REG18 Flashcards
Does a partner recognize a gain on a distribution of property from a partnership that they contributed? .
No, no gain is recognized on a distribution of property from a partnership. Remaining precontribution gain may be recognized if property is distributed, but neither rule applies if a partner receives the property he contributed.
What are the 3 qualifications for Earned Income Credit (EIC)?
- The individual must have principal place of abode in the US for more than one-half of the taxable year;
- (S)he must be at least 25 years old and not more than 64 years old at the end of the taxable year; and
- The individual can’t be claimed as a dependent of another taxpayer
What are the 4 requirements needed to take a dividends-received deduction of a foreign corporation?
(1) not be a foreign personal holding company, (2) be subject to federal income taxation, (3) be 10% or more owned by the domestic corporation, and (4) have income from effectively connected business sources within the US.
Is it true that to recover damages at common law based on contract or negligence, privity between the plaintiff and accountant may be required?
Yes, under common law, privity between the plaintiff and accountant may be required. To recover under the Securities Act of 1933, however, a purchaser of securities need not prove privity of contract with a CPA.
Can a nonresident alien own shares in an S corporation?
No
If bonds are issued and subsequently repurchased by the corporation, is there a deduction for that ?
Yes, If bonds are issued and subsequently repurchased by the corporation at a price in excess of the issue price, the excess of the purchase price over the issue price is deductible as interest expense for that taxable year.
If previous years Sec 1231 losses are able to be taken against the current year Sec 1231 gain, is that OI or Capital Gain?
The Sec. 1231 loss that is recaptured in the current year is OI and the remaining gain will be a long-term capital gain.
Is the majority rule that the CPA is liable to foreseen third parties (foreseen users and users within a foreseen class of users)?
Yes
Examples of organizational expenses and how would you amortize for tax?
Amortize its organizational expenses over at least 180 months starting with the month in which it begins business. Organizational expenditures are those incurred incidental to the creation of the corporation. Expenditures connected with issuing or selling stock and with transferring assets to the corporation are EXCLUDED.
Examples: State incorporation fees , legal fees for drafting the charter, expense for temporary directors.
Are personal casualty losses, wage or salary income, nonbusiness income in excess of nonbusiness deductions, interest and dividends included in a NOL?
A net operating loss is defined as the excess of allowable deductions (as modified) over GI. An NOL generally includes only items that represent business income or loss. Personal casualty losses and wage or salary income are included as business items. Nonbusiness income in excess of nonbusiness deductions must be included.
Interest and dividends are not business income.
In a Sec. 351 exchange, what is the basis of the property transferred into the corporation?
It is the basis of the property transferred plus the amount of gain recognized by the taxpayer.
If a car is received in addition to the stock there is a gain. The realized gain is FMV of stock + FMV car – AB in the property.
The amount of gain recognized is the lesser of the realized gain or the FMV of the property other than the stock received (car).
Can all implied warranties be excluded by the expressions “as is,” or “with all faults”?
Yes, all implied warranties are excluded by the expressions “as is,” “with all faults,” or other language that (1) calls the buyer’s attention to the exclusion of warranties and (2) makes plain that no warranty is implied. A disclaimer of the implied warranty of merchantability must mention merchantability and be conspicuous if in writing. A disclaimer of the implied warranty of merchantability may be oral.
Can a well-known seasoned issuer and a seasoned issuer make oral communications at any time if certain conditions are met?
Only a well-known seasoned issuer (filed for at least 1 year and has a market cap of at least $700 million) can make oral communications at any time if certain conditions are met. Including a free-writing prospectus and a written offer that is not a statutory prospectus.
A seasoned issuer (filed for at least 1 year and a market cap of at least $75 million) cannot.
Does guaranteeing a corporate loan increase an S Corp SH Basis?
No
Are CPAs liable for ordinary negligence if a party is not a foreseen user?
The CPAs are liable at most for ordinary negligence. In most jurisdictions, however, a party who is merely a reasonably foreseeable user and not (1) a foreseen user, (2) a member of a class of foreseen users, or (3) in privity of contract or a primary beneficiary will have no standing to bring suit for ordinary negligence.
