REG Flashcards
What is Agency Law?
Agency Law deals with someone’s ability to bind you to a contract with a third party
What are the basic actions that occur in a bankruptcy?
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.
What are the key elements of a valid Partnership?
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.
What is a promissory note?
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)
What must a contract contain?
Offer, Acceptance, Consideration, Proper form (oral or written), Legal subject matter, 2 Competent parties
What is considered the biggest change to financial regulation since the Great Depression of the 1930s?
The Dodd-Frank Wall Street Reform Act of 2010
Describe the Federal Unemployment Tax Act
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.
What are the key points of the 1933 Securities Act?
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
What is the revenue limit for an Emerging Growth Company IPO?
$1 Billion
What is the purpose of a Consulting Engagement?
This engagement helps the client be more efficient with personnel and resources in order to accomplish their goals.
What does Real Property include?
Land, Buildings fixed to the land, and Property under/above the land.
What sales are covered under the Uniform Commercial Code (UCC)?
Only sales of goods are covered under the UCC.
When does a security interest attach; or become legally enforceable?
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
How is shareholder basis calculated for a new interest in a Corporation?
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.
How is Gift taxation different from Estate taxation?
Property transferred while taxpayer is living
Under what accounting basis are individual tax returns prepared?
Cash Basis. Note: This basis is NOT allowed for Corporations, Partnerships with a C-Corp partner, or for inventories.
What is the Interstate Income Act of 1959?
Restricts a state’s authority to tax interstate commerce
True or false? Partnerships are a taxable entity.
False. Income and expenses flow through to the partner to be taxed via a Form K-1.
What is the basic calculation for basis in property?
Cost of property + Purchase expenses + Debt assumed + Back taxes and interest paid = Basis. Note: taxes and interest related to time when a taxpayer did not own the property are not deductible - they are added to basis.
What is required for Agency to exist?
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
For what debts does bankruptcy NOT stop collections?
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
Can corporations and other partnerships become partners in a partnership?
Yes; corporations and other partnerships can become partners of a partnership
What is a draft?
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
What forms may acceptance of a contract take?
Can be written or oral Must be in the form/method required by offeror Must be mirror image - i.e. no changes in terms
What is the goal of the Volcker Rule?
Banking Institutions maintain healthy capitalization ratios
What are the major aspects of FICA and Social Security taxes?
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
What entities are exempt from filing registration statements under the 1933 Securities Act?
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.
For an Emerging Growth Company IPO, how many years of audited financial statements are required?
2 years
What is required by the Statements on Standards for Consulting Services (SSCS)?
Competence; Due Professional Care; Planning; Supervision; Obtain Sufficient Data; Serve Client Interest; Agreement: Written or Oral; Communicate w/ Client; Objectivity NOT REQUIRED: Independence
What are the characteristics of a deed?
Must be in writing Signed Description of Property Delivered Recorded
What elements are needed for a sale covered under the Uniform Commercial Code (UCC)?
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.
What are the characteristics of perfection of interest in a secured transaction?
Gets higher priority over others claiming rights to collateral after the perfection takes place Attachment must take place BEFORE perfection
How is shareholder basis calculated for a TRANSFEROR of an interest in a Corporation?
Transferor’s basis + Gain recognized by shareholder = Basis OR FMV of Corporate Interest - Adjusted basis of property = Gain
What is the annual exclusion amount for a taxpayer’s Gift taxation? What is required to get the exclusion?
$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
What are the deductions to arrive at Adjusted Gross Income (AGI) for individuals?
*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 *Tuition - can’t take AOC/Lifetime Learning Credit for same expense *Teacher expenses *Attorney fees in discrimination lawsuit
What are the principles of the Interstate Income Act of 1959?
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)
When exchanging property for a partnership interest; how is gain or loss recognized?
Neither gain nor loss is recognized in an exchange of property for a partnership interest. It is a non-taxable event.
What is the recipient or donee’s basis on gifted property?
Sold at a gain: use donor’s basis Sold at a loss: use lesser of donor’s basis or FMV at time of distribution Sold in between donor’s basis and FMV: No gain or loss
What is Actual Authority in an agency?
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
How does bankruptcy of a corporation affect the owner’s ability to file bankruptcy?
It doesn’t; because the corporation is a separate legal entity. Under bankruptcy; corporations are dissolved Under bankruptcy; individuals are discharged
Name the Basics of Partnership Formation - Form of agreement and intent
Agreement can be very informal - either ORAL; IMPLIED or WRITTEN Intent is to make a profit
What is a check?
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
Who can accept an offer?
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
How does the Volcker Rule limit banking institutions?
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)
When is an employee covered by Workman’s Compensation?
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
What are the key points of the 1933 Securities Act; Regulation A?
Issuer can issue $5M 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
How did Reg D, Rule 506 change under the JOBS Act?
General Solicitation and Advertising now allowed
What is the difference between Express versus Implied duties of an accountant under contract?
Express: Contract specifies what accountant will do Implied: Accountant performs without negligence
What are the characteristics of a Mortgage?
Must be in writing Signed Description of property Delivered
What are the elements of a Firm Offer?
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
How does perfection occur in a secured transaction?
By filing a financing statement By possessing the collateral
What basis do shareholders and Corporations use for property?
They both use ADJUSTED BASIS, NOT FMV of property.
If a Gift is an annuity, what value is used for the Gift?
If the Gift is an annuity, use Present Value to determine the gross Gift
Which items can be carried over to future years on an individual tax return?
Investment interest expense in excess of investment income Charitable contributions Excess Section 179 Capital losses AMT Paid Passive Activity Losses
What is the Uniform Division of Income for Tax Purposes Act (UDITPA)?
Uniform criteria for determining taxable income of multi-state corporations Also known as the Multi-State Tax Compact
What is a partner’s basis in partnership property?
Initial basis for partnership property is the basis of the property that was contributed or exchanged for the partnership interest.
What is the basis and holding period of inherited property?
FMV at date of death or alternate valuation date (6 months later) If alternate date is elected by property is sold before 6 month window; use FMV at date of death. Property inherited is LTCG property regardless of how long it is held by the recipient.
What is Implied Authority in an agency?
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
What key action will cause a bankruptcy discharge to be denied?
If a debtor fails to keep good records or falsifies documents; a discharge will be denied
When must a partnership agreement be in writing?
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
What is the difference between a post-dated check and a negotiable time draft?
A check is payable on demand; even if post-dated. A negotiable time draft is not payable until the date designated for payment.
What happens if an offeree accepts a contract but puts added stipulations?
It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree
What does the Volcker Rule require banking institutions to disclose?
Relationships with hedge funds must be fully disclosed to regulators
What age group is protected under Age Discrimination Laws?
They protect people ages 40 and above at companies where at least 20 people are employed
Under the 1933 Securities Act; Regulation D; what are Rules 504; 505 and 506?
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
Under the JOBS Act, what is the capital ceiling under Regulation A?
Reg. A Capital ceiling raised from $5M to $50M
Accountant’s liability for negligence - What are the requirements?
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.
What are the characteristics of a lease?
No writing required if < 1 year Warranty of habitability is implied Death does not terminate a lease Sale of property does not terminate a lease
Under what situations are sales of goods covered by the Statute of Frauds? What are the exceptions?
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)
When does automatic perfection occur in a secured transaction?
Store sells a consumer good on credit - Store retains security interest A bank finances the purchase of a consumer good - Bank retains security interest
Describe how loss is taken on Section 1244 small business Corporation stock?
A loss on worthless stock is an ordinary loss.
What is the basic Gift tax calculation?
Gross Gifts - 1/2 of Gifts (treated as given by spouse) - Total # of donees x $14,000 exclusion = Taxable Gift
Characterize the following carryover: Passive Activity Loss
No carryback Can carry forward indefinitely
What are the basic principles of UDITPA?
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
When services are exchanged for a partnership interest; how is this treated for tax purposes?
It is a taxable event; treated the same as compensation for the services. The taxable income equals the % of partnership interest received times the FMV of the partnership. i.e. the FMV of the interest received is the taxable income for the service provider.
What is the holding period on a stock dividend?
Holding period of new stock received from a dividend takes on the holding period of the original stock
What is Apparent (Ostensible) Authority in an agency?
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
What are the basic characteristics of a Chapter 7 bankruptcy (liquidation)?
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)
How are profits shared in a partnership?
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
What is a trade acceptance?
Seller extends credit to Buyer Buyer agrees to pay Seller - Buyer has primary liability Seller is both Drawer and Payee - Seller has Secondary Liability
When is an offeror bound by a contract?
When they RECEIVE the acceptance. If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.
What are the tenets of the Occupational Safety and Health Act (OSHA)?
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
What are the registration form options under the 1933 Securities Act?
S-1 - Long Form or S-2 and S-3 - Less Detailed and preferred by issuers
Under the JOBS Act Title V - Private Company Flexibility and Growth, what is the shareholder limit if there are less than 500 non-accredited shareholders?
2,000
What is an Accountant’s Liability for Detecting Fraud (Under Normal Circumstances)?
It is not the accountant’s job to find fraud and they are not normally liable for not detecting it
What is personal property?
Tangible property; such as cars; equipment; etc. Intangible property such as patents; trademarks; copyrights; etc.
When does title and risk of loss transfer on a sale of goods?
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
What are the priority rules for payment in a secured transaction?
If two parties are perfected; then the first one to file wins If neither party is perfected; then the first one to attach wins
What are the requirements for taking an ordinary loss on Section 1244 small business Corporation stock?
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
How is a Gift taxed if a recipient gains a future ownership in the Gifted property?
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
How is excess 179 expense carried forward?
Carry forward to next year. Use in any year is limited to taxable income.
What is considered Business Income?
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
What is the partner’s basis in a partnership when they provide a service in exchange for the interest?
The basis in the partnership interest is the amount of taxable service revenue provided by service provider.
What property is eligible for like-kind exchange treatment?
Real for real or personal for personal business property only US property only
How is an Agency terminated?
*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
What are the requirements for a voluntary bankruptcy filing under Chapter 7?
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
What is the Liability of General Partners in a partnership?
Joint Liability - Partners are collectively liable for debts/torts Several Liability - Partners are individually liable for debts/torts
What is the purpose of the negotiation of commercial paper?
Transfers ownership to another party
What will void an offer?
If offeror dies or becomes insane before acceptance; offer is void. Contract is binding if acceptance occurs before death/insanity.
What types of discrimination are prohibited for employers based on civil rights laws?
Sex Race Religion National Origin
Name the securities registered under the Securities Act of 1933.
Stocks Stock Options Stock Warrants Limited Partnership Interests - General Partnerships not allowed Bonds
When can a client be sued for failing to detect fraud?
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.
What are the three requirements for a gift?
Intent for it to be a gift Delivery of the gift Acceptance of the gift
What is a Warranty of Title?
The seller has the right to sell the good and no one else can stake claim to that good
What are the advantages of a creditor holding a lien in a secured transaction?
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
What are the basic rules for filing a form 1120?
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
What are the deductions for Gift tax, besides the annual exclusion?
Tuition and medical expenses paid directly to the provider organization (note: NOT books or dorm fees) Political contributions Charitable Gifts Unlimited Gifts to spouse
How long can investment interest expense in excess of investment income be carried forward?
Indefinitely.
What is the holding period of an asset that has been contributed to a partnership?
The partnership inherits the holding period of the asset contributed. The exception of inventory- the holding period begins when contributed.
What is BOOT in a like-kind exchange?
Cash received + unlike property received + liability passed to other party
How do you terminate Apparent Authority?
*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
What are the requirements for an involuntary bankruptcy filing under Chapter 7?
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 $14;425 If less than 12 unsecured creditors - only 1 must file; claim(s) must be in excess of $14;425 Upon filing; a judge will declare an order for relief unless the debtor protests
Which assets may creditors of a partnership go after; and in which order?
Creditors must go after partnership assets first before suing partners individually
What is required to maintain the negotiability of a commercial paper?
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
What actions or circumstances will revoke a contract?
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.
What are the powers granted under the Environmental Protection Act?
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
Who can sue under the Securities Act of 1933?
Purchasers of securities only
When has an accountant committed fraud?
Misrepresentation - Accountant misrepresents MATERIAL fact(s) Scienter - Accountant commits scienter Damages - Client has actual damages. Reasonable Reliance - Client reasonably relied on the misinformation.
What are the rights of found property?
Lost property - Finder’s rights to property are less than Owner’s Abandoned property - Finder’s rights to property are greater than Owner’s
What is Warranty of Merchantability?
This good will do its intended purpose Can be disclaimed
When are Corporate federal tax estimated payments required, and how are they calculated?
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.
What is the basis of Gifted property for the recipient?
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
How long is the carry forward for charitable contributions?
Can be carried forward 5 years.
What is the tax treatment of startup costs for a partnership?
Tax treatment is the same as that of an individual taxpayer. However syndication fees are not deductible or amortized.
In a like-kind exchange; how is it handled if a netting of mortgages results in net boot paid?
DO NOT subtract the boot paid amount from the cash received Ignore the boot paid amount from the mortgage completely
What is an Agency Coupled with an Interest?
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
What entities are disallowed from involuntary Chapter 7 bankruptcy filings?
Charities Farms
What are the rights of a General Partner in a partnership?
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
What characteristics will cancel the negotiability of a commercial paper?
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
What is an Option?
Some amount of consideration (like money) is put forth by offeror to keep the offer open for a stated period of time
Name the Requirements for Accountant to be liable under the Securities Act of 1933.
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
What is Scienter?
To report something knowing it is false. Characterized by reckless disregard for truth Intentionally conceal facts
What is tenancy in common?
Undivided interest in a portion of the property Upon death; property goes to decedent’s heirs
What is Warranty of Fitness?
This good is the right choice for you based on the seller’s expert opinion Can be disclaimed
Describe the AMT calculation for C-Corporations
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
How/when are Gift tax returns filed?
Calendar-year basis only Due April 15
How long is AMT paid carried forward, and how is it applied?
It can be carried forward indefinitely. It may be applied against future *regular* income tax, but not against future AMT tax liability.
What deductions are subtracted from gross revenues to arrive at partnership income?
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)
What is an involuntary conversion? When does it not result in a gain?
Occurs when you receive money for a property involuntarily converted There is no gain if you reinvest the proceeds completely If proceeds not completely reinvested; gain is LESSER of realized gain or amount not reinvested.
When is an employee an Agent; and when does this make the employer liable?
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
How can a debtor reclaim possession of their property from the interim bankruptcy under Chapter 7?
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
What does and does NOT happen when a General Partner assigns their partnership interest to someone else?
- 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.
What is required to negotiate Order Paper?
Must have delivery and endorsement If paper is exchanged for value; transferor must give an UNQUALIFIED endorsement
What is a Requirements Contract? How are they limited?
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
Name the Defenses of an Accountant under the Securities Act of 1933.
Accountant used Due Diligence Accountant followed GAAP Damages weren’t caused by accountant’s work Plaintiff knew of the material misstatements
What is the Accountant’s Liability to Third Parties - Privity Defense?
Lack of privity defends against contract breach and negligence. NOT a defense against fraud.
What is joint tenancy?
Undivided interest in entire property Upon death; property goes to other joint tenants
What is strict liability with respect to buyer protection?
Manufacturers of goods cannot disclaim that their products will be safe Can be liable if negligent
What are the pre-ACE adjustments for C-Corporation tax AMT calculations?
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
What are the basic characteristics of complex Trust?
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
How are capital losses applied in individual taxes?
$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).
How are partnership losses taken on an individual’s return?
Losses cannot be taken beyond a partner’s basis in the partnership Losses in excess of basis are carried forward until basis is available
What are the requirements for exclusion of gain on a primary residence? How are losses treated?
Must live there 2 out of 5 years Loss on sale of home is NOT deductible
When are Agents liable for torts (civil wrongs) they commit?
Agents are liable for torts (civil wrongs) committed whether they had authority or not
What are the basic characteristics of a Chapter 11 bankruptcy (business repayment) filing?
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
What is the actual authority of a partner in a partnership?
Has authority to bind the partners to a contract.
What are the major types of endorsements on commercial paper?
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
What is promissory estoppel?
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
What does the Securities Act of 1934 govern?
The trading/selling of securities after the IPO
The definition of Ultramares Decision:
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.