REG - 6/12 Part I Flashcards
What constitutes the termination of an agency-principal-third party relationship?
OPERATION OF LAW. (ex: incapacity from a stroke)
When an agency relationship is terminated by operation of law, the agent’s authority to enter into a binding agreement on behalf of the principal ceases.
There is no requirement that notice be given to third parties when the agency relationship is terminated by operation of law.
What type of property is excluded from gross income?
Property received as a GIFT, bequest, devise, or inheritance.
If there was stock be-quested, NO INCOME IS RECOGNIZED.
Upon the dissolution of a corporation - how are assets distributed if there are debts owed to creditors?
CREDITORS > PREFERRED SHAREHOLDERS > COMMON SHAREHOLDERS
Only after all debts owing to creditors are satisfied will the remaining corporate assets be distributed among the shareholders.
What is the difference between Preferred Stock and Corporate Debenture?
PREFERRED STOCK is a type of OWNERSHIP SECURITY and is not similar to CORPORATE DEBENTURES which are UNSECURED DEBT SECURITIES (no ownership rights).
Are unpaid dividends in cumulative stock a liability of a corporation?
NOT UNTIL they are DECLARED.
*However, any cumulative preferred stock dividends not paid in any year must be made up before any future distributions can be made to common shareholders.
What happens upon declaration of a cash dividend on preferred stock? (corporation)
It becomes a LEGAL DEBT OF THE CORPORATION, and the PREFERRED SHAREHOLDERS = UNSECURED CREDITORS of the corporation.
What are Proxies?
The authority to REPRESENT SOMEONE else, especially IN VOTING.
What is a “like-kind” exchange, and is there a gain/loss recognized?
The term “like-kind” means the SAME CLASS OF PROPERTY (i.e., real estate must be exchanged for real estate).
NO GAIN/LOSS IS RECOGNIZED on the exchange of business or investment property for property of a like-kind.
How are Intercompany Dividends treated in Consolidated Returns?
A dividend distribution from one member to another member of an affiliated group during a consolidated return year is ELIMINATED IN DETERMINING TAXABLE INCOME.
*Note, that if a consolidated return is not filed, dividends received from an affiliated corporation (80% or more ownership) are eligible for a 100% dividends-received deduction.
What does Scienter mean?
Scienter is defined as the INTENT TO MISLEAD, and AN ELEMENT NECESSARY IN ESTABLISHING FRAUD.
The intent, or scienter, element necessary to establish a cause of action for fraud will be met if the plaintiff can show that the…
Defendant had knowledge of a misrepresentation with the intent to mislead, or showed a RECKLESS DISREGARD FOR THE TRUTH.
What is the Cash Method of Accounting?
Under the cash method, income is RECOGNIZED WHEN IT IS ACTUALLY RECEIVED, whether in cash or in property.
Here, Mosh’s gross taxable income for the current year would include the $100,000 cash collected from customers. Mosh’s accounts receivable at the beginning and end of the year are not relevant.
If an insolvent buyer who is not in possession of the document of title refuses to pay cash, is the seller entitled to stop delivery of goods in the hands of a carrier?
Yes
What is an Artisan’s Lien?
A type of lien that permits an artisan to retain possession of a piece of work until it has been paid for.
How many years should an S-Corporation wait before making a new S election if it was revoked? (in the absence of IRS consent to an earlier election)
A corporation must wait FIVE YEARS before reelecting subchapter S status unless the IRS consents to an earlier election.
