Review Questions Flashcards
Accord and satisfaction
Where both parties agree to new terms that vary from the original contract such that the old contract is discharged and the new agreement is fulfilled
Novation
When a new contract substitutes a new party for an old party in an existing contract on the agreement of all parties
When does Circular 230 allow contingent fees
1) an IRS examination or audit
2) a claim solely for a refund
3) a judicial proceeding arising under the IRC
Unreimbursed employee expenses are:
NOT deductible
Common Adjustments
- Educator Expenses
- Traditional IRA Contributions
- Student Loan interest
- Self employment tax, health insurance, retirement plans
- Penalty on early withdrawal of savings
- Alimony paid
- Charitable contributions ($300)
- Real estate taxes
Common Itemized Deductions
- Medical Expenses
- State, Local, Foreign taxes
- Interest Expense
- Charity (60, 50, 30% rule)
- Casualty Losses
How are gains realized from the sale of hot assets treated
as ordinary income
Which of the following are included in taxable income: punitive damages, compensatory damages
Both are included in taxable income
In a situation where a writing is required, when is a contract enforceable even without that writing (SWAP)
- Specially manufactured goods
- Written confirmation (10 day rule)
- Admitted to in court
- Performed already (to the extent of the performance)
Define real property
Includes land and all items permanently affixed tot he land (ie. buildings, paving, etc)
Gain or loss on gifts
IF FMV>NBV, Rollover basis = NBV.
If FMV is LESS THAN NBV, basis is based on the selling price. If below FMV, basis is FMV. If above NBV, basis is NBV. If in-between basis is the same as selling price and gain/loss is 0.
DONT FORGET THIS RULE
What allows a creditor to collect money from a debtors wages?
Writ of garnishment
Where are guaranteed payments stated
Ordinary business income AND K-1 (separately)
Common deductible medical expenses
- Prescription drugs
- Necessary surgeries
- Medical insurance premiums
- Eye exams, glasses, hearing aids, wheelchair, crutches
- Drug rehabilitation treatment
- Plastic surgery from prior injuries
- Transportation costs for medical purposes
- Physical therapy
** Supplements and vitamins are NOT deductible, even if recommended by a physician. Only prescription medication is deductible
What is the max allowable business loss deduction for single taxpayers? Married taxpayers?
$262,000 / $524,000
What type of income is interest income
Portfolio income, NOT passive income
How are Current E&P and Accumulated E&P distributed throughout the year
Current E&P: Distribute pro rate based on distribution amount NOT distribution date
Accumulated E&P: Chronological order, first come first serve
Separately stated depreciation
Section 179: YES
MACRS: NO
What does a covered opinion include
Any written or electronic advice concerning transactions specified by the IRS as listed transactions
Auctions without reserve
1) Must sell goods if an offer is made
2) Goods don’t have to be sold if an offer is not made in a reasonable time
* With reserve, you can withdraw the goods put up for sale any time before the auctioneer announces completion of the sale
Defense of privity
- Privity of contract = no direct relationship between the accountant and the third part
- Privity is only a defense to negligence, not fraud
Power of Attorney
A written authorization of agency
- The principal, not the agent, is the only party required to sign the power of attorney
Common Law vs. Sales Article
Common law - an offeree must assent to every term in the offer without change, otherwise the offeree makes a counteroffer (ie. mirror image rule)
Sales Article - New or different terms in an acceptance of a a contract under the Sales Article generally do not affect the validity of the acceptance
Type of writing needed to satisfy the statute of frauds
- The full contract itself does not need to be in writing, any type of writing that state the material facts will do
- The writing only needs to be signed by one party, but the contract can only be enforced against the one who signed it
- The terms can be stated in more than one document
Result to a surety when a creditor and debtor decide to extend the time of payment
- Any extension of time discharges a gratuitous surety
- A compensated surety is discharged only if the extension of time materially increases the suretys risk
If a security becomes worthless in the current taxable year, it is treated as sold or exchanged on:
The last day of the current taxable year. A worthless security is treated as being sold or exchanged on the last day of the year it becomes worthless
Wash sales
Sale of security 30 days before or after a repurchase of the same security is a disallowed loss TO THE EXTENT of what is repurchased.
Separately stated items in a partnership
- Guaranteed payments to partners
- Net rental income or loss
- Interest / Dividend income
- Capital gains and losses
- Net section 1231 gain / loss
- Charitable contributions
- Section 179 depreciation
- INVESTMENT interest expense
- Partners health insurance premiums and retirement plan contributions (part of guaranteed payments)
- Tax credits claimed by partners
Charity itemized deduction FMV vs NBV
- Cash = FMV (obviously)
- Ordinary income property = LESSER OF FMV and NBV
- LTCG property = FMV only
