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cpa regulation > wiley points > Flashcards

wiley points Flashcards

1
Q

fee simple

A

max amount of ownership & rights

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2
Q

EPA is responsible persons

EPA CANNOT

A

any relation to hazardous waste production; joint and several liability (all or partial liability)
Rank Risk

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3
Q

179 exclusion and type pf property

A

related party & only for business property

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4
Q

grantor of a revesionary trust who is taxed

A

grantor

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5
Q

coal capital mining depletiin rate

A

10%

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6
Q

1934 suspension

A

1- less than 300 SH
2 - less than 500 SH & total assets less than 10 milliom over 3 consecutive years
1 or 2 APPLIes only if not traded nationally

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7
Q

179 does not include

A

LAND (never included in depreciable property)

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8
Q

pmsi preference & grace period

A

noninventory (inventory mist file) filed within a 10 day gface period takes preference over another perfected

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9
Q

taxable dividend & property distribution to SH cannot exceed what threshold

A

E&P of a corporation on transaction (property gain fmv-basis)

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10
Q

trust income

1) Indirect expenses allocation formula
2) personal deduction amount
3) Capital contributions to corpus - allowed/disallowed

A

1) (ex fees, distributions) allocation of % of taxable versus non taxable income
2) $300
3) allowed

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11
Q

1231 specific exclusion & holding period

A

inventory & LT (1year +)

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12
Q

179 threshold

A

over 200K dollar for dollar amount reduction of 25K

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13
Q

capital gains tax payment

1) 0 - 15 =
2) 25 - 35
3) 39.6
4) Section 1250 gain (MUST BE HELD 1+)
5) Collectibles
6) can they be netted

A

1) 0
2) 15
3) 20
4) 25
5) 28
6) YES

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14
Q

Losses are disallowed on sale or exchange of property between individuals who own what % of a partnership

A

50%+

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15
Q

Pay to order or bearer versus

I promise to pay

A

1) draft

2) promissory note

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16
Q

S corps individual tax returns can recognize loss up to

A

basis zero out OR 3K

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17
Q

Contigent Fees

A

not allowed to prepare a tax return ONLY allowed to represent a client in tax examination or US tax court

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18
Q

Due Diligence is met by

A

seeking consul NOT obtaining additional accreditation

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19
Q

Empowerment Zone Employment Credit

A

1) 20% or 15K of qualified wages from each employee

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20
Q

Investment income deduction rules

A

The amount of investment interest deduction for a current year cannot exceed NET investment income

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21
Q

Secured creditor has a deficit after sale; rules on collection of the deficit

A

The deficit can be collected after all secured creditors have been paid; the amount paid is allocated by the percentage owed/total amount owed * remainder of cash

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22
Q

Check certification

A

equates to acceptance

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23
Q

1933
Exemption
Reports needed
Prospectus

A

1) Trucking Company
2) K-10 annual report
3) Required registration materials

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24
Q

Shelf registration

A

continuous and future (ex benefit plans)

must be regularly updated

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25
Q

Equal Pay & Civil Rights deals with

Civil Rights does not prohibit

A

SEX

AGE

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26
Q

1934 act excludes from the definition of securities

A

CDS

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27
Q

Clean water act key word

A

point source

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28
Q

Articles of Incorporation covers

A

shares issued

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29
Q

Private Foundations are not subject to what taxes

A

ACCUMULATED EARNINGS

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30
Q

What level must all tax cases start?

A

Trail Court (includes Tax Court, District Court,& Federal Claims court)

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31
Q

Excluded fro PHC income

A

capital gains

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32
Q

inherited property when sold is treated as gain

A

LT

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33
Q

affliated groups/corporation controllership %

A

80%

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34
Q

consolidated returns

A

offset abilities

DONT NEED TO ISSUE CONSOLIDATED FS

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35
Q

Bankruptcy involuntary claim leads to

A

court order of relief

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36
Q

agency coupled w/ interest termination

A

only agent

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37
Q

controlling interest/board of directors making personal gains from company transactions are

A

disallowed & any profit made must be returned to the corporation

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38
Q

operational agreements are used to

A

diffuse conflicts before they begin

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39
Q

fees not connected to bankruptcy are prioritized as

A

unsecured claims

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40
Q

who cannot ratify a contract

A

UNDISCLOSED PRINCIPLE

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41
Q

Revised Uniform Partnership Act

A

partners share in losses based on percentage of profits

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42
Q

joint ventures resemble what type of business structure

A

general partnerships

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43
Q

Type of security a bond is

A

debt security NOT AN INTEREST in entity!!

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44
Q

before reorganization plan is confirmed what must be done

A

provisions for full payment of admin. expenses

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45
Q

commingling of funds discludes

A

corporations taking loans from SHs

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46
Q

articles of incorporation versus court ruling

A

court ruling takes preference

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47
Q

perferential treatment time frame and other

secured preferential

A

90 days before insolvency & ANTECEDENT DEBTS

SECURED is not a preference

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48
Q

only time debts are not discharged

A

willful or fraudulent acts by the debtor to obtain the money; negligence is discharged

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49
Q

those hired by a buisness - ALWAYS answer

A

MUST act in business’s best interest

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50
Q

consolidation and old company status

A

completely new corporation is formed

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51
Q

LLC versus S Corp appreciated property distribution

A

LLC tax free (same as partnership rules)

S Corp - taxable to corporation

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52
Q

ultra vires

A

beyond normal scope of activities

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53
Q

bankruptcy fees procedures

A

must be filed and approved by the COURTS

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54
Q

effect of piercing corporate veil

A

shareholders pick up liability

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55
Q

lp is disolved when

A

only gp leaves

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56
Q

respondeat superior

A

employer iis liab’e for employee torts in the scope of buosness

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57
Q

director wants to have a transactions with corporation it directs
1
2
3

A

Either the transaction is fair or it is disclosed and approved by the SHAREHOLDERS or it is known to board and approved by DISINTERESTED members

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58
Q

Foreign Corporation

A

business run in any stare aside from where it was incorporated

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59
Q

statutory liens, when can a trustee set aside

A

when a bankruptcy is filed; anything that exists before cannot be set aside

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60
Q

Bankruptcy taxes

A

any amount preceding 3 years of bankruptcy not discharged

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61
Q

type of dividend not considered a distribution

A

stock

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62
Q

lp certificate must show name of

A

general partners only

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63
Q

involuntary petition stops

A

judgement liens

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64
Q

who can’t own shares in an s corp

A

C corp

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65
Q

bankruptcy of a corporation is owner liable

A

no

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66
Q

who cannot file for voluntary bankruptcy or be charged with involuntary bankruptcy

A

railroads
insurance
banks
savings

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67
Q

purpose of cumulative voting

A

let minority shareholders have a say

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68
Q

lp profits and losses

A

based on contribution

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69
Q

general warranty

quitclaim

A

grantor has most rights nothing is encumbered

no warranty of title made by the grantor; just interest given

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70
Q

tender by a debtor not accepted effects a surety how

A

releases them

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71
Q

lien creditors rights

field warehousing arrangement/ bill of lading/neg. receipts are prefected how

A

takes preference over unsecured & any secured interests AFTER the lien is attached

filing or TAKING POSSESSION

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72
Q

damages for a breach are calculated by

A

difference between contract price and price AT DATE OF BREACH times units

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73
Q

firm offer requirements

A

merchant to create is own separately written agreement

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74
Q

trademarks last versus coptyrights

A

as long as the company wants them

authors life +70

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75
Q

UCC who bears the risk of loss

A

look in terms of contract

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76
Q

CF SHIPPING

A

seller loading dock

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77
Q

UCC applies to

A

consumer goods by a nonmerchants

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78
Q

co surety is removed what happens to his share of debt

creditor releasing a cosurety

A

is removed from debt owed

cosureties liability is reduced by amount of release party

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79
Q

does a mortgage need to be recorded
BUT
reason why it should be recorded

A

no

to protect 3rd parties from taking possession of it; no record 3rd party automatically gets title

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80
Q

1st and 2nd mortgager who has rights

A

1st mortgager goes 1st

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81
Q

trade secrecy law

fair use doctrine

A

power to protect intellectual property rights

minimal copyright protection

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82
Q

terms of a lease agreement

A

parties, amount, term, description, exclusive possession

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83
Q

contribution cannot be made

A

before the loan is paid

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84
Q

deed title of real property to transfer (mortgage)

A

deed delivery to purchaser

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85
Q

joint tenanacy versus tenant in common

A

tenant in common when the other tenants do not consent on the new tenant

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86
Q

possessory interest

A

leases and mortgages; not full title

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87
Q

mortgagor

mortgagee

A

getting mortgage

giving mortgage

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88
Q

race statue
notice statue
race notice

A

recording
good faith - no recording
good faith takes perference

89
Q

easement

A

written permission to use land

90
Q

title insurance policy

A

only things that are recorded

91
Q

major exception to UCC written contract

A

possession of goods

92
Q

warranty against infringement protects who ; time frame to disclaim

A

the seller ; before contract i form

93
Q

warranty of title is excluded when

A

the seller clearly expresses it does not have the title

94
Q

sale of goods by a creditor when debtor has paid 60% is mandatory for only

A

PMSI only not business equipment

95
Q

discovering nonconforming goods after delivery

A

allowed to refuse if in a reasonable time frame

96
Q

do lessees possess insurable interest

A

yes

97
Q

PMSI defeats personal use good faith purchaser how

A

filing a financing statement

98
Q

statutory liens take preference against what other creditors

A

perfected security interests

99
Q

private litigation reforms act

A

amends 1933 & 1934

100
Q

under common suits the minimum that must be proved

unforseen 3rd parties

A

negligence

gross negligence

101
Q

unemployment to emploer

A

can take a credit

102
Q

accountants do not need to notify clients of disclosure of records when

A

the records are outsourced

103
Q

IRC applies to preparers; prepares are defined as

A

individual or firm who prepares returns for compensation

104
Q

non contributory pension plans

A

all funds provided by employer

105
Q

exempt issuers traded on the national exchange

A

must register with 1934

106
Q

auditor is responsible to SEC up until

A

effect date of registration statement

107
Q

1933 buyer recission

A

when seller fails to meet disclosure requirements

108
Q

1934 securities not national but need to be reported

A

10 million in assets 500+ shareholders

109
Q

1933 required filing

A

prospectus & registration

110
Q

1934 proxy statements

A

require in conjunction a financial statement to be issued

111
Q

client alters tax return cpa

A

discontinues relationship

112
Q

penalties for tax return preparers exclude

A

conflicts of interest & disclosing info to third parties

113
Q

s-1
s-2
s-3

A

1933
long form
short form
short form

114
Q

not likely to be considered on 1933

A

General Partnership

115
Q

strict liability is for

A

manufactured goods/employers for workers comp.

116
Q

foreseen third parties cannot collect due to

A

NEGLIGENCE

117
Q

accountants common law liability to a CLIENT include

A

negligence, fraud, breach of contract

118
Q

private reform securities litigation act defendants have what type of liability

A

proportionate

119
Q

1933 intrastate exemption

3 OTHER EXEMPTIONS

A

80% of business in the state and buyer must be resident

government banks insurance, certificates issued by bankruptcy trustee

120
Q

common law usually deals with what type of liability

A

non criminal

121
Q

negligence need not include

A

RELIANCE

122
Q

1933 stock warrants issuance

A

required to file

123
Q

preparers declaration

A

important to remain in tact

124
Q

1933 offerors who must file

A

issuers, underwriters, dealers

125
Q

1933 exempts what securities

A

BANK

126
Q

monopoly accusation must have

A

intent; discludes a superior product

127
Q

cpas are premitted to leave blank on tax return

A

reasonable grounds exists

128
Q

alimony recapture formula

A

2nd year = 3rd year - 2nd year -15K
1st year = year 1 - (average year 2 & 3) - 15K - year 2 recapture
Total Recapture = 1year + year 2

129
Q

medical expenses exception ONLY! (DOES NOT APPLY TO FILING STATUS)

A

can make over 3900 and still claim if more than half support and family relationship

130
Q

exception to IRA proportional phaseout

A

$200 always deductible

131
Q

qualified education loans include

A

room & board

132
Q

passive income management rule

A

deductible 25K up to 100K; in between 100 -150 deductible is reduced by 50%

133
Q

IRA early withdrawal formula

A

10% penalty tax & higher tax rate

134
Q

rental income excludes

A

improvements NOT in lieu of rent

135
Q

dependant care formula

A

35% reduced by # of exemptions * total expenses

136
Q

items excluded from personal NOL

A

exemptions, capital losses, standard deduction

137
Q

to be a non taxable fellowship candidate

A

must be using $ for tuition

138
Q

itemized property discludes

A

special assessment

139
Q

health insurance reimbursements are included in income

A

no

140
Q

why estimated taxes necessary

A

not sufficiently covered by withholding

141
Q

no underpayment penalty exists when

A

1- withheld + estimate payments = 90% of current year TR or 100% of the previous year TR (110% for individuals with AGI 150K+)

142
Q

annualized method versus seasonal method

A

seasonal only for CORPS

143
Q

nonrefundable credits

A

adoption

144
Q

general buisness credit carryover

A

1 year back 20 years forward

145
Q

ss withheld greater than it should be

A

credit against if from 2+ employers

146
Q

individuals tax rate is applied when

A

after either SD/itemized deduction is taken & personal exemption is taken * tax rate

147
Q

personal interest itemized? WHAT NOT TO CONFUSE

A

non deductible (auto loan) PERSONAL PROPERTY TAX IS DEDUCTIBLE (auto related tax)

148
Q

accrual

A

earned & amount is REASONABLY ACCURATE

149
Q

100 floor trick

A

applies to all losses

150
Q

filing statue is starts from

A

whichever is later the due date or the payment date

151
Q

health insurance premium versus other premiums

A

others are not deductible itemized expense

152
Q

moving adjustment allows

A

moves for new jobs to stop being unemployed or if the employee is fired

153
Q

spouse dies and has no dependants; filing status

A

single

154
Q

refund claims

A

later of 3 years after the due date or 2 years after payment date

155
Q

MACRs formula

A

type of property determines the years/ time period which to depreciate over

156
Q

charity in land LT versus short term

A

long term FMV; short term purchase price

157
Q

students can deduct

A

loans and cash support from parents

158
Q

gross income excludes

A

COGS and deductions

159
Q

federal income tax

A

non-deductible for both corps and self-employed individuals

160
Q

interest forfeiture

A

itemize deduction

161
Q

American opportunity; Hope scholarship credit

A

only for 1st four years of post secondary

162
Q

fees paid for compensation than remitted to employer

A

deduction to arrive at AGI

163
Q

limitations on passive activity losses apply to

A

PHC, individuals, estates, trusts, and CLOSELY held C Corps

164
Q

what is boot

A

cash and anything that is not considered like property (ex exchange of land for land a bike; bike is boot)

165
Q

like kind exchanges do not apply to what

A

bonds, stocks, notes, convertible securities, interests

166
Q 
parent corps (80+) treat sub losses as
qualified small buisness stock gains
A

ordinary losses

if held for 5yrs+ (not more than 10X original basis) gain can be reduced by 50%

167
Q

when you received stock dividends holding period

A

same as ORIGINAL STOCK

168
Q

involuntary conversion replacement period

ADDITIONAL FACT TO CONSIDER

A

2 tax years after refund is issued

does not exclude involuntary conversions

169
Q

291 depreciation gains

A

only for corporate sales
amount of ordinary income (not 1231) *.2 = A (ordinary)
(SP - basis) - A = section 1231

170
Q

wash sales and repurchase rule & LT/ST

A

the wash sale is added to the repurchase price to determine allowed gain or loss; time period goes back to orginal sale date

171
Q

nonliquidating distribution on stock or property

Corp.’s gain or loss treatment

A

gain yes loss DISALLOWED
cash dividend - distrubution no gain
Property dividend (gain) = fmv - basis

172
Q

liquidating distributions

A

long - term capital loss full amount

173
Q

taxation of dividend to SH

A

FMV- purchase price (taxable)

174
Q

corp foreign tax credit

A

foreign taxable income/total us taxable income * US tax

175
Q

S Corps & Partnership pass-through items (not included in corp
0

A

1 - Capital Gains/Loss
2 - TAX EXEMPT interest income
3 - INVESTMENT interest expense (reg interest exp. nonseperate)
4 - Dividend, interest, royalties income
5 - Depletion (NOT DEP. - DEP IS BUISNESS EXP.)
6 - 179 expense
7 - Charitable Income
8 - Foreign Income
9 - Real Estate & other rental income (rent EXPENSE nonsep)
10- bad debt received that was previously written off
11- misc income divided differently then stated allocation

176
Q

Corps gain on asset with a liability formula

A

greater of FMV or liability - basis

177
Q

Built in gain formula

A

unrealized gain (FMV - basis)

178
Q

1244 losses
1 - apply to
2 - requirements
3 - applicable deduction

A

1 - original stockholder (individuals and partnerships)
2 - 5 years preceding less than 50% of gross receipts
3 - 50K - S/ 100K - M

179
Q

income recognized for inputs to a corporation
1 - cash
2 - services
3 - property

A

1 - no income
2 - FMV of what is received
3 - FMV - basis

180
Q

corporation recognizes income from

1 - property

A

1 - 80% ownership no recognition; only boot received in recognized
2 -less than 80% (TRANSFERRING PROPERTY OWNERS MUST JOINTLY OWN 80%) ownership transferor basis + gain recognized by tranferor = (FMV - BASIS)

181
Q

M-1 VERSUS M-2

A

M-1 whats on the tax return

m-2 per the books UNAPPROPRIATED

182
Q

S Corp Shareholder restriction

A

only individuals and certain trusts and estates

183
Q

S CORP borrows from a bank, what is shareholder affect

A

does not affect S/H

184
Q

Redemption treated as dividends versus capital gain
5 qualities preventing dividend treatment
IMPORTANT

A 
1- not equivalent to dividend
2- disproportionate (STOCK OWNERSHIP CHANGES)
3- terminates SH interest
4 - noncorp. SH in partial liquidation
5 - payment of death taxes
185
Q

PHC tax

PHC exclusion from income

A

1 - income at corp rate
2 - undistributed income at a 20% penalty
Capital gains

186
Q

preceding year estimated taxes excludes

A

years where there is an operating loss

187
Q

C corp to S Corp dates

A

before/on march 15th - retroactive

after march 15th - the 1st day after end of C corps FISCAL year

188
Q

recapitalization

A

bondholders exchange old bonds for stock or new bonds

189
Q

CORP treasurury stock sale treatment

A

NO GAIN OR LOSS; treated as an additional to paid in capital

190
Q

what entities have NOL

A

C Corps; trust & estates; npos with ubi

191
Q

at risk loss & passive activity losses limitation applies

A

at the partner level

192
Q

partnership taxable year is determined by

EXCEPTIONS

A

the tax year of the partner owning 50%+ of P&L
Exceptions
maximum deferral period doesnt exceed 3 months
valid buisness purpose with IRS approval

193
Q

gains and losses to partners of a partnership

A

gains always recognized

losses not recognized for partners owning over 50%

194
Q

What is a disporportionate distribution?
How does it affect the partner?
Proportionate distribution

A

applies only to complete liquidation with money, unrealized, receivables or inventory

  • partnership doesn’t zero out difference is a capital loss
  • partnership zeroes out no G/L
195
Q

partnership ; individual partners gain on the land

A

FMV - basis + SP - FMV * ownership %

196
Q

SCorp versus partnership liabilities

A

scorp - decreases basis

partnership only - increases basis

197
Q

partnership ordinary losses effect on partnership

A

reduces up until basis is zeroed out; remained loss can be carried forward

198
Q

partnership must hold property how long so it won’t be subject to built in gains tax

A

7 years

199
Q

partnership basis in an asset

partner receives a non-liquidating property distribution

A

basis ignoring any mortgage

use BASIS not FMV

200
Q

S Corp consent rules

A

termination - 50%

beginning - 100%

201
Q

S Corp Tax liability lesser of

A

realized gain or built in gain

202
Q

50% owner of an S Corp can recognize what type of losses

A

only losses related to nonseperately stated items

203
Q

Trust and estate SD

A

NONE its an exemption

204
Q

trust DNI taxable

A

whatever is distributed not taxable to trust

whatever DNI received is taxable to beneficiary (only DNI taxable)

205
Q

whose taxed in a trust

A

person who has the power to REVOKE

206
Q

NOL and DRD versus charitable

A

DRD is added to NOL

Charitable is not included in NOL

207
Q

advertising cost amortization period

A

not amortized expensed as business

208
Q

executive pay $1 million cap

A

publicly held C Corps

209
Q

installement estimated payment

time frame to pay

A

preceding and current BOTH 100%

4 months 15 days after year end

210
Q

Current negative E&P if distrubution made halfway through the year formula

A

allocate half the negative E&P the accumulated; this is the amount that can be distributed

211
Q

E&P GAINS AND LOSSES

A

REMEMBER TO FACTOR INTO E&P

212
Q

qualified and ordinary dividends

A

same thing

213
Q

organizational expenses

A

legal, accounting, filing

214
Q

articles of incorporation amended by

A

shareholders

215
Q

Like kind Exchanges
1 - realized
2- recognized
3 - basis of new

A

1 - FMV new (+boot/-liability assumed) - basis old
2 - lesser of realized or FMV of boot (no loss) BOOT isn’t netted
3 - basis of property given up + recognized gain + boot paid - boot received

216
Q

accumulated earnings tax and federal income

A

allowed to deduct federal income tax

217
Q

distribution
current earnings
accumulated earnings

A

1 - pro rata

2 - chronological (beginning with the earliest distribution)

218
Q

not considered 193 security

A

gp interest not warrant

cpa regulation (5 decks)

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