Reg Deck 2

Question 1

What is an agent?

Answer 1

Anyone allowed to act for another (a principal). Partners, Officers, employees, Real Estate Brokers, & Powers of Attorney are all agents. infants and mentally incompetant cannot be agents.

Question 2

What is agency?

Answer 2

Meeting of the minds, not consideration.

Question 3

Actual authority

Answer 3

Principal gives agent right and power to act on principal’s behalf. Express authority or implied authority.

Question 4

Apparent Authority or Agency by estoppel

Answer 4

Principal gives appearance to 3rd party that an agent is authorized.

Question 5

What is novation?

Answer 5

A substitution, by agreement, of an old contract for a new one, with the rights under the old contract being terminated.

Question 6

What type of claim would be paid first in a bankruptcy estate under the liquidation provisions of Chapter 7?

Answer 6

A proerly perfected secured debt.

Question 7

What is considered a “preference” payment under bankruptcy law?

Answer 7

A “preference” is a payment to a creditor within 90 days of a bankruptcy decision which gives an unfair advantage over other creditors.

Question 8

Degine Elements of Contracts. (PLACCO acronym)

Answer 8

Proper Form -contracts in writing
Lawful Object - not illegal
Acceptance - by offeree
Consideration - both sides agree
Competant Parties - neither insane or intoxicated
Offer - by offeror

Question 9

Define Statute of Frauds (acronym GRIPE + marriage)

Answer 9

Goods (sale) - >$500 must state a quantity
Real Estate contracts
Impossible to complete (from when contract is made, not begins)
Promise to answer debt of another
Executor’s promise to be liable for estate debt
Marriage is consideration

Question 10

Elements of Simple Fraud

Answer 10

Misrepresentation of Material Fact
Reasonable Reliance by Injured Party
Intent to mislead - Scienter
Results in injury or damage

Question 11

Elements of Constructive Fraud

Answer 11

Misrepresentation of Material Fact
Reasonable Reliance by Injured Party
Reckless Disregard for the truth
Results in injury or damages

Question 12

Steps to perfect a security interest:

Answer 12

1.) Filing financing statement in appropriate state office
2.) Take possession of collateral
3.) Purchase Money Security Interest

Question 13

Creditor / Debtor Onligations in strict foreclosure

Answer 13

1.) Creditor keeps collateral in full settlement of debt.
2.) Can only retain goods if debtor paid <60% of purchase price.
3.) If debtor paid >60%, creditor must sell unless debtor waives right.
4.) Sue debtor and reduce claim to legal judgement.

Question 14

Types of UCC Secured Transactions

Answer 14

1.) Goods - consumer goods, equipment, inventory, etc.
2.) Instruments - stocks, bonds, negotiable instruments.
3.) Intangibles - AR, Intellectual property.

Question 15

Types of bankruptcy cases under Federal law

Answer 15

1. Chapter 7 - LIQUIDATION
2. Chapter 9 - municipal debt adjustment
3. Chapter 11 - REORGANIZATION
4. Chapter 12 - family farmers w/ regular income
5. Chapter 13 - ADJUSTMENTS OF DEBTS OF INDIVIDUALS WITH REGULAR INCOME
6. Chapter 15 - Ancillary and other cross-border cases

Question 16

Describe Chapter 7 voluntary bankruptcy

Answer 16

Debtor files for liquidation/ trustee appointed.
Assets liquidated to pay debts.
Debtor is given an order of relief when filed.
BANKRUPTCY ABUSE & PROTECTION ACT OF 2005 - DEBTOR MUST PASS MEANS TEST TO PROVE THEY ARE NOT ABUSING CODE.

Question 17

Chapter 7 involutary bankruptcy

Answer 17

Creditors force bakruptcy - trustee appointed.
> 12 creditors - at least 3 file.
< 12 creditors - at least 1 has to file.

Question 18

What are the 5 test that define a preferential transfer? (T.A.N.I.M.)

Answer 18

Transfer that benefited creditor.
Antecedent debt.
Ninety days prior ro filing.
Insolvent with the creditor.
More that would have received in bankruptcy.

Question 19

Debts not discharged in bankruptcy

Answer 19

Alimony / Child support
Fraud
Taxes
Intentional injury to others
Educational loans
Luxury goods
Cash advances

Question 20

What are advantages of Corporate structure?

Answer 20

Shareholders have limited liability for debts
Continuous (perpetual) life until disolved
Shares purchased, sold, assigned freely

Question 21

Statutory Close / Closely Held / Closed Corporations

Answer 21

<50 shareholders
2/3 of shares of stock must approve status
Articles / Shares must state status
May function w/o BOD and shareholder meetings.

Question 22

Qualities of an S Corporation

Answer 22

Classified as a corporation, taxed as partnership
100 shareholders max
1 class of stock
Eligble owners - individuals, estates, trusts, & tax-exempt entities
Non-residents, corporations, & foreign trusts excluded

Question 23

What is included in the articles of incorporation?

Answer 23

Name of corporation
Purpose
Capital stock authorized
Principal office location
# of directors
Names & address of registered agent for service of process
Capital structure & duration

Question 24

3 defects of formation

Answer 24

De Jure Corporation -complies with requirements
De Facto Corporation - fails to comply with requirements (forces 3rd parties to perform on contracts and removes direct liability from shareholders)
Corporation by Estoppel - protection of shareholders from 3rd party suits w/o de facto corporation

Question 25

What is piercing the Corporate veil

Answer 25

Hold stockholders personally liable when assets are used for personal purposes of owner
Corporation is used to perpetuate a fraud.

Question 26

What do shareholders do?

Answer 26

Elect directors & approve of removal of directors
Approve dissolution

Question 27

What do directors do?

Answer 27

Set corporate policy
Elect / Terminate Officers
Declare Dividends
Comply with Articles of Incorporation

Question 28

Stockholder Rights (D.I.V.A.P.)

Answer 28

Derivative/Direct Action - Sue for benefit of corporation or self
Inspect books - Right to inspect books
Voting Rights - Right to vote
Asset Share on dissolution
Preemptive rights to refuse new issue.

Question 29

Types of partner authority

Answer 29

Actual (real) authority - May be expressed or implied
Apparent (customary) authority - May be different from firm to firm.

Question 30

What are Capital Assets?

Answer 30

Any property held by a taxpayer, whether or not it is connected to a business. Section 1221 assets.

Question 32

Gain & Loss calculation

Answer 32

1.) Gain/Loss = amount realized - adjusted basis
2.) Amount realized =
Cash received+FMV of property received+Liabilities assumed-Selling expenses

Question 33

What is Pre-MACRS Deprection?

Answer 33

Property placed pre-1981,
Salvage value was recovered using SL, declining balance OR sum o the years method

Question 34

Accelerated Cost Recovery System (ACRS)

Answer 34

Recover basis of deprecable property over select class lives (3-, 5-,10-,15-,18-,19- yrs)

Question 35

Modified Accelerated Cost Recovery System (MACRS)

Answer 35

All property except land, intangible assets, & preperty not in years.
(3-, 5-, 7-, 10-, 15-, 20-, 27.5-, 31.5-, 39- yrs)