Professional Documents
Culture Documents
Reg Flash Cards PDF
Reg Flash Cards PDF
T - tax "deductions"
I - interest deductions on some home equity loans
M - medical deductions (limited to excess over 10% AGI)
M - miscellaneous deductions not allowed
E - exemptions (personal) and standard deduction
Q318.
what are the tax preference items?
A318.
1 - Private activity bond interest income (on certain bonds)
2 - percentage depletion the excess over adjusted basis of
property
3 - pre- 1987 acc depreciation
Q319.
what is the credit for prior year minimum tax?
A319.
certain allowable AMT paid in a taxable year may be carried
over as a credit to subsequent taxable years. it may only
reduce regular tax, not future amt.
Q320.
what is the carry- forward for the credit for prior year
minimum tax?
A320.
forever
Q321.
what is the limitation on the credit for prior year minimum
tax?
A321.
AMT created from certain permanent differences cannot be
carried forward as part of the credit.
Q322.
what is the general statute of limitations for when the
government can assess an additional tax?
A322.
three years from the later of the due date of the return or
the date the return is filed (including amended returns)
Q323.
what is the statute of limitations if there is a 25%
understatement of gross income?
A323.
6 years from the later of the due date of return or date
return is filed
Q324.
what is the statute of limitations for fraudulent and false
returns?
A324.
no statue. forever!
Q325.
what is the form for a refund?
A325.
form 1040x
Q326.
when can you file a refund claim?
A326.
three years after you filed it, or two years after the time the
tax was paid if you didn't pay when filling.
Q327.
when can you file for a refund for bad debts and worthless
securities?
A327.
seven years later of: due date of return or when it is filed
Q328.
what is form 1139 for?
A328.
to claim a refund of corporate income taxes.
Q329.
what is form 1045 for?
A329.
to request a quick refund of individual income taxes due to
the carry back of a net operating loss
Q330.
what is form 843 for?
A330.
to request a refund of taxes other than income tax
Q331.
a taxpayer is required to make estimated quarterly tax
payments if both of the following conditions are met:
A331.
1. $1000 or more tax liability
2. Inadequate Tax estimates (less than 90% of current
year's tax or 100% of last years tax)
Q332.
for corporations tax consequences, there is no gain or loss
to the corporation issuing stock in exchange for property
in the following transactions:
A332.
1. formation - - issuance of common stock
2. reacquisition - purchase of treasury stock
3. resale - sale of treasury stock
Q333.
in a corporation formation, the general rule is that the basis
of the property received from the transferor/shareholder is
the greater of:
A333.
greater of:
- adjusted basis (nbv) of the transferor/shareholder (plus
any gain recognized by the transferor/shareholder), or
- debt assumed by corporation (transferor may recognize
gain to prevent a negative basis)
Q334.
if the aggregate adjusted basis of property contributed to a
corp by each transferor/shareholder in a tax- free
incorporation exceeds the aggregate FMV of the property
transferred:
A334.
the corp's basis in the property is limited to the aggregate
FMV of the property to prevent the transfer of property with
"built in losses" to the corporation
Q335.
the shareholder contributing property (not services) in
exchange for corporation common stock has no gain or
loss if the following conditions are met:
A335.
1. 80% control of the voting stock and 80% of the non-
voting stock
2. boot not received
Q336.
what are three gross income items that represent
temporary differences between tax and book items?
A336.
interest, rental, and royalty income received in advance
Q337.
what are GAAP income items that are not includible as
taxable income?
A337.
interest income from municipal or state obligations/bonds,
proceeds from life insurance on the life of an officer where
the corp is the beneficiary, and federal income taxes are
not deductible
Q338.
what is the limit on the domestic production deduction?
A338.
can't exceed 50% of the W2 wages paid by the corporation
for the year
Q339.
how much is the domestic production deduction?
A339.
9% of the lesser of:
1. qualified productions activities income (QPAI)
2. taxable income (disregarding the QPAI deduction)
Q340.
How is QPAI calculated?
A340.
domestic production gross receipts
- cogs, other expenses, and other deductions
Q341.
a publicly held corporation may not deduct compensation
expenses in excess of _____ paid to the CEO or ________
unless based upon __________
A341.
$1,000,000; the four other most highly compensated
officers; qualifying commissions or a performance based
plan of the company
Q342.
entertainment expenses for officers, directors, and 10% or
greater owners may be deducted only to the extent that ___
A342.
they are included in the individual's gross income
Q343.
bonuses paid by a(n) ____ basis taxpayer are deductible in
the tax year when all events have occurred that establish a
liability with reasonable accuracy, and provided they are
paid within ____
A343.
accrual; within 2.5 months after year end
Q344.
accrual method taxpayers must use the _____ method to
write off bad debts
A344.
specific charge off (direct write- off method)
Q345.
all interest paid or accrued during the taxable year on
indebtedness incurred for _______ is deductible
A345.
business purposes
Q346.
interest expense on loans for investment has a limitation
on deductibility of _____
A346.
net investment income (taxable)
Q347.
prepaid interest expense must be allocated to _____
A347.
the proper period to which it is related. (incurred & paid)
Q348.
corporations making contributions to recognized
charitable orgs are allowed a max deduction of ___
A348.
10% of their taxable income
Q349.
for charitable deductions, total taxable income is
calculated before the deduction of:
A349.
1. any charitable contribution deduction
2. the dividends received deduction
3. any NOL carryback
4. any cap loss carryback
5. U.S. production activities deduction
Q350.
is business property is partially destroyed, the loss is:
A350.
the lesser of:
a. the decline in value of the property
b. the adjusted basis of the property immediately before
the casualty
Q351.
if business property is fully destroyed, the amount of the
loss is:
A351.
the adjusted basis of the property
Q352.
what is the deduction for organizational expenditures and
start- up costs?
A352.
may elect to deduct up to 5,000 or each, and the excess is
amortized over 180 months from when the business
started. (5,000 reduced if costs are over 50,000)
Q353.
what are the included costs for the organizational
expenditures and start up costs deduction?
A353.
fees paid for legal services in drafting the corporate
charter, bylaws, minutes of organization meetings, fees
paid for accounting services and fees paid to the state of
incorporation
Q354.
what costs are excluded from the organizational
expenditures and start up costs deduction?
A354.
costs of issuing and selling the stock, commissions,
underwriter's fees, and costs incurred in the transfer of
assets to a corporation
(cost of raising $)
Q355.
what is the GAAP rule for organizational expenditures and
start- up costs?
A355.
expense
Q356.
how are goodwill, covenants not- to- compete, franchises,
trademarks, and trade names amortized?
A356.
on a straight- line basis over a 15 year period beginning
with the month that the intangible was acquired
Q357.
what is the difference in the treatment of purchased
goodwill (yrs 2002 and forward)?
A357.
tax rule - amortized on a straight line basis over 15 years
OR
Substantial performance
Material breach
A766.
Substantial performance: contract price less any damages
AND
EXCEPTIONS:
- original offer precludes such additions
- new terms materially alter original offer
- the original offeror gives notice of his/her objection within a
reasonable time.
Elements:
1.) detrimental reliance on promise
2.) reliance is reasonable and foreseeable
3.) damage results (injustice) if promise is not enforced
Q878.
Are promises to donate to charity enforceable and why?
A878.
Yes - for public policy reasons
Q879.
Legal capacity - what Ks are void and what are voidable for
lack of legal capacity?
A879.
- Minors = voidable (by minor)
- Incompetent persons = void if K by person adjudicated
insane; = voidable (by incompetent person) if K made
before person adjudicated insane
- Intoxicated person = voidable (by intoxicated person) IF
extent of intoxication at time of K was so great that
intoxicated party did not understand terms or nature of K
Q880.
Illegal Ks and relief available from court
A880.
When both parties are guilty, neither will be aided by court
(BUT if one party repudiates prior to performance, s/he
may recover his/her consideration).
if it does, then ND
Q1044.
INDIVIDUAL TAX
CASUALTY LOSS
A1044.
Sch A - Itermized deduction
DEPENDENT - DEFINITION
A1057.
- any person who qualifies as a dependent exemption
except that
- gross income & joint return tests are not met
SALES TAX
A1058.
12/31/2003- 1/1/2009
Not taxable
Q1061.
INDIVIDUAL TAX
IRA CONTRIBUTION
A1061.
- no phaseout based on AGI if you didn't participate in an
employer qualified pension plan
2008- lesser of 100% of contribution or 6000
Q1062.
INDIVIDUAL TAX
Not Taxable
Q1063.
INDIVIDUAL TAX
DEPENDENCY EXEMPTION
A1066.
C - must be US citizen, Canada, or Mexico
I - income limited to 3,300/3400- (2007)
- unless child is under 19yrs old or
- full time student under 24 yrs old
R - relationship, must be lineal descent, does not include
cousin
- met if dependent lives with you entire year
S - Support - over 50%
- includes tax exempt items like Social Sec, AFDC, scholarships
not include
- multiple support agreement - if more than 1 person pays >
50%, can give exemption to any person who paid at least 10%
CHARITABLE CONTRIBUTIONS
CARRYOVER RULES
A1073.
carryback - no
carryforward - 5 years
Q1074.
NOL for INDIVIDUAL CARRYOVER RULES
A1074.
carryback - 2 years
carryforward - 20 years
Q1075.
CARRYOVER RULES
carryforward - indefinitely
INVESTMENT INTEREST
A1076.
carryback - no
carryforward - indefinitely
Q1077.
CARRYOVER RULES
COMMIT
A1085.
Charitable Contributions
Other Misc Exp not subject to 2%
Misc Exp subject to 2%
Medical Exp (exceeds 7.5% of AGI)
Interest Paid - investment, mortgage loan, home equity
loan
Taxes
Thefts & Casualty Losses
Q1086.
Sch A Itemized Deduction Phaseout
FOR AMT?
A1232.
STRAIGHT LINE METHOD OVER 39 YEARS FOR TAX
(understates amti before ace adj, need to increase
adjustments to convert reg taxable income to amti)
-
Q1237.
MIN TAX CREDIT
A1237.
AMT PAID IS ALLOWED AS CREDIT AGAINST REGULAR
TAX LIABILITY IN FUTURE
- CARRIED FORWARD INDEFINITELY
- CAN BE USED ONLY TO REDUCE REGULAR TAX LIAB,
NOT FUTURE AMT LIABILITY
- CANNOT BE CARRIED BACK
Q1238.
SMALL CORP EXEMPTION FROM AMT
A1238.
1ST TAX YEAR - EXEMPT
2ND YR - GROSS RECEIPTS TEST
3RD YR - AVERAGE GROSS RECEIPTS FROM 1ST 2
YEARS < 7.5 MILLION
Q1239.
AMTI EXEMPTION
A1239.
- 40,000 EXEMPTION,
- PHASEOUT AT 310,000
Q1240.
DISALLOWED LOSSES
FROM SALE OR EXCHANGE OF PROPERTY
A1240.
- A C CORP AND A MORE THAN 50% SHAREHOLDER
- C CORP AND S CORP IF SAME PERSON OWNS MORE
THAN 50% EACH
- CORP AND PARTNERSHIP IF SAME PERSONS OWN
MORE THAN 50% OF CORP AND MORE THAN 50% OF
CAPITAL & INTERESTS OF PARTNERSHIP
Q1241.
CAPITAL LOSSES
A1241.
ONLY DEDUCTIBLE TO EXTENT OF CAPITAL GAINS
- CANNOT OFFSET ORDINARY INCOME
- CARRYBACK 3YRS, CARRYFORWARD 5 YRS
- ALL CORP CAPITAL LOSS CARRYBACKS &
CARRYFORWARDS ARE SHORT TERM
Q1242.
CORPORATE DISTRIBUTIONS OF PROPERTY
- DIVIDEND?
- RETURN OF STOCK BASIS?
- GAIN ?
A1242.
div - included in gross inc
Deductible up to $108K
AND
what happens?
A1316.
Partner must recognize ORDINARY INCOME when a capital
interest is received as compensation for services rendered
(FMV of interest rcvd x %)
Q1317.
PARTNERSHIP FORMATION
INCREASES
A1322.
+ contribution of assets by partner to partnership
+ debts incurred by partnership
+ allocation of partnership to partner
Q1323.
PARTNER'S BASIS
DECREASES
A1323.
- distributions of assets from partnership to partner
- allocation of partnership losses to partner
- repayments/reductions of debt of the partnership
Q1324.
PARTNERSHIP FORMATION
FMV is ignored
Q1326.
PARTNERSHIP FORMATION
GUARANTEED PAYMENT
A1329.
payment to partner for services or use of capital, like salary
- not based on partnership inc/loss
- include in determining ordinary income to partnership
Q1330.
PARTNERSHIP TAX YEAR
A1330.
- required to adopt the same tax year as that of the partners
or a majority of partnership interests
- can have a tax year with valid business reason but limited
to using one of 3 months prior to the required year end
- result - up to 3 months of partnership income is deferred
before being taxed on the returns of the partners
Q1331.
PARTNERSHIP OWNERSHIP
OF 50% OR MORE
A1331.
- Losses from sales of property between controlling
partner and his partnership are not allowed
- Gains from sale of property is ordinary Income
Q1332.
PARTNERSHIP DISTRIBUTION
Got cash & property that depreciated
If over 50% owned, gains are taxable but losses are not
deductible (related party rule)
Q1345.
Partnership interest received in exchange for services
rendered: partner's basis in partnership interest?
A1345.
Fair market value of services rendered
Q1346.
Sale of partnership interest: calculation of gain/loss to
selling partner
A1346.
+ Amount received
+ Share of partnership liabilities assumed by buying
partner
- Basis in partnership interest
Q1347.
Sale of partnership interest: calculation of basis in
partnership interest to buying partner
A1347.
+ Purchase price
+ Share of partnership liabilities assumed
Q1348.
S Corporation: requirements
A1348.
Fewer than 100 owners
No owner can be a C Corporation
Q1349.
S Corporation: calculation of at- risk balance for owner
A1349.
+ Capital balance (investment + share of profits -
distributions)
+ Loans to corporation
Q1350.
Calculation of original tax basis in partnership interest
A1350.
+ Money contributed
+ Adjusted basis of property contributed
+ Share of liabilities on other partners' contributions
assumed by partner
- Share of liabilities on partner's contribution assumed by
other partners
Q1351.
Calculation of change in partnership interest
A1351.
+ Share of partnership net income (loss)
+ Share of separately stated income (loss) items
+ Share of increase (decrease) in partnership liabilities
+ Cash contributions (distributions)
+ Property contributions (distributions) at adjusted basis
+ Share of tax- exempt (non- deductible) partnership
income (expenditures)
Q1352.
Partnership is terminated for tax purposes when:
A1352.
1) 50% or greater of partnership interests are sold within a
12- month period, OR
2) Partnership discontinues operations for a 12- month
period, OR
3) Partnership no longer has at least two partners
Q1353.
S Corp election:
Who must consent?
When effective?
A1353.
All shareholders during tax year must consent
A If the land has a tax basis to the partnership of $43,000, Heathcliff must
recognize a taxable gain of $11,000.
B If the land has a tax basis to the partnership of $43,000, the partnership
must recognize a taxable gain of $7,000.
C If the land has a tax basis to the partnership of $43,000, Heathcliff will
retain that same tax basis in his records.
D If the land has a tax basis to the partnership of $43,000, Heathcliff will
recognize the land with a tax basis of $32,000.
A1368.
The correct answer was D.★★The normal rule for nonliquidating
distributions is that the tax basis is retained so that no income is
recognized by either the partnership or the partner. ★The partner
picks up the property at this tax basis ($43,000) and reduces his
basis in the partnership by that same amount. However, a problem
arises when the basis of the property received is larger than the
basis reported by the partner for the partnership as a whole. Then,
unless cash is received that is greater than the basis in the
partnership, the new property is recorded at an amount that is equal
to the basis in the partnership. Here, because the $43,000 basis
exceeds the basis reported by Heathcliff in the partnership, the land
will be reported by this partner at $32,000. No gain or loss is
reported; the land simply moves from partnership to partner but the
upper limit of recognition for the partner is the basis in the
partnership.
Q1369.
Nancy and Drew have been equal partners in the Mystery Partnership for a
number of years. During the current year, Nancy was given a cash
distribution of $5,000 along with land having a tax basis of $30,000 and a
fair value of $40,000. Which of the following statements is true?
A Serena will report $36,000 more in taxable income this year from this ownership
than Venus will report.
B Serena will report $60,000 more in taxable income this year from this ownership
than Venus will report.
C Serena and Venus will report the same amount of taxable income this year from
their ownership.
D Venus will report $24,000 more in taxable income this year from this ownership
than Serena will report.
A1370.
The correct answer was A.
Partnerships file income tax returns but do not pay any income
taxes. Instead, certain items such as rent and royalty income, capital
gains and losses, dividend and interest revenue, and charitable
contributions pass directly through the tax return of the individual
partners. All other items are lumped together to arrive at an ordinary
income figure that is also allocated to the individual partners. A
guaranteed payment to a partner is viewed as an expense of the
business in determining the ordinary income for the year and as
income for that specific partner.
Q1372.
An S corporation has a capital gain of $4,000, interest revenue
of $5,000, and sales of inventory of $30,000. The S corporation
has 10 equal owners. What is the tax effect relating to these
three items?
A A husband and wife who are employed with the same company are only
entitled to a combined total of 12 weeks for the birth of a child, when
adopting a child, or to care for a parent with a serious health condition.
B An “eligible” employee allowed leave under the FMLA is an employee
that has been employed with a company for at least 1,250 hours during a 12
month period prior to the start of the leave.
C An employer may NOT ask the employee to provide a medical
certification from a health care provider to substantiates the need to use
FMLA.
D An employee can ask to use FMLA to care for a family member, for their
own physical/mental health care, and after the birth or adoption of a child.
A1389.
The correct answer was C.
Government agency
Banks and S&Ls
Farm co- ops
Charities
Railroads
Bankruptcy trustees
Q1429.
Regulation A:
Benefit to issuer?
Restrictions on offerings?
A1429.
Simplified registration
A - Reg A
C - Commercial Paper (notes, bonds mature less than 9 months & (not for
investing purposes)
I - Intrastate offerings *at least 80% of sales are exclusive to state of
incorporation but buyers cannot resell outside the state for 9 months
D - Reg D private placement offerings (504, 505, 506)
B - Brokerage transactions
R - Regulated Industries (savings & loans)
A - Agencies of the government - railroads, muni bonds)
I - Insurance Contracts & Policies *stock from insurance co's are not
exempt*
N - Not for profit
S - Stock Divs & Splits (exchanges with existing holders)
Q1459.
WHAT IS THE LIABILITY FOR FALSE OR MISLEADING
REGISTRATION STMTS?
A1459.
whether securities are exempt or not, still liable under the
anti- fraud provisions of the Sec 33 Act
- both SEC & person defrauded can challenge the fraud
Q1460.
WHICH SECURITIES ARE EXEMPT FROM REGISTRATION?
A1460.
acidbrains
Interstate Commerce
B - Brokerage transactions
R - Regulated securities - savings & loans
A - Agencies of Government (railroads, muni bonds)
I - Insurance contracts/policies - insurance co that issues
stock - not exempt
Not for Profit / charity
S - Stock Dividends & Splits (exchanges with existing
holders who know about company
Q1473.
DOES OFFER COMPLY WITH $$ LIMITATION?
A1473.
REG A - UP TO 5 MILLION
REG D -
504- UP TO 1 MILLION
505- UP TO 5 MILLION
506 - UNLIMITED
Q1474.
DOES OFFER COMPLY WITH METHOD OF SALE
RESTRICTIONS?
A1474.
REG A - freely advertised, no restrictions on resale
504 - no advertising to non- acc investors, no resale to
non- acc investors for 2 yrs
505 - no advertising, no resale for 2 yrs, audited b/s must
be provided to non- acc
506 - no advertising, no resale for 2 yrs, audited b/s must
be provided to non- acc and must be represented by
accredited
Q1475.
WAS OFFERING SOLD WITHIN THE APPLICABLE TIME
LIMIT?
A1475.
REG A, 504, 505 & 506 -
506 - unlimited
Q1477.
TENDER OFFERS
A1477.
attempts to buy 5% or more of a class of stock
- owners of 5% or more must file Sch 13D - showing source
of funds used for purchase
- amt of stock owned
- price offered for shares
- future plans for the co - disclose to SEC, the co, & stock
exchange
Q1478.
PROXY SOLICITATIONS
A1478.
the right to vote someone's shares at a shareholder
meeting
- must be sent to each shareholder
- must notify SEC 10 days prior to mailing
Q1479.
LIABILITY OF COMPANY NOT MEETING REPORTING
REQUIREMENTS OR VIOLATING PROVISIONS OF 33 OR 34
ACTS
A1479.
registration of securities be suspended or revoked
Q1480.
LIABILITY OF CPA IF VIOLATE ANY PROVISION OR
WILLFULLY OMITS A MATERIAL FACT IN A
REGISTRATION STMT
A1480.
criminally liable
Q1481.
SARBANES- OXLEY ACT
A1481.
- amends 34 Act to make it illegal for issuer to give various
types of personal loans to or for any executive officer or
director
- statement of CEO/CFO that certifies reports comply fully
with relevant securities laws and fairly present the financial
condition of the company
Q1482.
SARBANES- OXLEY ACT - FINES
A1482.
any officer who makes certification while knowing it does
not comply with SEC requirements can be fined up to 1M
or imprisoned up to 10 years
- officers can be fined up to 5M in prison up to 20 years
Q1483.
SARBANES- OXLEY ACT - REQUIREMENTS OF
EXECUTIVES
A1483.
executives to forfeit any bonus or incentive based pay or
profits from the sale of stock, received within 12 months
prior to an earnings statement when misconduct is present
Q1484.
SARBANES- OXLEY ACT -
REQUIREMENTS OF AUDITORS
A1484.
requires auditor to promptly inform the board of directors
(audit committee) of all significant problems identified
during the engagement
Q1485.
AUDIT REPORTS -
1. UNQUALIFIED OPINION
A1485.
standard "clean" report
Q1486.
AUDIT REPORTS
3. QUALIFIED OPINION
A1487.
"except for"
- disagreement (non- GAAP, inadequate disclosure,
inconsistency), scope limitation
Q1488.
AUDIT REPORTS
4. ADVERSE OPINION
A1488.
"do not present fairly"
Q1489.
AUDIT REPORTS
5. DISCLAIMER OF OPINION
A1489.
"we do not express an opinion"
Q1490.
SECURITIES ACT OF 1933
A1490.
- the purpose of the 1933 Act are to provide investors with
full and fair disclosure of a security offering
- to prevent fraud
- no sale of a security shall occur in interstate commerce
without 1) registration & 2) prospectus to purchasers
unless security is exempt for registration
Q1491.
10- K
A1491.
annual reports
*must be filed with SEC
*financial statements must be certified by independent
public accountants
Q1492.
10- Q
A1492.
quarterly reports
*doesn't have to be filed with SEC
*doesn't have to be certified by independent public
accountants
Q1493.
8- K
A1493.
current report
*when certain material events take place (i.e. change in
corporate control)
*file with SEC within 15 days after material event occurs
Q1494.
Robinson- Patman Act
A1494.
prohibits price discrimination in interstate commerce that
results in lessening competition or creating a monopoly
Q1495.
SECURITIES EXCHANGE ACT OF 1934
TENDER OFFER
A1500.
a request to shareholders of a given co to tender their
shares at a stated price
- if unsolicited, then must report to SEC
Q1501.
SEC 34 ACT
Payee = lender/creditor
Q1522.
Draft: parties
A1522.
Drawer = signer
Drawee = signer's bank (usually)
Payee
Q1523.
Check: special conditions
A1523.
Must be drawn on a bank
No known defenses
Q1533.
Bearer vs. order paper: method of transfer
A1533.
Bearer paper need only be delivered
bearer paper?
A1547.
endorse in blank (does not specify the endorsee)
- once it becomes bearer paper, you don't need to endorse
it to negotiate it to the next party
Q1548.
blank endorsement
A1548.
- check made to order of Me (on front)
Me signing name (on back)
- converts order paper into bearer paper
- bearer paper can be negotiated through delivery (I lose
the check, C picks it up and gives it to D, D is valid holder
and C's endorsement is not required)
Q1549.
special endorsement
A1549.
- on back of check payable to Me,
I sign - pay to Mr. Smith
- "pay to order of"- on back not required
- bearer paper into order paper
Q1550.
restrictive endorsement
A1550.
1) "for deposit only" signed Me
2) pay to X only if X fixes my car (condition on back is ok)
Q1551.
qualified endorsement
A1551.
- "without recourse" signed Me
- I am disclaiming liability to pay holder or any subsequent
endorser
Q1552.
special qualified endorsement
A1552.
pay to S without recourse, signed Me
Q1553.
blank qualified endorsement
A1553.
without recourse, signed Me
Q1554.
restrictive, qualified, blank
A1554.
for deposit only, without recourse, signed M
Q1555.
restrictive, qualified, special
A1555.
pay to X, if she completes the work, without recourse,
signed Me
Q1556.
holder in due course
A1556.
- entitled to payment on negotiable instrument
requirements:
1) be a holder
2) give value
3) take in good faith
4) without notice that it is dishonored, or that a person has
a claim to it, or overdue
Q1557.
rights of a holder in due course
A1557.
- takes free of all PERSONAL DEFENSES
- breach of K - HDC still has right to collect
STATUTE OF FRAUDS
- names of grantor (transferor) and grantee (transferee)
- intent
- description
- must be delivered to purchaser
- grantor's signature
Q1594.
TYPES OF DEEDS
A1594.
QUITCLAIM DEED
GRANT DEED
WARRANTY DEED
Q1595.
quitclaim deed
A1595.
- "as is"
- transferor makes no warranties whatsoever
- usually by gift or inheritance, rarely used in sales
Q1596.
grant deed
A1596.
- transferor warrants that they have done nothing to create
any impairments of title during ownership
- does not protect the transferee against defects in title
prior to transferor's period of ownership
- aka "bargain & sale" or "special warranty" deed
Q1597.
warranty deed
A1597.
- no defects in title
- transferee is guaranteed full rights of use and enjoyment
of the property, including a promise that there are no
undisclosed claims against the property by any other
property
Q1598.
How do you protect a deed?
A1598.
- transferee may get title insurance
- insurance co will perform a search for any defects
Q1599.
What is an easement?
A1599.
A defect in marketable title to real property
Q1600.
What do you need to make the deed valid?
A1600.
must be recorded at the appropriate government office
Q1601.
NOTICE- RACE JURISDICTION
A1601.
earlier claim will win if
- later claimant knew about the earlier claim
- the earlier claimant records the deed before the later
claimant
- if mortgagee does not record its mortgage, a subsequent
mortgagee will win b/c has superior security interest
Q1602.
In a notice- race jurisdiction, the later claimant will win
when
A1602.
- the later claimant records first
- did not know about the earlier claim when they acquired
their rights
Q1603.
tenancy in common
A1603.
2 or more persons (co- owners) with separate interests (%)
in the same property
- at time of loss
- doesn't have to exist when policy issued
Q1657.
who can have an insurable interest
in property?
A1657.
- mortagee has insurable interest in mortgage balance
owed
- partner in a partnership
- owner of a company who wants to buy life insurance on
an officer critical to company
CONSTRUCTIVELY
Q1666.
The first estimated tax payment is due by the _______
following the close of the tax year. Other payments are due
on the ________ of the fiscal year.
A1666.
15th day if the 4th month
6th, 9th, and 12th month
Q1667.
What type of expenses are these?
1.Expenses of temporary directors
2. Fees paid to a state for incorporation
3. Accounting and legal fees incident to organization
A1667.
ORGANIZATIONAL EXPENSES - they are directly
connected with the creation of the corp.
$5000 may be deducted in the taxable year in which the
business begins if total expenses are less than $50,000; or
reduce by amount that is above $50,000.
Q1668.
Under Uniform Capitalization Rule, these costs MUST be
included in inventory:
1. ________
2. ________
These costs are never capitalized to inventory : (4)
A1668.
1. ALL DIRECT COSTS
2. indirect cost - OFF- SITE STORAGE COSTS
BREACH OF CONTRACT
Who can sue?
A1709.
accountant is liable as a result of non- performance of
contract
- liable to client who hired her or anyone IN PRIVITY
- intended 3rd party benefit by client
Q1710.
COMMON LAW
BREACH OF CONTRACT
What does plaintiff have to prove?
A1710.
MILE
BREACH OF CONTRACT
What does acct have to prove?
A1711.
- didn't breach
- fully performed under contract terms
Q1712.
NEGLIGENCE LAW - Who can sue?
A1712.
- if in majority of states (which follow
2ND RESTATEMENT OF TORTS)
she is liable to any - KNOWN OR FORESEEN by the CPA
- PRIVITY
- ULTRAMARES ACT - only if in privity
Q1713.
COMMON LAW
NEGLIGENCE
Who can sue?
A1714.
- anyone IN PRIVITY
- any KNOWN & FORESEEN by CPA (shareholder)
- BUT, NOT IN MINORITY IF STATES THAT FOLLOWS
ULTRAMARES ACT
Q1715.
COMMON LAW
NEGLIGENCE
What must plaintiff prove?
A1715.
MIL- E & CAMPS
M - Material misstatement or omission
I - Info in F/S - was harm
Loss
E- Error - NO DUE PROFESSIONAL CARE/NEGLIGENT
NEGLIGENCE
What does CPA have to prove?
A1717.
- followed GAAS - show due professional care
- lack of privity (useless against client or intended 3rd
party)
Q1718.
1934 ACT /FRAUD/GROSS NEGLIGENCE
A The creation of the new privilege was not intended to modify, but rather
to extend the attorney- client common law confidentiality privilege to other
practitioners, such as CPAs.
B Information disclosed to a CPA for the purpose of preparing a return is
privileged under the Reform Act.
C The preparation of tax accrual work papers is not considered tax advice
when developed to evaluate a client’s contingent tax liabilities in
connection with financial condition disclosures.
D The privilege does not extend to written tax advice to corporate clients
concerning their corporations’ involvement in tax shelters.
A1745.
The correct answer was B.