REG14

Question 1

Is distributable net income current net accounting income reduced by any amounts allocated to corpus?

Answer 1

Yes.

Question 2

Would there be a tax liability if a $6,000 cash gift was given to a friend if already had given $11,180,000 in gifts to other people?

Answer 2

No, a donor is entitled to an exclusion from taxable gifts of $15,000 of gifts of present interest to each donee each calendar year.

Question 3

Does the the gross estate (GE) include insurance proceeds on the decedent’s life if the proceeds are payable to or for the estate?

Answer 3

Yes, included in GE

Question 4

Are gifts within 3 years of death included in the gross estate of the decedent?

Answer 4

Yes

Question 5

Are dividends declared after death included in the gross estate of the decedent?

Answer 5

No, dividends declared after death are not included in the GE of the decedent.

Question 6

Can a simple trust distribute to principal?

Answer 6

No

Question 7

Can the BOD amend the article of incorporation?

Answer 7

No, that is a power reserved for the shareholders.

Question 8

What does the BOD have the authority to do?

Answer 8

(1) selecting of officers, (2) determining capital structure, (3) proposing fundamental changes, (4) declaring dividends, and (5) setting management compensation.

Question 9

Is a perpetual partnership one “in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking”?

Answer 9

NO, it is partnership at will.

Question 10

What is surplus of a corporation?

Answer 10

Net assets in excess of stated capital.

Question 11

If one partner doesn’t have enough in their capital account to allocate a loss, what happens?

Answer 11

The excess over his or her capital account balance must be allocated to the other partners in the same ratio as that for sharing profits

Question 12

Do all members have a right to participate in a member-managed LLC?

Answer 12

Yes, all members have a right to participate and most business matters are decided by the majority. In a manager-managed LLC, each manager has equal rights, but managers are selected or removed by a majority vote of the members. An LLC is deemed to be member-managed unless the articles of organization state otherwise.

Question 13

What six items must the limited partnership certificate contain?

Answer 13

The name of the limited partnership, the address of its office, the name and address of its agent for service of process, the name and business address of each general partner, the latest date upon which the limited partnership is to dissolve, and any other matters the general partners determine to include.

Question 14

Does a joint venture require a filing?

Answer 14

No statute requires a filing to create a joint venture. It is an association to accomplish a specific business purpose, is easily formed and is often organized for a single transaction.

Question 15

Is a stock split a distribution from assets or capital?

Answer 15

It is not a distribution from assets or capital. The amount of earned or capital surplus or stated capital does not change. Each share of a class of stock is merely divided into a multiple of one share. The value of each share changes, not the SH’s proportionate ownership interest.

Question 16

Does an LLC have to maintain in its state of formation an agent for service of process and an office?

Answer 16

Yes, it must at all times maintain in its state of formation an agent for service of process and an office. Same for limited partnerships and corporations.

Question 17

During the winding up process of a partnership, how do you calculate the cash received?

Answer 17

Calculate any losses. Calculate the cash balance after paying the creditors and other cash collections/payments.
Capital Amount – (Loss x % of profit/loss).

Question 18

How do you calculate the GP % when there is a liability assumed?

Answer 18

The GP % is the proportion of gross profit in relation to total contact price. GP = Basis - Total Received - Selling Expenses.
GP % = GP / Contract Price (Does not include the liability…just the cash/installment pmts)

Question 19

When SH are doing cumulative voting, how are their shares counted?

Answer 19

TOTAL Votes for SH = # of shares owned x # of directors being elected.

Question 20

Is management or the board responsible for establishing overall corporate policy and overseeing its implementation?

Answer 20

The board controls the corp and is responsible.

Question 21

If a company offered to purchase all of the assets, including furniture, fixtures, equipment, materials, supplies, inventory, etc and the offering letter stated a price equal to 105% of the total of all outstanding claims of creditors, what is the offer considered?

Answer 21

A contractual offer. It is a simple contract offer to buy the assets and no tender offer was made to the SH’s.
The acquisition is an acquisition of substantially all assets, not a merger.

Question 22

Can the death of a partner cause dissociation in both a general partnership and limited partnership?

Answer 22

Only is a general partnership

Question 23

Do both general partners and limited partners have the ability to act as an agent of the partnership?

Answer 23

Yes, both do. General partners are always agents of the partnerships. Limited partners may act as an agent, employee, or contractor of the partnership or a general partner without losing limited liability (RULPA).

Question 24

What rule protects an officer or a director from personal liability for honest mistakes of judgment if he or she acted in good faith; was not motivated by fraud, conflict of interest or illegality; and was not grossly negligent?

Answer 24

The business judgment rule.

Question 25

If a 3 for 2 REVERSE stock split, how do you calculate new shares and per-share basis?

Answer 25

Original shares x (2 / 3) = new shares (Should be less when a reverse split and higher per share value)
If stock split it is (3 / 2), higher $+# of shares lower per share value.

Question 26

Can a partner assign rights in specific partnership property?

Answer 26

A partner may assign her interest in the partnership but is not allowed to assign rights in specific partnership property. A partner’s individual creditors may not attach partnership property but may charge a partner’s interest in the partnership. Only a claim against the entire partnership allows specific partnership property to be attached.

Question 27

Are partners jointly and severally liable for the torts committed by another partner who acted within the ordinary course of the partnership business?

Answer 27

Yes. Joint and several liability means that all of the partners are liable, but a third party may hold any partner liable for the entire amount. Under the RUPA, joint and several liability is also imposed for all partnership obligations, not merely those arising from torts.

Question 28

Is an officer or director who is liable to the corporation because of negligence in the performance corporate duties entitled to indemnification?

Answer 28

Usually, is not entitled to indemnification. However, a court may order indemnification of an officer or director of a corporation (even though found negligent) if the court determines (s)he is fairly and reasonably entitled to it in view of all the relevant circumstances.

Question 29

Does an assignee have an obligation for partnership debts?

Answer 29

Without partnership status, the assignee has no obligation for partnership debts. A partner’s transferable interest consists of a partner’s share of partnership profits and losses and the right to receive distributions.