Review Flashcards
Corporation is liable for torts of employees during the course of business
Respondent Superior
Debtor pays debt to original creditor without being notified that their debt had been assigned. Are they no longer liable?
Yes, No Longer Liable
S-Corp distributions in excess of their stock basis, and no E&P is what?
Capital Gain
Rule 505 Regulation D
- $5 million 12-months
2. 35 unaccredited
What is available to a principal when an agent breaches a fiduciary duty?
- Termination
2. Constructive Trust
Requirement of a partnership agreement that can not be completed in 1 year
Must be in writing
Discharge of the maker of an instrument in bankruptcy is what type of defense?
Real Defense
Who can take property free of any security interest whether or not it was perfected?
Buyers in the ordinary course of business
Formula for Foreign Income Tax Credit
(Foreign Taxable Income/Worldwide Income) x US Tax
Are debts from the negligence of a debtor discharges in bankruptcy?
Yes
Are debts from willful or malicious misconduct discharged in bankruptcy?
No
Real estate Rental Activities are generally what type of activities?
Passive
What is the Material Rental Activity deduction?
Can offset $25,000 non-passive income with Rental Passive losses, phased out between $100,000 and $150,000 by 50% on the dollar.
What amount can a common carrier limit their liability for?
Dollar amount specified in the contract for the goods
Merger of 2 Corporations requires approval from who?
Both Board of Directors
What is the affect to a corporation on a non-liquidating distribution of appreciated property?
Recognize gain, just like property was sold
Passive loss carried forward and back rules
Carried forward indefinitely, or until property is disposed of, no carry back
If their is two perfected security interest who has priority
The first that was perfected
Is the only way to ratify a contract is by writing?
NO, can be ratified by action
Is selling goods “As Is” adequate to disclaim?
No
When is a loss in a transaction of property between a partner and a partnership disallowed?
Partner owning more than 50% capital or profits in the partnership
What is the name of a partnership that does not have a specified duration?
Partnership at Will
When can a party sue regarding an Anticipatory Breach?
On the date of the Anticipatory Breach
What type of organizations can distribute appreciated property tax free?
Partnerships and LLC
What type of organization must recognize a gain on the distribution of appreciated property?
C-Corp and S-Corp
What is the treatment of Real Estate taxes paid by a business?
Deduction as ordinary business expense
No penalty will be imposed on a corporation for underpayment of estimated tax in what instance?
Tax for that year is less than $500
What must happen for title to transfer in real property?
Deed delivered to purchaser
Must file a fiduciary income tax return in what instance?
Income equal to or greater than $600
Limited Partnerships Units fall under what?
SEC 1933 as a security
3 Type of Assets for tax purposes
- Ordinary
- Section 1231
- Capital
3 characteristics of Ordinary assets
- Inventory & AR
- Depr Property used in Business owned less than 1 year
- Copyrights, music, literacy, etc
3 characteristics of Section 1231 assets
- Depr property used in business/trade
- Realty owned by a business
- Owned for more than 1 year
3 characteristics of Capital Assets
- Assets that are not Ordinary or Section 1231
- Held for Investment
- Personal Use
Basis for Gifted Property
- Gain = AB of Donor
2. Loss = lower of FMV at date of gift or AB of Donor
What is the depr basis for gifted property?
Gain basis
What is the value for gifted property for Gift Tax?
FMV
Netting Process (3 Steps)
- Net ST
- Net LT
- Net ST and LT Net, Greater amount determines of ST or LT
What is the result of Netting Process having more LT and ST?
Capital Gain/Loss
What is the result of Netting Process having more ST and LT
Ordinary Income/Loss
Assume what capital gain rate unless given another?
15%
What is Section 1245 recapture?
Gain resulting from Accumulated Depreciation is recaptured as ordinary income
What is Section 1250 recapture?
Amount of Gain or SL depreciation is Ordinary income, amount of Gain from SL is taxed at 25%
What is the lookback period for Corporate 1231 losses?
5 years
Section 1231 losses are deductible as what?
Ordinary Income
Depreciation period for most business property under MACRS?
5 years
Depreciation for Furniture & Fixtures under MACRS
7 years
Business use property uses what Depreciation method under MACRS?
200% declining balance
In excess of what amount of Unearned Income by a child under 18 is taxed at their parent’s rate?
$2,000
Any transfer for value of an order instrument gives the transferee what?
Unqualified endorsement from the transferor
Who may assert the Ultra Vires doctrine?
Shareholder of a Corporation
A CPA who intentionally violates the provisions of Section 10(b), Rule 10(b)-5 can be what?
- Civil Liable for monetary damages
2. Criminal liable of a fine
How will a court decided risk of loss on a contract?
Intent of the parties when the contract was manifested
Limited Partnerships are created by what?
State Statute
How is debt relief involved in the sale of a home?
Part of the amount Realized
Exclusion amounts for the sale of Personal Residence
Unmarried = $250,000 Married = $500,000
Which of the following was an issuer not prefer to file:
S-1, S-2, S-3
S-1
How does tax-exempt interest affect a partner’s basis?
Increases their basis
A seller of a product and the party that sold them the product have what type of liability for defective products
Strict Liability
Criteria for a qualifying child for the Child Tax Credit
- Dependent son, daughter, stepchild, grandchild
- Under the age of 17
- Social Security Number on Tax Return
Does every estate have to file an estate tax return?
No
Amount to qualify estate to not have to file a return
Estate less than $5.34 million due to the lifetime exclusion
Who is exempt from registration with the SEC when selling securities?
Anyone who is not a
a. Issuer
b. Underwriter
c. Dealer
Can Chapter 11 be commenced voluntarily or involuntarily?
Both, Voluntarly and Involuntarly
Difference between an easement and a license of real property?
Easement - Writing
License - Oral, can be revoked any time
What exempt must be used under regulation D for a offering of $5 million?
Rule 506 - Private Placement
What amount of cash will a partner receive in a liquidation of a partnership?
Capital account plus or minus the gain/loss of partnership assets
A debtor must file with court attorney fees for bankruptcy proceeding and have them approved (T/F)
True
A mortgage on real property must be delivered to the mortgagee (T/F)
True
What method of accounting would a tax payer use if they had inventory on hand at year end?
Accrual Method
Does having accounts receivable require a tax payer to use accrual accounting?
No
What is the dollar limit that C-Corp’s can use Cash Method of accounting?
$5 Million Gross Receipts
When is the 10% penalty applied for early withdraw of retirement savings?
Before 59 1/2
Estimated Tax Prepayment Options
- 90% of current year tax
- Prior Year’s Tax Liability
a. AGI $150,000 or less = 100%
b. AGI over $150,000 = 110%
How are amounts received for non-competes treated?
As ordinary income
Is an issuer fails to meet the disclosure requirements of SEC 1933, the buyer may ask for what?
Recession of the sale
How are liquidating damages created?
Listed in the contract
Does an oral agreement modifying an existing contract for the sale of goods need new consideration to be binding?
No
Treatment of medical expense of a decedent within 1 year of their death?
Deducted on final income tax return if waiver is attached to not claim on estate tax return
2 ways Foreign Income Taxes can be deducted
- Credit against US Income Tax (limited)
2. Itemized Deduction (NOT subject to 2% floor)
Income and distribution order for S-Corps and Pass-Throughs
First, income increases basis.
Second, Distribute Income based on new basis
FMLA Covers who (3 criteria)
- Employer with 50+ employees
- Employed 12 months
- Worked 1250 hours
Material modification of a real estate contract requires what to be binding?
Consideration
Is a modification of a service contract valued over $500 required to be in writing
No
Any modification to a service contract requires what to be binding?
Consideration
4 Parts of RICO 1962 (c)
- Conducted or Participated
- In an Enterprise
- Through a Pattern
- Of Racketeering Activity
What must an accountant do to not be liable under RICO 1962
Stick to Accounting Acitivites
Risk of loss for a FOB destination contract transfers to the buyer when?
Goods are tendered to the buyer
How can implied warranty of merchantability be disclaimed by a seller?
Statement mentioning merchantability
What type of buyer can get implied warranty of merchantability?
Any buyer buying from a merchant
What must occur for Replivin or Specific Performance to apply?
Goods must be identified
What party would a payee go to first to get paid?
Drawee (Bank)
UCC Negotiable instruments article Governs what?
- Commercial Paper
2. Negotiable Instruments
What type of instrument is it if the instrument only has to parties?
Promissory Note
When can a drawee of a time draft be held liable
Only after acceptance
Perfecta security interest gives the secured party priority over who?
Most, but not all, creditors that also have interest in the collateral
A surety can not do what?
Compel the creditor to collect from the principal debtor or collateral
What type of deed gives the purchaser the most protection
General Warranty
How is debt relief used in the sale of property?
Amount realized
Order of Bankruptcy distribution (12)
- Perfected
- Child Support/Alimony
- Admin Costs
- Ordinary Business
- Employee wages
- Employee benefit plan
- Farmer/Fisherman
- Consumer Creditors
- Taxes
- Death/Personal Injury
- All unsecured Creditors
- Debtor
Does a principal have to ratify a contract in a undisclosed principal situation to be held liable?
No
Emerging Growth Company (EGC) Qualifications (4)
- Less than $1 bill Rev
- Public less than 5 years
- Float of less than $700 mill
- Less than $1 bill debt in a 3 year period
EGC Advantages (3)
- Confidential Review of registration statement
- Reduced Audit Requirements
- More publicity
Can a foreign company be an EGC?
Yes
Do the limited partner and general partner need to be listed on the Limited Partnership certificate?
Only the General Partner
How is primarily responsible for an employees FICA
Employer
What standards can a CPA use as a defense against Section 11
GAAP and GAAS
How can a CPA be absolved of criminal liability under Section 18
Acted in Good Faith and had no Knowledge of misstatments
What does the Dodd-Frank authorize the PCAOB to do?
Regulate the audit of non-public broker dealers
Under the Dodd-Frank act, does an employee have to report suspected violations to employer first?
No, but it is encouraged
What rate can be credited against the Federal Unemployment Tax rate as a deduction?
State Unemployment rate
ERISA broadly pre-empts what?
State Regulation of Pension Funds
ERISA applies to what type of plans?
Benefit and Welfare
Is an LLC operating agreement required and what does it do?
Does not have to be filed, settles disputes among members
Does the debtor have to be insolvent in the 90 window to create a voidable preference?
Yes
What must a corporation furnish to it’s shareholders when soliciting a proxy?
Last 2 years audited financials
Pay to Order of Cash is what type of negotiable instrument
Bearer
C&F terms title and risk of loss transfer to the buyer when?
When delivered to a common carrier
Under Common Law what must be proved to held an accountant liable for an audit
Negligence, not using due care
Is someone a HDC if they do not give value for an instrument and their was a breach of contract on that instrument?
No, because of the personal defense of breach of contract
What is the purpose of Worker’s Comp Statues
Enable employees to recover for injuries regardless of negligence
How can a landlord “constructively evict” a tenant with a written lease?
Cut off the utilities
When can a gain be recognized in a corporate reorganization that involves stock for stock?
If boot is also received
What is a type B reorganization?
Stock for Stock
A loss for a S-Corp shareholder can not exceed what?
The shareholder’s basis
Estate Tax return is due when?
9 months after death
Are state death taxes an estate tax credit?
No
What is the result of a “No Change Report” issued by the IRS
Can not reopen the tax case unless there was fruad
What does a 90 day letter mean?
Taxpayer has 90 days to petition tax court
Does UCC apply to merchants only?
No merchants and non merchants alike
Breach of implied warranty statute of limitations starts when?
When the goods are tendered to the buyer
How do you calculate a Gain on the liquidation of C-Corp in exchange for shareholder stock
Property received at FMV, just like the shareholder sold the stock
When is a option contract not enforceable?
When no consideration is given
How soon must an 8-K be filed?
4 days
Can charitable contributions create a NOL?
No
Having to perform additional acts, beside paying money, for a negotiable instrument does what to it?
Makes in non-negatiable
If a seller ship FOB Destination and during shipment they find the buyer to be insolvent and won’t pay cash what can the seller do?
Stop delivery of goods
What does a merchant firm offer have require to be binding?
Only offeror’s signature
Is consideration required for a merchant firm offer?
NO
He deed has to only be signed by who?
Seller
If a non-accredited investor is involved in a 505 offering what must be provided to them?
2 years audited balance sheet
What type of interest does a lease create?
Possessory Interest
Is FUTA a deductible business expense?
Yes
Under what Regulation D rule is general solicitation allowed?
Rule 506
Can distributions reduce accumulated profits if Earnings and Profits are negative?
NO
Distributions from C-Corps never do what?
Increase or create a deficit in E&P
4 ways to create a Judicial Dissolution of a Corporation
- Waste of Corporate Assets by BOD
- BOD Deadlock
- BOD acts are illegal or oppressive
- Shareholder deadlock over election of BOD for 2 years
When does risk of loss for a merchant seller to the general public transfer to the purchaser (the general public)
When the purchaser takes possession
Personal holding company tax may be avoided by do what?
Dividend Payments
An option contract is not enforceable when?
No consideration is give
8-k events must be filed within how man days?
4 days
How are organizational expenditures treated for AMT calculation?
Added back as ACE adjustment
Can Charitable Contributions create on NOL?
NO
Can an accountants working papers be transferred to another accountant?
Not without the client’s permission
Does a merchant firm offer need consideration or a signature to be binding?
Only the offer’s signature
Who has to sign a DEED
Only the seller
What must happen if a non-accredited investor is involved in a REG D 505 offering?
Non-accredited investor must receive 2 years audited balance sheet
A lease creates what type of interest for the lessee?
Possessory Interest
General Solicitation is available for what Reg D exemption?
506
Do distributions to shareholders reduce Negative Accumulated Earnings and Profits?
No, only positive
Can distributions create or increase a E&P deficit?
No, never
