REG 5 Flashcards
To who can recover a third person injured by the agent’s or employee’s tortious act, when committed within the course of employment
Any third person injured by the agent’s or employee’s tortious act, when committed within the course of employment, can proceed against either the employee or employer
When the employee is held liable for a tortious act which was committed upon direct instructions from the employer, what right does he have for indemnification?
When the employee is held liable for a tortious act which was committed upon direct instructions from the employer, he has a right of indemnification against the employer for any damages he must pay a third person.
Who elects method used to depreciate partnership property in a partnership?
The method used to depreciate partnership property is an election made by the partnership and may be any method approved by the IRS.
Must all the partners of a partnership apply the same depreciation method for property?
The partnership is not restricted to using the same method as used by its “principal partner.”
Are partners bound by the depreciation method that the partnership elects to use?
Since the election is made at the partnership level, and not by each individual partner, partners are bound by whatever depreciation method that the partnership elects to use.
No gain or loss is recognized if property is transferred to a corporation solely in exchange for stock if the transferors of property, in the aggregate, own at least 80% of the stock of the corporation after the exchange : what is including the term “prop
The term property includes cash, but it does not include services.Example : Quigley, Roberk, and Storm form a corporation. Quigley exchanges $25,000 of legal services for 30 shares of stock. Roberk exchanges land with a basis of $10,000 and a fair market value of $100,000 for 60 shares of stock. Storm exchanges $10,000 cash for 10 shares of stock. What amount of income should each shareholder recognize?Here, although Roberk and Storm transfer property, they own only 70 of the corporation’s 100 outstanding shares after the exchange and fail the 80% control test. As a result, the formation of the corporation is taxable and Roberk must recognize a gain of $100,000 ? $10,000 = $90,000 on the transfer of land. Of course Storm doesn’t recognize any gain on the transfer of cash, and Quigley must recognize compensation income of $25,000 on the receipt of stock in exchange for services.
Who are the oonly person able to accept a contract?
Offers to contract may only be accepted by the person to whom they were made. Offers are not assignable to others unless the offeror consents to such assignment.
When are claims for services rendered by insiders allowed?
Claims for services rendered by insiders (a director is an insider) are only allowed to the extent the court decides the claims are reasonable. Even if the court decides the claim is reasonable, the priority given to wage claims in a bankruptcy proceeding does not include salary claims by officers of the corporation.
What is the effect of perfection of a security interest?
Perfection by filing a financing statement will not defeat all other parties who acquire an interest in the same collateral; rather, perfection by filing gives the secured party his best possible rights in the collateral. For example, purchasers from a merchant in the ordinary course of business take the collateral free from any prior perfected security interest. The only time a purchaser would take the collateral subject to a prior perfected security interest would be when the purchaser knew that the merchant was selling the goods in violation of a financing statement.
When a partner’s share of partnership liabilities increases, what is the effect on that partner’s basis in the partnership
Since partners are individually liable for their share of partnership liabilities, a change in the amount of partnership liabilities affects a partner’s basis for a partnership interest. An increase in partnership liabilities increases each partner’s basis in the partnership by each partner’s share of the increase
What is the title insurance not covering?
Title insurance insures against all defects of record; however, it does not insure against those defects which would be disclosed by physical inspection of the property or those defects listed as exceptions on the face of the policy.
Can a title insurance be transferred to a purchaser?
Even though the property may be transferred to a subsequent owner, the title insurance does not run with the property and cannot be transferred to the purchaser.
How must be treated a director’s profit derived at the corporation’s expense?
If a directo’s profit is derived at the corporation’s expense, the director must account for the profit made.
Is Mortgagee required to acknowledge a mortgage?
The mortgagee is not required to acknowledge the mortgage although the mortgage must be in writing and signed by the mortgagor, the party to be charged.
Must a mortgage in real property indicate the amount of indebtedness and the rate of interest payable thereon?
No. However, these are included in most mortgages.
Is consideration for mortgage reuqired to be stated?
It is not required that the mortgage state the consideration given for the mortgage.
Must a mortgage be delivered to the mortgagee?
A mortgage is an interest in real property used to secure payment for a loan. A mortgage must be delivered to the mortgagee to secure the obligation due to the mortgagee.
Jane, a 25% partner in Excel Partnership, received a $30,000 guaranteed payment in 2014 for services rendered to the partnership. Guaranteed payments to other partners for services rendered totaled $50,000. Excel’s 2014 partnership income consisted of
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A partnership is a pass-through entity and its items of income and deduction pass through to be reported on partners Ereturns even though not distributed. The amount to be reported by Jane consists of her guaranteed payment, plus her 25% share of the partnership’s business income and capital gains. Since Jane’s $30,000 guaranteed payment and the $50,000 of guaranteed payments to other partners are for deductible services rendered to the partnership, they must be subtracted from the partnership’s net business income before guaranteed payments of $160,000 to determine the amount of net business income to be allocated among partners. Jane’s reportable income from the partnership includesGuaranteed payment $30,000Business income [($160,000 ? $80,000) ÁE25%] 20,000Net long-term capital gain ($50,000 ÁE25%) 12,500 Total $62,500
How are stock redemption treated?
A stock redemption qualifies for exchange treatment generally resulting in capital gain or loss if the redemption is a partial liquidation, or reduces the shareholder’s interest in the corporation and after the redemption the shareholder owns (directly and constructively) less than 50% of the corporation’s stock.
The partnership of Bond and Felton has a fiscal year ending September 30. John Bond files his tax return on a calendar-year basis. The partnership paid Bond a guaranteed salary of $1,000 per month during the calendar year 2013 and $1,500 a month during th
Both distributable shares of income and guaranteed payments are reported by partners for the year in which the end of the partnership fiscal year occurs. Thus, Bond would calculate his income as follows:Guaranteed payments (10/1/13 to 9/30/14): $1,000 ÁE3 months =$ 3,000$1,500 ÁE9 months= 13,500Share of ordinary income$80,000 ÁE40% = 32,000 Total = $48,500
What is he requirement to be liable on an instrument
No person is liable on an instrument unless his signature appears thereon.
Does a bank has obligation to certify a check if adequate funds are on the account?
No. Bank is under no obligation to certify a check.
What is impliying signature of a check?
Certification of a check constitutes acceptance; therefore, signator becomes primarily liable as an acceptor and engages that it will pay the instrument according to its tenor at the time of its acceptance.
What are the requirements of the uniform capitalization rules regarding cost in acquiring property for resale?
The uniform capitalization rules generally require that all costs incurred in acquiring property for resale must be capitalized as part of the cost of inventory. The costs that must be capitalized include the costs of purchasing, handling, processing, repackaging and assembly, as well as the costs of off-site storage. An off-site storage facility is one that is not physically attached to, nor an integral part of, a retail sales facility.
What is the treatement of unreimbursed employee business expenses?
Unreimbursed employee business expenses are deductible as a miscellaneous itemized deduction subject to the 2% of AGI floor.
What is the treatement of real estate taxes?
Real estate taxes are fully deductible as an itemized deduction
What is the treatement of gambling winnings/losses?
Gambling losses up to the amount of gambling winnings are deductible as a miscellaneous itemized deduction not subject to the 2% of AGI floor.
What is the treatement of unreimbursed medical expenses?
Unreimbursed medical expenses are deductible as an itemized deduction subject to a 10% AGI floor.
Which credit may reduce federal estate tax?
The federal estate tax may be reduced by a credit for foreign death taxes.
Which credits do not reduce federal estate tax?
No federal estate tax credit is available for foreign gift taxes, foreign income taxes, or foreign intangible property taxes.
What is required for the proxy statement of a reporting comaopny solliciting proxies Under the Securities Exchange Act of 1934?
Under the Securities Exchange Act of 1934, a reporting company that is soliciting proxies must file its proxy statement with the SEC. There is no exemption if the company has only one class of stock.
if a person entrusts possession of goods to a merchant, or to his/her agent, who deals in those goods,what is the condition to obtains title to those goods?
if a person entrusts possession of goods to a merchant, or to his/her agent, who deals in those goods, a good-faith purchaser for value obtains title to those goods unless s/he knew the merchant or agent did not own the goods.
What is a trade acceptance?
A trade acceptance is a special type of draft in which a seller of goods extends credit to the buyer by drawing a draft on that buyer directing the buyer to pay the seller a sum of money on a specified date. The seller is therefore both the drawer and payee in a trade acceptance.
When may a trustee in bankruptcy may set aside statutory liens?
a trustee in bankruptcy may set aside statutory liens that become effective when the bankruptcy petition is filed but may not set aside those that were effective before the bankruptcy petition was filed. Therefore, this answer is correct.
What are the requirement for an instrument to be negociable?
For an instrument to be negotiable, it must be written and signed by the maker or drawer and contain an unconditional promise or order to pay a fixed amount in money. It must also be payable at a definite time or on demand. It must be payable to order or to bearer, except in the case of a check. The instrument in the question satisfies all of these requirements and is a negotiable note.
Whart does a decedent’s gross estate generally include?
A decedent’s gross estate generally includes all property in which the decedent had an ownership interest at time of death, including the value of revocable transfers, as well as all transfers over which the decedent had, at the time of death, the power to change the enjoyment of what was transferred by altering, amending, revoking, or terminating an interest
A trust with an independent trustee that was established for a minor : included or excluded from grantor’s gross estate?
a trust with an independent trustee that was established for a minor would be excluded from a grantor’s gross estate.
An income beneficiary disclaims trust property, which then passes to the remainderman who happens to be the grantor’s friend : is property to be included oor not in the grantor’s gross estate?
the fact that an income beneficiary disclaims trust property, which then passes to the remainderman who happens to be the grantor’s friend would not cause the property to be included in the grantor’s gross estate.
If business property is completely destroyed, what is the amount of casualty loss deduction if business property is completely destroyed?
If business property is completely destroyed, the amount of casualty loss deduction is the property’s adjusted basis immediately before the casualty, less any insurance reimbursement.
To who are applying “$100 floor” and “10% of adjusted gross income” limitations
the “$100 floor” and “10% of adjusted gross income” limitations that apply to nonbusiness casualty losses of individuals do not apply to business casualty losses.
Whart is the effect on dividends received from affiliated group if a consolidated return is filed?
An affiliated group of corporations (i.e., corporations connected through 80% or more stock ownership) can elect to file a consolidated tax return, instead of filing separate tax returns. If a consolidated return is filed, dividends received from affiliated group members are eliminated in the consolidation process, and are not reported on the consolidated tax return.
For destroyed, damaged, or stolen property, when does the replacement period ends?
For destroyed, damaged, or stolen property, the replacement period ends 2 years after the close of the taxable year in which the gain is first realized.
What is a composition of creditors?
A composition of creditors occurs when creditors make an agreement with each other to accept less than the full debts as full satisfaction of those debts. Once the debtor performs under the agreement, the debts are discharged, so this generally causes a release of the debtor from its debts.
What is an assignment for the benefit of creditors?
An assignment for the benefit of creditors does not generally cause the release of the debtor from it debts. In this case the creditors do not have to agree to the assignment. The debtor assigns its assets to a trustee who sells the assets for cash. The cash is then paid out to creditors who agree to accept a stipulated amount to release their claims. The assignment itself, however, does not cause the claims to be released because at that point the creditors have not agreed to do so.
How are treated distribution as dividends in a S corporation since inception?
A S corporation since inception does not have any earnings and profits and its distributions will not be taxed as dividends : distributions will be treated as a nontaxable return of stock basis for each shareholder until the shareholder’s stock basis is fully recovered. Thereafter, distributions in excess of stock basis will be taxed as capital gain, just as if the shareholder had sold the stock.
In 2015, Dave Burr acquired a 20% interest in a partnership by contributing a parcel of land. At the time of Burr’s contribution, the land had a fair market value of $35,000, an adjusted basis to Burr of $8,000, and was subject to a mortgage of $12,000.
Burr’s basis is the $8,000 adjusted basis of the land contributed reduced (but not below zero) by the net decrease in his individual liabilities resulting from the assumption by the partnership of his liabilities (80% ÁE$12,000 = $9,600). Thus, Burr’s basis for the partnership interest is zero. Note that Burr would have to recognize a gain of $9,600 ? $8,000 = $1,600.
Are general offering or solicitation permitted under Rule 505 of Regulation D?
No general offering or solicitation is permitted under Rule 505 of Regulation D.
Gibson purchased stock with a fair market value of $14,000 from Gibson’s adult child for $12,000. The child’s cost basis in the stock at the date of sale was $16,000. Gibson sold the same stock to an unrelated party for $18,000. What is Gibson’s recogni
The adult child sold the stock to Gibson for $12,000 when the stock was worth $14,000. As a result, the transfer of property to Gibson is treated as part sale and part gift. As such, the adult child (transferor) is not allowed to recognize a loss, and is treated as having made a gift to Gibson equal to the difference between the stock’s FMV of $14,000 and the selling price of $12,000, or $2,000. Where a transfer of property is in part a sale and in part a gift, the basis of the property in the hands of the transferee (Gibson) is generally the greater of (1) the amount paid by the transferee for the property ($12,000), or (2) the transferor’s basis for the property at the time of the transfer ($16,000). As a result, Gibson’s basis for the stock is $16,000, and the subsequent sale of the stock to an unrelated party for $18,000 results in Gibson recognizing a gain of $2,000.
When is a partnership terminated for tax purposes?
A partnership is terminated for tax purposes when there is a sale or exchange of 50% or more of the total interests in partnership capital and profits within any 12-month period.
Concerning breach of an implied warranty when does the statute of limitations begins to run?
when a warranty explicitly extends to the future performance of the goods, a cause of action for breach of that warranty must be brought within the statute of limitations period as measured from the time the breach was discovered or should have been discovered. If the warranty does not explicitly extend to future performance, a cause of action for breach accrues at tender of delivery.
How much can be reduce the UCC statutory period if agreed in original contract?
in original contract, can be agreed to reduce the UCC statutory period of 4 years to a period of not less than 1 year. Under no circumstances, however, may the parties extend the statute of limitations.
Can a plaintiff claim that that the running of the statute of limitations has been tolled?
A plaintiff may, in proper circumstances (i.e., disability of plaintiff to sue or defendant’s absence from the jurisdiction), claim that the running of the statute of limitations has been tolled (stopped).
Is automatic stay valid against collection of alimony?
An automatic stay is valid against the garnishment of the debtor’s wages. However, the automatic stay is not effective to prevent the collection of alimony, child support, or other matters related to domestic disputes.
Is The NOL carryover deductible in computing the current years ENOL?
The NOL carryover is not deductible in computing the current years ENOL.
Is The DRD allowed in computing NOL?
The DRD is allowed in computing NOL
What is the treatment of advertising costs?
Advertising costs are deductible as an ordinary and necessary business expense if they are reasonable in amount and bear a reasonable relation to the business. Deductible expenses may be for the purpose of gaining immediate sales or developing goodwill. Advertising costs are deductible even though the advertising program is expected to result in benefits extending over a period of years.
What is EPA objective?
The Environmental Protection Agency (EPA) is set up to insure compliance with environmental protection laws.
Can private citizen bring suits against EPA to enforce compliance with the law?
The EPA generally uses civil suits more than criminal prosecutions. Private citizens may also bring suits against the EPA to enforce compliance with the laws. Citizens or the state may also bring their own suits against the violators under the environmental statutes. Furthermore, the EPA may refer both civil and criminal actions to the Department of Justice.
What I the realized gain recognized on a like-kind exchange of investment property?
in a like-kind exchange of investment property, a realized gain is recognized to the extent of un-like (boot) property received.
How is considered an item if removal of such? item would cause material harm to real property.
It is generally held that an item has become a fixture
