

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74
Q

There is a 100% DRD for whom?

A

Affiliated Corporations (Consolidated-Common Parents owns 80% of voting power or stock)

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75
Q

Small Corporations must pay the _____ of 100% of tax for current year or 100% of tax for preceding year

A

lesser

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76
Q

ACE is adjusted by adding back what?

A

Municipal bond interest, organizational expense amortization, life insurance proceeds, difference between AMT and ACE, 70% DRD

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77
Q

What is the tax rate on AMT for C Corps?

A

20%

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78
Q

What is the additional tax rate for accumulated earnings/personal holding companies tax?

A

20%

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79
Q

Corporate distributions are first applied to current E & P and then to accumulated E&P=

A

Dividend Income

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80
Q

No E & P=

A

Return of Capital (Not taxed) and Reduces Basis

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81
Q

No basis and No E & P=

A

Capital Gain Distribution

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82
Q

Are stock dividends taxable?

A

NO, unless shareholder has a choice (FMV)

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83
Q

If Corp. Distributes Property, what increases E & P?

A

Gain (FMV-NBV)

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84
Q

A corporation’s capital loss carryback or carryover is:

A

Always treated as a short-term capital loss

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85
Q

May corporations deduct any capital losses in excess of capital gains in a year?

A

NO

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86
Q

When does an unrealized “built-in gain” occur for an S Corp?

A

C Corp. elects S Corp status, FMV of assets exceeds basis of assets

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87
Q

When are fringe benefits for non-shareholder employees deductible?

A

The employees own 2% or less of S Corp

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88
Q

For an S Corp with No C Corp E&P, the distribution to shareholder is not taxable to the extent of what?

A

Basis in stock (Treated as Return of Capital)

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89
Q

For an S Corp with No C Corp E&P, the distribution to shareholder is taxable when?

A

Excess of basis of stock (Capital gain distributions-Taxed as Long Term Capital Gain)

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90
Q

What form is required to be filed if an organization is tax exempt and when is it due?

A

Form 990, May 15

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91
Q

What organizations do not have to file Form 990?

A

$50,000 or less gross receipts, churches, high school (religious), religious orders, internal support auxiliaries, societies-missionary related, tax exempt

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92
Q

An exempt organization is not taxed on unrelated business income of less than _____

A

$1,000

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93
Q

An ______ _______ does not include any activity where all the work is performed by the organization by unpaid volunteers

A

unrelated business

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94
Q

If corporation owns 80% or more of another, is there any dividend income?

A

NO

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95
Q

Recognized gain=

A

Lesser of realized gain or boot received

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96
Q

Losses are deductible for S Corps only to the extent of what?

A

Shareholder’s basis (Reduce it to 0)

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97
Q

Gain or loss=

A

Amount realized-Adjusted Basis of Asset Sold

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98
Q

What is the holding period for inherited property?

A

Long-term property

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99
Q

Earlier of Distribution date of asset or alternate valuation date (max 6 months)=

A

Alternate Valuation Date for FMV

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100
Q

Inherited property=

A

Step up (down) to FMV

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101
Q

What is the amount of exclusion for homeowner’s?

A

$500,000 for MFJ or $250,000 for single

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102
Q

What amount of taxable boot is recognized for involuntary conversions?

A

Extent of unreinvested amount

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103
Q

FMV of like kind property received - Deferred gain + Deferred loss=

A

Basis in like kind property when boot is received

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104
Q

Is a realized loss recognized in like-kind exchanges?

A

NO

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105
Q

What losses are nondeductible?

A

Wash Sale Loss, Related Party Transaction, Personal Loss

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106
Q

The holding period for related party transactions is what?

A

New owner’s period of ownership

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107
Q

Individual Capital Losses are recognized as ordinary income to the extent of what?

A

$3,000, carryforward forever

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108
Q

Net capital gains of a corporation are added to what?

A

Ordinary income and taxed at regular tax rate

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109
Q

Nonresidential Real Property is depreciated over how many years?

A

39 (Mid-month convention)

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110
Q

Residential Real Property is depreciated over how many years?

A

27.5

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111
Q

Section 1231 losses are treated as what?

A

Ordinary losses

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112
Q

Gains are treated as what to the extent of all A/D?

A

Ordinary income

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113
Q

If the sales price is over A/D and NBV, then treat that amount as what?

A

Long Term Capital Gain

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114
Q

Gain recognized=

A

Lesser of realized gain or boot received

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115
Q

Is a realized loss recognized in like-kind exchanges?

A

NO

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116
Q

In a partnership, if basis is below zero from liabilities, how much is the taxable gain?

A

The amount of negative basis, taxable gain increases basis to 0

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117
Q

Capital Account + Partner’s Share of Liabilities =

A

Partnership Basis

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118
Q

Related party losses for a partnership are what?

A

Disallowed

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119
Q

Related party gains for a partnership are what?

A

Ordinary income

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120
Q

Guaranteed payments are what?

A

Tax deductions to partnership and income to the partner

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121
Q

Partnership losses are what?

A

Limited to basis, excess is carryfoward indefinitely

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122
Q

Are nonliquidating distributions taxable or nontaxable?

A

Nontaxable, reduce partner’s basis (stop at zero)

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123
Q

Gain for a complete withdrawal liquidation is recognized to the extent of what?

A

MONEY received exceeds the partner’s basis

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124
Q

Liquidating distributions must what?

A

“zero out” account

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125
Q

What assets require gains to be treated as ordinary income?

A

Hot assets (Unrealized receivables, inventory, recapture income)

126
Q

Payments for an interest in partnership assets result in what?

A

Capital gain or loss

127
Q

Services are valued at what?

A

FMV (Ordinary Income)

128
Q

Withdrawals/distributions are not reported as income, yet will decrease the partner’s what?

A

Basis

129
Q

DNI=

A

Estate Gross Income - Estate Deductions + Adjusted Tax-Exempt Interest - Capital Gains

130
Q

Income Distribution Deduction is the lesser of what?

A

Actual distribution to beneficiary or DNI (less adjusted tax-exempt interest)

131
Q

All trusts (Form 1041) must use what year end?

A

12/31

132
Q

Simple trust is permitted an exemption of $____ in arriving at TI, Complex trust is permitted an exemption of $____ in arriving at TI

A

300, 100

133
Q

Form 706 (Estate Tax) must be filed within how many months after the decendent’s death?

A

9

134
Q

Gifts must be both what?

A

Present and Complete

135
Q

Does DNI include long-term capital gains allocable to corpus?

A

NO

136
Q

What kind of trust may distribute principal?

A

Complex

137
Q

______ (Form 1041) must use either Calendar Year or Fiscal year (15th day of fourth month after year-end)

A

Estates

138
Q

The generation-skipping transfer tax is imposed:

A

As a separate tax in addition to the gift and estate taxes

139
Q

Multiply the depreciation by .5 for Half year when what?

A

Asset is sold during the year

140
Q

More Likely Than Not=

A

> 50%

141
Q

Reasonable Basis=

A

> 20%

142
Q

Substantial Authority=

A

> 33% but

143
Q

Significant purpose is to evade federal income tax:

A

Tax shelter

144
Q

Position is not deemed unreasonable if the position is undisclosed and there is a what?

A

Substantial authority for the position

145
Q

Position is not deemed unreasonable if the position is disclosed and there is a what?

A

Reasonable basis for the position

146
Q

Position is not deemed unreasonable if the position is a tax shelter or a reportable transaction and there is a what?

A

More likely than not position

147
Q

What is the penalty for understatement of taxpayer liability for preparer?

A

$1,000 or 50 percent of the income of the preparer

148
Q

What are the due diligence requirements for tax return preparers?

A

Eligibility checklists, computation worksheets, reasonable inquiries to the taxpayer, record retention

149
Q

What does Circular 230 address?

A

Practice before the IRS of “practitioners”

150
Q

A practitioner may never charge what fee?

A

Unconscionable fee (may charge contingent fee)

151
Q

Does state law allow practitioner to retain the records in the case of a fee dispute?

A

YES

152
Q

Who is the only entity with the power to suspend or revoke a CPA’s license?

A

State Boards of Accountancy

153
Q

Are tax services allowed if pre-approved by the audit committee?

A

YES

154
Q

What must forms 10-K and 10-Q include?

A

Internal control report

155
Q

Under the provisions of the Sarbanes-Oxley Act of 2002, registered public accounting firms are required to prepare and maintain audit work papers for how many years?

A

7

156
Q

What are the two requirements for U.S. District Courts?

A

Must pay disputed tax liability and sue IRS, heard before one judge, jury trial

157
Q

Failure to file penalty is how much of the amount of tax due (Tax liability-Taxes Withheld-Taxes Paid?

A

5%

158
Q

Failure to pay penalty is how much of the amount of unpaid tax?

A

1/2 of 1% per month

159
Q

Negligence penalty with respect to an understatement of tax is how much?

A

20% of the understatement of tax, defense is reasonable basis

160
Q

Penalty with respect to a substantial understatement of tax is how much?

A

Disclose: Reasonable Basis, Not Disclosed: Substantial Authority

161
Q

What is a nationwide court that has jurisdiction over most claims for money damages against the U.S., one of which is tax refunds?

A

U.S. Court of Federal Claims

162
Q

Constructive Fraud (Lack of even slight care)=

A

Gross Negligence (Acts recklessly)

163
Q

What are the 5 elements of fraud?

A

Misrepresentation of material fact, scienter or intent to deceive, actual and justifiable reliance, intent to induce reliance, damages

164
Q

Is privity a defense for fraud?

A

NO

165
Q

Lack of reasonable care=

A

Ordinary Negligence

166
Q

To whom is the CPA liable for fraud?

A

Everyone who relies on the F/S

167
Q

Section 11 of 1933 Act (IPO) =

A

Liable to a plantiff who suffered a loss, acquired the stock, F/S contained a material misrepresentation

168
Q

Rule 10b-5 of 1934 Act (Fraud)=

A

same as section 11 + misrepresentation made with SCIENTER, plaintiff RELIED on misrepresentation

169
Q

For negligence, the general rule is that accountants are liable to whom?

A

Anyone in a class (such as potential lenders or investors) of third parties whom the CPA knows will rely on the opinion of the financial statements (forseen person)

170
Q

Under the “Ultramares” rule, to what party will an accountant be liable for negligence?

A

Persons in Privity of contract with the CPA (clients)

171
Q

What is the best defense for fraud?

A

Lack of scienter (good faith)

172
Q

In a common law action against an accountant, lack of privity is a viable defense if the plaintiff:

A

Is the client’s creditor who sues the accountant for negligence

173
Q

What must the plantiff prove in a negligence case (otherwise known as breach)?

A

Failure to act with due care (Reasonable Care)

174
Q

What are the elements of negligence?

A

Duty of care, breach, caused injury, damages

175
Q

What type of fraud requires intent?

A

Actual fraud

176
Q

What is the goal of the Securities Act of 1933?

A

Assure investors have sufficient information on which to make an informed investment decision (doesn’t guarantee accuracy)

177
Q

When may securities be sold?

A

After registration is effective (20 days after filing)

178
Q

What securities never have to be registered under 1933 Act?

A

Banks, Not for Profit, Government, Railroads, Short-term commercial paper (9 months or less maturity date), insurance policies

179
Q

1933 Act does not apply for Regulation D-Private Offering Exemption , which include what rules?

A

504, 505, 506

180
Q

Under Rule 505, if only accredited investors purchase, is disclosure required?

A

NO

181
Q

Under 505, if any unaccredited investors purchase, is disclosure required?

A

YES, to all investors

182
Q

Is general solicitation generally prohibited under rules 504, 504, 506?

A

YES, always prohibited for rule 505

183
Q

Does Rule 504 required any specific disclosure to investors prior to the sale?

A

NO

184
Q

Defendants are not liable if they can prove they used what?

A

Due dilligence

185
Q

What are the two types of companies who must register their securities under 1934 Act?

A

Shares traded on a national exchange, companies that have more than $10 million in assets and at least 2,000 shareholders or 500 unaccredited shareholders

186
Q

What must be reported under 1934 Act?

A

5% or more owners, tender offers, insider trading (more than 10% stockholders), proxy solicitations and proxy statements

187
Q

Are intrastate securities offerings exempt from the registration requirements of the Securities Act of 1933?

A

YES

188
Q

What does the registration statement include?

A

Prospectus, Information about the Securities being issued (audit BS and profit and loss statement, principal purposes, anything affecting value, amount of stock and debt, names of >10% owners)

189
Q

What are the three requirements of a legally enforceable contract?

A

Offer and Acceptance, Exchange of Consideration, Lack of Defenses

190
Q

To create a contract, an offer must be accepted before what?

A

It is terminated

191
Q

Acceptances are generally effective when they are what?

A

Sent (Mailbox Rule), offeror can opt out to say they must be received to be effective

192
Q

Consideration must be what?

A

Legally Sufficient by both sides

193
Q

A promise made by one party and detrimentally relied upon by another can be enforced without what?

A

Consideration

194
Q

Punitive damages are only for what?

A

Fraud

195
Q

Fraud in the execution=

A

Void

196
Q

Fraud in the inducement=

A

Voidable

197
Q

A unilateral mistake is NOT a defense to a contract, unless what?

A

Mistake is a material fact(other party knew or should have known of the mistake)

198
Q

What is the statute of limitations for common law?

A

4-6 years (measured from date of breach)

199
Q

What are contracts requiring a writing?

A

Multiyear contracts, land contracts, sale of good of $500 or more, surety contracts (promise to pay debt of another)

200
Q

Accord=

A

Same parties, new agreement

201
Q

Novation=

A

Same agreement, substituted party

202
Q

What does the parol (oral) evidence rule prohibit?

A

Introducing evidence at trial or oral or written statements made prior to or contemporaneously (during) with the contract

203
Q

Under common law, if there has been a material, intentional or substantial breach, the nonbreaching party can what?

A

Be discharged from the contract

204
Q

Under common law, if there has been a minor breach, the nonbreaching party is what?

A

Entitled to damages

205
Q

Under contract law a nonbreaching party cannot recover for damages that could have been what?

A

Reasonably avoided

206
Q

Intended beneficiaries (donee and creditors) are third parties, can the contract be enforced?

A

YES

207
Q

Assignment of rights=

A

party wants to give contract rights to a third party

208
Q

Assignment of duties=

A

party wants to have a third party perform contractual duties

209
Q

What are the elements to qualify as a firm offer?

A

Seller must be a merchant, offer must be in writing, offer must give assurances if will be kept open for a certain time (no longer than 90 days)

210
Q

Under common law contracts the terms of an acceptance must _____ the terms of the offer

A

mirror

211
Q

Under UCC, a shipment of nonconforming goods is what?

A

An acceptance and a breach of contract, exception is if seller notifies buyer (then counteroffer)

212
Q

What are the four exceptions for sale of goods over $500 being evidenced in writing?

A

specifically manufactured, written confirmation, admitted in court, contracts that have been performed

213
Q

In a noncarrier case, when does the risk of loss pass for a nonmerchant seller?

A

Tender of Delivery

214
Q

In a noncarrier case, when does the risk of loss pass for a merchant sale?

A

Actual Delivery

215
Q

In a carrier case, when does the risk of loss pass in a shipment contract?

A

On Delivery to the carrier (In the truck)

216
Q

In a carrier case, when does the risk of loss pass in a destination contract?

A

Goods reach the destination

217
Q

For risk of loss to pass, goods must be what?

A

Identified

218
Q

If the seller sends nonconforming goods, the risk of loss remains on whom?

A

Seller, regardless of shipping terms

219
Q

Can any implied warranty be disclaimed?

A

YES

220
Q

Strict products liability focus is on product, must prove:

A

Defective product, defect caused injury, defect made the product dangerous, seller was in the business, product reached user without substantial change

221
Q

When can the true owner not recover stolen goods from 3rd parties?

A

Entrusting the goods to a merchant, accepting a bad check

222
Q

When can the buyer not inspect the goods prior to payment?

A

Cash on delivery sale

223
Q

Warranty of title can only be disclaimed how?

A

specifically (I do not warrant title), or by circumstance

224
Q

Express warranties must be part of what?

A

Basis of bargain between the buyer and seller

225
Q

Insolvent=

A

Liabilities > FMV

226
Q

A check is a type of draft with what two characteristics?

A

Drawn on a bank and payable on demand

227
Q

What are the qualifications to be a negotiable instrument?

A

Be in writing, signed by the maker or drawer, contain an unconditional promise, fixed amount of money, be payable on demand or at a definite time, be payable to order or to bearer

228
Q

If an instrument is not negotiable, there can be no what?

A

Holder in Due Course

229
Q

If the endorsement is blank, what is the instrument?

A

Bearer

230
Q

Bearer paper requires what?

A

Delivery

231
Q

Order paper requires what?

A

Delivery and Endorsement

232
Q

If the endorsement is special (names a particular person), what is the instrument?

A

Order

233
Q

An endorsement that adds “without recourse” is what kind?

A

Qualified endorsement (No contract liability)

234
Q

What are the 4 qualifications to being a holder in due course?

A

For value, good faith, without notice of defenses or claims of ownership, negotiable

235
Q

Holder in due course is free from what defenses?

A

Personal

236
Q

What are the real defenses (maker/drawer doesn’t have to pay anyone)?

A

Fraud in the execution, Forgery, Adjudicated insanity, Material alteration, Infancy, Illegality, Duress, Discharge in bankruptcy, Suretyship defenses, Statute of limitations

237
Q

Fraud in the inducement, breach of contract, failure of consideration and mistake are all examples of what?

A

Personal defenses

238
Q

Who is primary liable and who is secondarily liable for a note/cd?

A

Maker=Primarily, Drawer=Secondarily

239
Q

Who is primary liable and who is secondarily liable for draft/check?

A

Drawee (if they accept)=Primarily, Drawer and endorsers=Secondarily

240
Q

Restrictive endorsement=

A

“For deposit only”

241
Q

What does Article 9 apply to?

A

Security interests in personal property or fixtures

242
Q

What are the three requisites for attachment?

A

Agreement (Authenticated Record or Creditor’s taking possession of control), Value must be given by the secured party, debtor must have rights in the collateral

243
Q

Record of the security agreement must be authenticated by whom?

A

Debtor

244
Q

What are the five methods of perfection?

A

Filing, taking possession of the collateral (best way), control, automatic perfection, temporary perfection

245
Q

A security interest is perfected by filing what?

A

Financing statement (Effective for 5 years)

246
Q

PMSI in consumer goods is what?

A

Automatic Perfection

247
Q

What are the priority rankings for collateral?

A
  1. Buyer in the ordinary course of business, 2. Perfected PMSI, 3. Perfected Non-PMSI, 4. Unperfected Security interest, Debtor
248
Q

PMSI in equipment has priority over other perfected security interests if filed when?

A

Within 20 days of the debtor getting possession of the collateral

249
Q

What are the effects of a sale of collateral?

A

Subordinate claims are wiped out and there is no right of redemption by subordinate security interest holders or the debtor

250
Q

In consumer goods case where the debtor has paid at least 60% of the loan the secured party must sell the collateral within ___ days after repossession

A

90

251
Q

What purchaser will own consumer goods free of a perfected security interest in the goods?

A

A consumer who purchases the goods in the ordinary course of business

252
Q

Proceeds of a default on sale are distributed in what order?

A

Pay the expenses of repossession and sale, creditors with a security interest in the collateral, surplus is paid to the debtor

253
Q

A security agreement must include what?

A

name and address of the debtor, a description of the collateral and the debtor’s authentication

254
Q

Trustee is required for what types of bankruptcy?

A

Chapter 7 and Chapter 13

255
Q

Trustee is not required for what type of bankruptcy?

A

Chapter 11 (Reorgs)

256
Q

Chapter 7 is permitted if what?

A

Average monthly income multiplied by 12 is equal to or less than the state median income

257
Q

Debtor may rebut the presumption of abuse by showing what?

A

Special circumstance (serious illness or call to duty)

258
Q

Who may be a debtor in Chapter 7 bankruptcy?

A

I,P,C (No railroads, savings institutions, insurance companies, banks, small businesses)

259
Q

Is chapter 13 voluntary or involuntary?

A

voluntary only (constitutes automatic order for relief)

260
Q

To file an involuntary, If the debtor has _____ than 12 creditors, any one or more creditors who are owed at least $15,325 in unsecured debt may file

A

fewer

261
Q

To file an involuntary, If the debtor has ____ than 12 creditors, at least three creditors who are owed at least $15,325 in aggregate undisputed debt

A

more

262
Q

Preferential payment is:

A

transfer made to benefit of creditor, on account of an antecedent debt of the debtor, made within 90 prior to the filing of petition (one year for insider), made while debtor was insolvent, results in creditor receiving more than the creditor would have received under Bankruptcy Code

263
Q

is the payment to a fully secured creditor a preference?

A

NO

264
Q

What are the debts of an individual not discharged under Chapter 7 or 11?

A

Taxes Due within Three Years of Filing, Debts Incurred by Fraud, Debts Undisclosed in the Bankruptcy Petition, Embezzlement, Alimony, Willful and Malicious Injury, Operating Vehicle While Intoxicated, Fines and Penalties, Educational Loans

265
Q

What are the three basic categories of claimants?

A
  1. Secured claimants, 2. Priority claimants, 3. General creditors who filed their claims on time
266
Q

What is the order of the Priority Claimants?

A
  1. Support Obligations to Spouse and Children, 2. Administrative Expenses, 3. Involuntary Case Gap Claims, 4. Wage Claims up to $12,475, 5. Employee Benefit Plans up to $12,475, 6. Grain Farmers and Fisherman, 7. Consumer Deposits, 8. Tax Claims, 9. Injury Claims Arising from Intoxicated Driving
267
Q

Guarantor is only liable when?

A

Debtor does not perform his duty to the creditor

268
Q

When a debtor defaults in a suretyship situation, the creditor may do what?

A

Immediately demand payment from the surety, immediately demand payment from the debtor, immediately go after collateral

269
Q

What are the defenses of the surety?

A

Creditor Bad Faith (Defrauded, Duress, Illegality), Payment of Tender, Release of Principal Debtor, Surety’s Incapacity or Bankruptcy

270
Q

What is the purpose of the Fair Debt Collection Practices Act?

A

Curbs abuses by collection agencies in collecting consumers debts

271
Q

For an uncompensated surety, what releases the surety?

A

Any variation of the surety’s risk

272
Q

For a compensated surety, what releases the surety?

A

Material change increasing risk

273
Q

Principal must have both what?

A

Capacity and consent

274
Q

Agency power can arise through what?

A

Grant of actual authority, apparent authority or estoppel, ratification

275
Q

Termination of actual authority by law includes what/

A

Death, incapacity of principal, discharge in bankruptcy by principal, failure to acquire license, destruction of subject matter, subsequent liability

276
Q

Apparent authority is what?

A

Third party belief that the agent has power to bind the principal

277
Q

Actual notice must be given to terminate apparent authority to who?

A

Old customers

278
Q

Constructive notice must be given to terminate apparent authority to who?

A

New customers

279
Q

Allowing a principal to choose to become bound by a previously unauthorized act of his agent is what?

A

Ratification

280
Q

Disclosed Principal=

A

Agent not liable if authorized

281
Q

Partially Disclosed and Undisclosed Principal=

A

Agent liable

282
Q

Principal is bound if what?

A

Agent had authority

283
Q

Is the principal liable for torts of an independent contractor?

A

NO

284
Q

Principle is liable for agents torts if what?

A

Act within the scope of employment

285
Q

Entity, except for federal income taxes=

A

General Partnership

286
Q

When partnership is dissolved, it’s assets are used to pay liabilities in what order?

A
  1. Creditors (including partners), 2. Amounts due or owed, 3. divide profits or loss
287
Q

Are partners liable for acts of fellow partners, employees or agents in an LLP?

A

NO

288
Q

In a limited and general partnership, management is the responsibility of whom?

A

General partners

289
Q

May a limited partner vote on extraordinary matters without incurring liability?

A

YES

290
Q

For a limited partnership, how are the profits and losses allocated?

A

According to capital contributions

291
Q

What are the two main features of an LLC?

A

Owners are not personally liable, flow through entity

292
Q

How is profit and loss allocated in a GP and LLP?

A

Equaliy

293
Q

What are the restrictions of an S Corp?

A

stock held by no more than 100 people, shareholders must be individuals, estates or trusts, domestic corp., one class of stock, foreign shareholders prohibited

294
Q

What must be included in Articles of Incorporation?

A

Name of corp., registered agent names, incorporators names, number of shares authorized to be issued

295
Q

When can shareholders dissent and demand the corporation pay them the fair value?

A

Dissolution, Amendment, Merger, Sale of Substantially all of assets (Fundamental corporate changes-need board and shareholder approval)

296
Q

FICA=

A

Provides workers and their dependents with benefits in case of death, disability, or retirement

297
Q

FUTA=

A

insurance to provide income to workers who have lost their jobs

298
Q

Who must participate in FUTA?

A

Employers who have quarterly payrolls of at least $1,500 or who employ at least 1 person for 20 weeks in a year

299
Q

What are the 3 defenses to employment discrimination (Title VII)?

A

Seniority system, professionally developed ability tests, occupational qualification

300
Q

What are the exclusions for overtime?

A

Newspaper deliverers, cab drivers, white-collar employees

301
Q

NLRA or Wagner Act=

A

workers right to bargain collectively for wages and other terms of employment

302
Q

COBRA=

A

Health insurance continues after employment ends, 20 or more employees qualifies a company

303
Q

FINCEN can enforce civil or criminal penalties?

A

Civil

304
Q

What is the threshold for required reports?

A

$10,000 within 15 days

305
Q

What is the threshold for record keeping?

A

$3,000, maintain for 5 years

306
Q

Horizontal restraints=

A

Agreements between competitors (Per se Violation)

307
Q

Vertical restraints=

A

Agreements by those at different marketing levels (rule of reason test)

308
Q

What are the two elements of an illegal monopoly?

A

Monopoly power and power was achieved unfairly or abused once achieved

309
Q

Monopoly=

A

Company with market share of more than 70%

310
Q

Article 7 deals with what two types of documents of title?

A

Warehouse Receipts and Bills of Lading

311
Q

With nonnegotiable documents of title, who must the goods be delivered to?

A

Party named in the document (consignee)

CPA Exam Review (4 decks)

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