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  1. what does the Internal revenue code represent
    codification of the federal tax laws of the US

    2-1
  2. what is the calculation to calculate the amount of personal taxes due
    • gross income
    • +- Adjustments
    • =AGI
    • - Deductions
    • - Net Exemptions
    • = Taxable income
    • X Tax Rate
    • = Tax Liability
    • - Credits
    • + Self Employment Tax
    • +AMT
    • - Withholdings
    • -Prepayments
    • = Tax Due
    • 2-1
  3. What is considered an adjustment
    • I EMBRACED Education Health and Farmers
    • Interest on student loan
    • employment tax
    • moving expenses
    • business expense
    • rent/royalty/flow through entity
    • Alimony
    • Contributions to retirement
    • Early withdraw penalty
    • jury duty pay
    • Education
    • Health Savings Accounts
    • Farm income (Schedule F)
    • 2-1
  4. What goes on a Schedule A
    • COMMITT
    • Charitable Contributions
    • Other Miscellaneous
    • Misc. Expense
    • Medical Expense
    • Interest
    • Taxes
    • Theft Casualty

    2-1
  5. When must an individual file a tax return
    • if income is greater than the sum of their personal exemptions plus their standard deduction or
    • net self-employment earnings of $400 or more
    • Individuals claimed as dependents on another taxpayers return and have any unearned income and gross income of 950
    • anyone receiving advanced payments on the Earned Income Credit
    • Kiddie Tax
    • 2-1
  6. What is the kiddies tax
    • children who are under 18 years old or full time students under 24, must pay tax at their parents tax rate on unearned income of more than 1,900
    • 2-1
  7. When is an individual tax return due
    April 15

    2-2
  8. How long of an extension is allowed for an individual tax return
    • 6 months (October 15)
    • 2-1
  9. What is allowed to be extended for individual filing an extension
    filing only and does not include tax payment

    2-2
  10. When does interest start and end for late tax payments for individuals
    Starts April 15 and ends when actual payment is made

    2-2
  11. what are the amounts of interest penalties for late tax payments for individuals
    .5% for late payments and 5% for late filings or not filing

    2-2
  12. what is the max amount of penalties for late filings/payments
    25% of net tax owed

    2-2
  13. what form is used to file an individual tax return extension
    4868

    2-2
  14. what form is used to file an amendment
    1040x

    2-2
  15. what is time frame an individual is allowed to file an amendment to their tax return
    • later of
    • 3 years of original tax return due date (including extensions)
    • 2 years after actual payment of tax

    2-2
  16. what are the statue of limitations for the IRS to come after you on an individual tax return
    • 3 years after later of due date of filing date (simple negligence)
    • 6 years if total income is understated by 25% or more (gross negligence)
    • unlimited for tax fraud or non-filing of return (fraud)

    2-2
  17. who uses the cash basis of accounting
    • service type business not exceeding $10M including
    • most individuals
    • S-Corps
    • individually owned partnerships

    2-2
  18. what entities are prohibited from using cash basis
    • C-Corps with receipts exceeding $5M
    • tax shelters
    • certain trusts
    • 2-2
  19. when do individuals on a cash basis recognize income and deductions
    • income - actually or constructively received
    • deductions - disbursed or charged on credit card

    2-3
  20. what is included as gross income
    • INSIST SIP DECAF
    • interest
    • net operating losses
    • Scholarships
    • injury awards
    • stock options
    • tax refunds
    • social security benefits
    • inheritance, gifts, and life insurance
    • prizes and awards
    • dividends
    • earned income
    • capital assets
    • annuities and pensions
    • foreign earned income benefits and annuities
    • 2-3
  21. When is income considered earned
    when it is constructively received

    2-3
  22. what are different types of earned income
    • LASTING JUG
    • life insurance
    • awards and prizes
    • salaries/wages
    • tips
    • illegal drug money
    • non-money form
    • gambling
    • jury duty
    • unemployment
    • group term life

    2-3
  23. when are tips considered earned
    in the month the schedule is submitted.

    • IE. Earned Dec but schedule submitted Jan.
    • 2-3
  24. when are premiums for group term life insurance considered earned income
    • when premiums for group term life are over $50K
    • 2-3
  25. when are prizes and awards not considered earned income
    under 400 and received for years of service

    2-3
  26. is health insurance considered earned income
    • no
    • 2-3
  27. when are scholarships taxable as income
    • compensation of services and
    • money spend of something other than tuition, books, or class supplies for degree seeking students

    2-3
  28. what interest is not taxable as income
    • state and local municipal bond interest
    • Series EE and Series I if redeemed for higher education and
    • bought by taxpayer or spouse
    • buyer at least 24
    • redeem directly (not transferred to school)
    • room and board do not qualify
    • 2-3
  29. what dividends are not taxable as income
    • life insurance dividend - return of premium
    • S-Corp
    • stock dividends from common or splits
    • liquidating dividend
    • 2-4
  30. what is tax rate for dividends
    15% or 0% and after 2012 taxes at normal tax bracket

    2-4
  31. what injury awards are not considered income
    • pain & suffering
    • workers comp
    • 2-4
  32. what value is given to awards and prizes
    • FMV
    • 2-4
  33. what conditions must be satisfied for a prize/award to not be taxed as gross income
    • no services required by recipient and
    • selected without any action on recipients part and
    • payment assigned by recipient to a governmental unit or charitable organization

    2-4
  34. when is social security excluded from gross income
    • if provisional income is less than $25K.
    • It provisional income exceeds $60K tax is subject to 85%

    2-5
  35. how much can you exclude as part of foreign earned income credit
    95,00 of income earned in foreign country

    2-5
  36. how does a person qualify for a foreign earned income exclusion
    • Bona fide residence test
    • physical presence test
    • 2-5
  37. what is the bona fide residence test
    • US citizen who is a foreign resident for an uninterrupted period that includes an entire year OR
    • 2-5
  38. what is the physical presence test
    • US citizen present in a foreign country for at 330 full days in a 12 month period
    • 2-5
  39. what is taxable when getting a tax refund
    • Federal - interest is
    • state - interest is and refund is itemized on schedule A in PY
    • 2-5
  40. what is tax rate for long-term capital assets
    • 15% if held for more than one year
    • 0% if tax bracket is 10 or 15%
    • 2-5
  41. how much of a net capital loss is allowed against ordinary deduction for individuals
    • 3000
    • 2-5
  42. what is carry forward for net capital loss for individual
    • indefinitely
    • 2-5
  43. how much of a net capital loss is allowed against ordinary deduction for corporations
    • $0
    • 2-5
  44. what is carry forward for net capital loss for corporations
    • back 3 years and forward 5 years
    • 2-5
  45. what is carry forward for net operating loss
    • back 2 years and forward 20 years
    • 2-5
  46. What is the name of schedule A and what goes into it
    • itemized deductions
    • personal and employee deductions
    • 2-5
  47. What is the name of schedule B
    interest and dividend income
  48. What is the name of schedule C and what goes into it
    • profit and loss from a business
    • employer expenses / 1099 income
    • 2-5
  49. What is the name of form 8949 and what goes into it
    • capital gains and losses
    • S/T & L/T investments

    2-5
  50. What is the name of schedule E and what goes into it
    • supplementary income or loss
    • Rental income
    • Royalties
    • Copyrights
    • Oil/gas
    • Patents
    • Flow through entity
    • 2-6
  51. What is the name of schedule F
    • profit and loss from farming
    • 2-6
  52. what is form 1116
    Foreign tax credit
  53. what is form 4562
    depreciation and amortization
  54. what is form 4797
    • sale of L/T business property (not inventory or receivables)
    • 2-6
  55. what is allowable adjustment for student loan interest
    • 2500
    • 2-6
  56. what is allowable adjustment for self employment tax
    • 50% of payroll taxes (FICA & Medicare)
    • 1--% of medical insurance premiums
    • 2-6
  57. what is deduction from payroll taxes for FICA and Medicare
    • FICA - 6.2%
    • Medicare - 1.45%
    • 2-6
  58. when would medical premiums not be allowed as an adjustment
    • when another member of the family has coverage through their employer
    • 2-6
  59. what qualifications must be met for moving expenses to be allowed as adjustment
    • work must be at least 50 miles further from old home (each way)
    • only direct costs are allowed
    • meals, house hunting costs or temp living expenses are not allowed
    • must work at least 39 weeks
    • 2-6
  60. what costs are allowed for business expense
    • FAST HOG
    • fifty percent of meals and entertainment
    • all costs to run business
    • similar to small corp.
    • taxes paid by business
    • hobby losses are not
    • one hundred percent of travel
    • gifts up to $25 per customer
    • 2-6
  61. how much is allowed as a deduction for promotional item for business expense
    • $4
    • 2-6
  62. what is definition of passive activity
    • any business venture in which the taxpayer doesn’t materially participate
    • 2-6
  63. what are the most common types of passive activates that a person can participate in
    • limited partnerships interest
    • all rental activity (if not a real state professional)

    2-6
  64. how are losses recorded for passive activity
    • losses only to the extent of passive gains with unused carried forward until activity disposal
    • 2-7
  65. what entities are allowed to claim a passive activity
    • individuals
    • partnerships
    • estates
    • trusts
    • closely held C-Corp
    • personal service Corp
    • 2-7
  66. when can tax credits from passive activities offset taxes
    • when it arises from passive activities
    • 2-7
  67. how are losses recorded for someone who materially participates in rental activity
    • real estate person - losses treated as ordinary loss
    • active participation - $25 K of losses as ordinary loss
  68. what is phase out for active participation for real estate
    • 50% reduction of excess of taxpayers modified AGI over 100K
    • 2-7
  69. when is rental income allowed to be excluded from gross income
    • dwelling is rented for less than 15 days
    • 2-7
  70. how is rental income treated for a property that is also used for personal use
    • rented more than 14 days or 10% of number of days rented - deductions are limited to gross rental income
    • rented is not more than 14 days or 10% - all expenses allocate to the rental portion
    • 2-7
  71. what qualifications must be met to be considered alimony
    • CANNOT
    • cash only (not property)
    • apart when payments are made
    • not child support
    • not designated as property settlement
    • own return for payer and payee
    • terminates on death of recipient
    • 2-8
  72. would payments for college qualify as alimony
    • yes
    • 2-8
  73. what qualifies as earned income for retirement plan
    • salaries and wages
    • net self-employment
    • alimony
    • 2-8
  74. how much is a person able to contribute to an IRA
    • 5000 or 6000 if 50+
    • 2-8
  75. what is the income cap for Roth IRA
    • 122K or 183K if married
    • 2-8
  76. what conditions cause a traditional IRA to not be deductible
    • individual participates in another pension or profit sharing plan AND
    • AGI excess 68K or 112 married
    • 2-8
  77. what happens to IRA contributions if a spouse is a participant in another plan
    contributions for no-participating spouse cannot be deducted if joint AGI excess 183K

    2-9
  78. when would early deduction from a IRA not cause a 10% penalty
    • reached age 59.5
    • medical expenses exceeding 7.5% AGI
    • death or disability of participant
    • first time purchase of home (10&
    • 2-9
  79. what is a Coverdell education savings account
    • allows 2000 contribution made to beneficiary who is under the age of 18
    • 2-9
  80. how are Coverdell education savings monies withdrawn tax free
    • pay elementary, middle, high school and college expenses
    • 2-9
  81. when does unspent money for Coverdell savings get taxed
    • at age 30 of beneficiary unless transfer money to another family member of same generation
    • 2-9
  82. when would jury duty be entered into AGI
    • when submitted to employer if employer reimbursed for it
    • 2-10
  83. what counts as qualified higher education and what is allowable deduction
    • courses required by employer, by law, govt. regulation, or improve/maintain skills required in performing job
    • $4,000
    • 2-10
  84. what form is used for health savings account deduction
    • 8889
    • 2-10
  85. what is the crop method of accounting
    • cost of producing crop is deducted in year the crop income is realized
    • 2-11
  86. what income items go on schedule f
    • raised livestock, produce & grains
    • livestock and other items bought for resale
    • 2-11
  87. what expenses are allowed for farmers
    • car/truck
    • chemicals & pesticides
    • depression and 179 depreciation
    • feed purchased
    • fertilizers
    • seeds & plants
    • reasonable wages paid to children, meals to feed workers
    • 2-11
  88. when do depreciation review farm income
    11-Feb
  89. what is the standard deduction if being claimed on another persons tax return
    • greater of 950 or earned income +300 never to exceed regular standard deduction
    • 2-11
  90. when would a standard deduction be increased from normal
    • if over 65 or blind
    • $1,450
    • 2-11
  91. when is a charitable deduction allowed to be deducted on taxes
    • if given cash or property and when charity receives the funds
    • 2-12
  92. what valuation is given to property for charitable contributions
    • lower of tax basis or fair market value on date of contribution
    • 2-12
  93. what valuation is given to property for charitable contributions that is held for at least one year
    • fair market value of long-term capital gains recovery
    • 2-12
  94. how much of a deduction is allowed for charitable contributions
    • 50% of AGI or 30% for long-term assets
    • 2-12
  95. what is carry forward for charitable contribution
    • 5 years
    • 2-12
  96. how much of a deduction is allowed for charitable contributions for corporations
    • 10% of ATI
    • 2-12
  97. what qualifies as an other miscellaneous expense
    • gambling losses to extent to winnings
    • estate taxes on income in respect to descendent
    • 2-12
  98. what qualifies as a miscellaneous expense
    • BIT
    • business expense as employee
    • investment costs
    • tax preparation/legal advice related to taxable income
    • 2-12
  99. what form is used for business expenses of an employee
    • form 2106 in schedule A
    • 2-12
  100. what qualifies as a business expense
    • A JAB CLUB
    • AICPA and union dues
    • job travel
    • appraisal fees for charitable donations or casualty loss
    • business mileage
    • CPE/job education
    • laptop
    • uniforms
    • business use of home
    • 2-12
  101. what is included as investment expense
    • safety deposit box
    • investment advisory fees
    • newsletters
    • and IRA custodial fees
    • 2-13
  102. what qualifies as medical expense for deductible expense
    review HW problems for items
  103. who can qualify for medical expense deduction
    • taxpayer
    • spouse
    • dependents
    • anyone who provides taxpayer over 50% of support
    • 2-13
  104. what interest is deductible
    • investment interest
    • mortgage loan interest
    • 2-13
  105. how much of mortgage loan interest is allowed be deducted
    • acquisition indebtedness to 1,000,000
    • home equity loans 100,000
    • 2-13
  106. how much is allowed for deduction of interest
    • extent of reported net investment income on tax return
    • carried forward indefinitely
    • 2-14
  107. what is definition of acquisition indebtedness
    • loans used to acquire or construct the home as well as loans that replace previous acquisition indebtedness
    • 2-14
  108. What taxes are allowed be itemized
    • personal property and real estate taxes
    • state and local sales tax
    • state, local, or foreign taxes
    • 2-14
  109. what does not qualify for taxes for deduction
    • fees
    • fines
    • federal
    • FICA
    • gas
    • excise
    • 2-15
  110. what is phase-out for itemized deductions
    • misc. - 2%
    • theft & casualty - 10%
    • medical - 7.5%
    • 2-15
  111. how is loss measured for theft & casualty
    • drop in fair market caused by event but is limited to the tax basis of asset
    • 2-15
  112. what is calculation for theft and casualty losses
    • loss
    • -insurance reimbursement
    • -$100 per event
    • -10% AGI
    • 2-15
  113. when can a child claim an exemption
    • when dependent child is not claimed as personal exemption
    • 2-15
  114. what is requirement for dependent
    • C-IRS Jack you
    • Citizen
    • income
    • relationship or unrelated household member
    • support
    • no Joint return
    • 2-16
  115. What are citizen requirements for dependence
    • US citizen
    • resident of Mexico or Canada
    • 2-15
  116. what is not considered relative for dependence
    • cousin
    • 2-16
  117. what are different credits allowed for individual tax return
    • FACE FED
    • foreign tax credit
    • adoption credits
    • child tax credit
    • education credits
    • first-time homebuyer tax credit
    • earned income credit
    • dependent and child care credit
    • 2-19
  118. what is the amount of child tax credit
    • 1,000 for children under 17
    • 2-17
  119. what is the dependent care credit based on
    • smallest of
    • actual dependent care expenses
    • earned income
    • 3,000 for one dependent or 6,000 for multiple dependents
    • 2-17
  120. what income is used for calculation of dependent care credit
    • earned income is based on lower-paid spouse
    • unless spouse in school and income based on the spouse who is gainfully employed
    • 2-17
  121. what is the amount allowed for the adoption credit
    • first 13,360 of costs and carry forward for 5 years
    • 2-18
  122. what are two different types of education credits
    • American opportunity tax credit
    • lifetime learning credit
    • 2-18
  123. what is the amount of the tax credit for the American opportunities tax credit
    • applies to first four years of post secondary school
    • 100% of first 2,000
    • 25% of next 2,000
    • per student
    • 2-18
  124. what is the amount of the tax credit for lifetime learning credit
    • applies to all other years of education
    • 20% of first 10,000
    • per family
    • 2-19
  125. what are limitations for lifetime learning and American opportunities credit
    • applies to only tuition and fees
    • credit is not available to taxpayers over a certain AGI
    • credit cannot be claimed on the tax return of the dependent
    • cannot claim both credits at the same time
    • 2-18
  126. what is the maximum investment income a person can have to still qualify for earned income credit
    • under 3,100
    • 2-18
  127. what amount is allowed for the first-time homebuyer tax credit
    • lesser of 8,000 or 10% purchase price
    • 2-19
  128. what form are estimated tax payments made
    • 1040ES
    • 2-19
  129. when are estimated tax payments due for individual taxpayers
    • months 4,6,9
    • and Jan 15
    • 2-19
  130. when would an individual be subject to underpayment tax penalty
    • balance due on the tax return is greater than 1,000 by April 15
    • 2-19
  131. how can an individual avoid the underpayment penalty for employment tax
    • withholding & estimated taxes excess 100% of prior year or 100% if taxable income is over 150,000 in PY
    • 90% of current year tax liability is paid
    • 2-19
  132. what is the penalty for underpayment for estimated tax payments
    • filing - 5% per month limited to 25%
    • payment - .5% per month
    • 2-19
  133. what is an accuracy related penalty
    • penalty of 20% if underpayment of employment taxes is attributable to negligence or disregard of rules
    • 2-20
  134. what is the calculation for alternative minimum tax for individuals
    • AMT
    • regular taxable income
    • +- adjustments and preferences
    • =AMTI before exemption
    • - exemption
    • =AMTI
    • X tax rate
    • =tentative minimum tax
    • - regular tax
    • =amt
    • 2-21
  135. what are different adjustments for AMT
    • SIMPLE PIE
    • standard deduction
    • interest on home equity loans
    • medical expenses under 10%AGI
    • personal and dependent exemptions
    • local and state income taxes, all property taxes and sales tax
    • employee business expense, tax prep and investment expense subject to 2%
    • 2-22
  136. what are preferences for AMT
    • PIE
    • private activity bond interest
    • incentive stock options
    • excess depreciation on personal property
    • 2-22
  137. what is the 1933 Federal Securities Act concerned with
    • original issuance of securities intended for sale to the public
    • 3-1
  138. what is the 1934 Securities exchange Act of 1934
    • provides ongoing reporting requirements and focuses on secondary offerings of securities and regulates purchases and sales after initial issuance
    • 3-1
  139. what is the SEC responsible for
    • administering federal securities laws
    • regulating brokers
    • issuing rules on work papers and other records
    • ability to de-list any issuer
    • 3-1
  140. what parts make up a registration statement for being able to issue securities
    • prospectus
    • detailed information about securities being issued
    • 3-1
  141. what is a prospectus
    • summarizes:
    • historical company information
    • discusses risks involved
    • 3-1
  142. what is the detailed information about the securities being issued that is part of registration statement
    • basin information:
    • names & addresses & amounts of securities held by directors, officers, underwriters and shareholders with at least 10% of stock
    • intended used of the proceeds
    • companies debt
    • companies operating history and pending litigation

    • financial information:
    • audited balance sheet (not more than 90 days old)
    • audited pal (for previous 5 years)
    • 3-2
  143. how long does it take for the SEC to deem a registration statement complete
    • 20 days
    • 3-2
  144. what is a red herring
    • issuance of preliminary prospectus
    • 3-2
  145. what does a red herring contain
    • prospectus that has been filed but missing certain unavailable information
    • 3-2
  146. what are tombstone ads
    • announces potential investment and how to acquire prospectus
    • 3-2
  147. is a tombstone ad an offer to sell
    • no
    • 3-2
  148. what is shelf registration
    • requires a company to periodically update the prospectus, but allows sales and resale to be continuous for an indefinite period of time.
    • 3-2
  149. who is a shelf registration not available to
    • first time issuers
    • 3-2
  150. what are blue sky laws
    • state adopted security laws
    • 3-2
  151. what applicable offerings require a registration statement and a prospectus made available
    • SPIN
    • securities offered
    • public issue
    • interstate commerce
    • no other exemption is available
    • 3-2
  152. what are the different exemptions were a securities registration statement is not required
    • ACID BRAINS
    • regulation A
    • commercial paper/casual sale
    • intrastate
    • regulation D
    • brokerage transactions
    • regulated industries
    • agencies of the Gov..
    • insurance contracts/policies
    • not for profit
    • stock dividends and splits
    • 3-3
  153. what is commercial paper
    • notes and bonds that mature within 9 months and used for commercial purposes
    • 3-3
  154. what is regulation A
    • exemption for offerings that raise up to $5M over a period not exceeding 12 months
    • 3-3
  155. what are requirements for regulation A
    • SEC notified within 15 days of first sale
    • offering circular provided to all prospective investors
    • 3-3
  156. what is an offering circular
    • less extensive than prospectus and information does not need to be audited
    • 3-3
  157. what is a casual sale
    • sale by persons not connected with the issuing company
    • 3-5
  158. what is required for intrastate offerings to be exempt
    • company does at least 80% of business operations in a single state
    • securities are offered exclusively to residents of that state
    • the investors agree not to resell their securities to non-residents for at least 9 month
    • 3-5
  159. what are the different types of regulation D exemptions
    • 504,505,506
    • 3-4
  160. is advertising allowed for regulation D rules 504, 505, 506
    • only for 504 and is to non-accredited investors
    • 3-4
  161. what is time frame that SEC must be notified of a sale for regulation D rules 504, 505, 506
    • 15 days after first sale
    • 3-4
  162. when and who is reselling allowed for regulation D rules 504, 505, 506
    • 504 - resale to non-accredited investors is allowed
    • 505, 506 - no resale for 2 years
    • 3-4
  163. what max amount of offerings for regulation D rules 504, 505, 506 and what is the time frame
    • 504 - 1M w/I 12 months
    • 505- 5M w/I 12 months
    • 506 - unlimited w/I unlimited amount of time
    • 3-4
  164. how many investors are allowed for regulation D rules 504, 505, 506
    • 504 - unlimited
    • 505 - unlimited accredited and less than 35 non-accredited
    • 506 - unlimited accredited and less than 35 non-accredited where non-accredited needs to be represented by accredited investor

    3-4
  165. what financial information needs to be given to investors for regulation D rules 504, 505, 506
    • 504 - none
    • 505 - audited balance sheet to non-accredited
    • 506 - audited balance sheet to non-accredited
    • 3-4
  166. for regulation D rules 504, 505, 506 which are allowed if required to report under 1934 act
    • 504 - not
    • 505, 506 - are allowed
    • 3-4
  167. who are causal sales not available to
    • issuers
    • underwriters
    • dealers
    • directors
    • officers
    • owners with at least 10% of any class of shares
    • 3-5
  168. if you are exempt from 1933 act are you exempt from 1934
    • not necessarily
    • 3-5
  169. when is a SEC S-1 (registration statement) needed
    • listed or traded on national exchange OR
    • at least 10M in assets and 500 shareholders
    • 3-6
  170. what is required disclosure for S-1
    • names of officers and directors
    • nature of business
    • financial structure of firm
    • any bonus and profit sharing provisions
    • 3-6
  171. what are forms:
    10k
    10q
    8k
    proxy statement
    • 10k - annual comparative audited financial statements
    • 10q - quarterly unaudited (reviewed) financial information
    • 8k - due after key events
    • proxy statement - indication and objective discussion of matters to be voted on
    • 3-6
  172. when are the following forms due:
    10k
    10q
    8k
    • 10k - 60 days for large accelerated filers, 75 days for accelerated filers, 90 days for all others
    • 10q - 45 days after quarter end
    • 8k - 4 days after event
    • 3-6
  173. what is the difference between a large accelerated filer and an accelerated filer
    • large - 700M of outstanding stock
    • accelerated - 75-700M of outstanding shares
    • SEC website
  174. what is a tender offer
    • attempt to but 5% or more of a class of stock at a specified price
    • 3-7
  175. who must file a tender offer with the SEC and what must be shown
    • person wishing to acquire the stock
    • must be shown:
    • source of funds
    • amount of stock owned
    • price offered for shares
    • future plans for the company
    • 3-6
  176. what happens if a director, officer or 10% shareholder sales stock purchased within 6 months
    • return the profit to the corporation
    • 3-6
  177. what is a proxy solicitation
    • right to vote someone's shares at a shareholder meeting
    • 3-7
  178. what is the fine for an officer of a company who makes certification while knowing it does not comply with SEC requirements
    • 1M of fines or imprisonment for 10 years
    • 3-7
  179. what does the Sarbanes-Oxley do with regards to loans
    • illegal for issuer to give various types of personal loans to or for any executive officer or director
    • 3-7
  180. when would an executive have to forfeit bonus
    • under Sarbanes Oxley must forfeit if an earnings restatement when misconduct was present
    • 3-7
  181. what is the most common lawsuit against auditors
    • negligence
    • 4-1
  182. who can sue for breach of contract
    • anyone in privity
    • intended 3rd party beneficiary (named in contract by client)
    • 4-1
  183. what is the definition of privity
    • person whom you have a contract with
    • 4-1
  184. who is the plaintiff of a case
    person suing
  185. who is the defendant in the case
    person who is being sued
  186. what must the plaintiff prove in lawsuit for breach of contract
    • MILE
    • material misstatement or omission
    • info was the proximate cause of harm
    • loss/damages financially
    • error - caused by breach or non-performance)
    • 4-1
  187. what is the most common general standard of an auditor that a person will sue for breach of contract
    due professional care

    4-1
  188. what are the defenses by the accountant for breach of contract
    • didn’t breach or it was fully performed under the contract terms
    • 4-1
  189. what is negligence in regards to auditing
    • accountant has a duty in the performance of an engagement to exercise due professional care expected of an ordinarily prudent CPA
    • 4-1
  190. who can sue an auditor for negligence
    • anyone in privity
    • anyone known or foreseen by CPA (ex. Shareholders)
    • 4-2
  191. who cannot sue an auditor for negligence
    • states that follow the ultramares decision
    • 4-2
  192. what must plaintiff prove for negligence
    • MILE
    • material misstatement or omission
    • info was the proximate cause of harm
    • loss/damages financially
    • error
    • 4-1
  193. what errors must be proven for negligence
    • absence of due care (carelessness)
    • lack of due diligence
    • negligence (NEG)
    • ___Nondisclosure of info to client
    • ___Errors previously discovered not corrected
    • ___GAAS/GAAP not followed
    • 4-2
  194. what is the ultramares decision
    • if a person is not in privity with an auditor they cannot sue
    • 4-2
  195. what is the defense of an auditor for negligence
    • followed GAAS
    • lack of privity (useless against client or intended 3rd party)
    • 4-3
  196. what standards guides a CPA's duty of due care
    • state and federal statutes
    • court decision
    • contracts with the client
    • GAAS & GAAP
    • customs of the profession
    • 4-3
  197. what is the definition of fraud
    • intent to deceive
    • 4-3
  198. what are types of fraud
    • actual fraud
    • constructive fraud (gross negligence)
    • 4-3
  199. what is the definition of actual fraud
    • making false statements with knowledge of their falsity
    • 4-3
  200. what is the definition of constructive fraud
    • making false statements with a reckless disregard for truth
    • 4-3
  201. what must a plaintiff prove for fraud
    • MILE
    • material misstatement or omission
    • info was relied upon
    • loss/damages financially
    • error - reckless or intentional misconduct (actual/constructive fraud)
    • 4-4
  202. what is the defense of an auditor for fraud
    • audit performed under GAAS
    • 4-4
  203. who is liable for damages under section 11 of the 1933 act
    • anyone who signed a registration statement
    • 4-5
  204. what must the plaintiff prove in lawsuit under 1933 act
    • M.L.
    • material misstatement
    • loss was suffered
    • 4-5
  205. what damages are awarded for 1933 act
    • difference of amount paid for stock and market value or sales of proceeds if sold
    • 4-5
  206. what is the defense of an auditor under 1933 act
    • due diligence
    • plaintiff had knowledge of misstatement
    • 4-6
  207. what is statue of limitations for a lawsuit to be brought against an auditor for 1933 act
    • must be brought within 1 year after discover and within 3 years from the offering date
    • 4-6
  208. what is the common source of liability for 1934 act
    • section 10(b) and rule 10(b)-5 commonly known as the anti-fraud provision of the act
    • 4-6
  209. what must plaintiff prove under 1934 act
    • MILE
    • material misstatement
    • info was relied upon
    • loss was suffered
    • error - scienter
    • 4-6
  210. what is scienter
    • fraud but it is held in federal court
    • 4-6
  211. what court is common law heard in
    • state court
    • 4-7
  212. what is defense of an auditor for 1934 act
    • conformity to GAAS
    • lack of intent to deceive
    • 4-7
  213. what is the violation for 10b-5
    • civil damages and/or criminal damages
    • 4-7
  214. what is common law
    • legal system that relies on precedent
    • WIKIPEDIA
  215. how test are required under the 1955 private securities act
    • RIG
    • related-party transactions
    • illegal acts
    • going concern
    • 4-7
  216. what would cause a penalty assessed to a paid tax preparer
    • fails to sign the return and provide the appropriate federal ID number
    • fails to provide a copy of the return to the client and retain a copy for the time specified by law
    • negotiates or endorses a clients tax refund check
    • 4-8
  217. what would cause a paid tax preparer to be held liable by the client
    • fails to provide the client the completed return to allow a timely filing
    • fails to advise the client of tax elections that would have provided the client with substantial tax savings
    • 4-8
  218. what are exceptions to keeping work papers confidential
    • valid subpoena
    • IRS administrative subpoena
    • court order
    • quality control peer review
    • where disclosure is in compliance with GAAS or GAAP
    • permit electronic preparations or submission of the taxpayers return
    • 4-9
  219. what are criminal violation of the internal revenue code
    • willfully preparing a false tax return (perjury)
    • assisting others to evade taxes (tax evasion)
    • 4-9
  220. under the racketeer influenced and corrupt organizations what is considered criminal liability
    • accountant is affiliated with a business or accounting firm involved in racketeering
    • an enterprise that has committed any two crimes within 10 years

    4-10
  221. what does racketeering consist of
    • ELF MOB
    • embezzlement
    • laundering money
    • federal securities fraud
    • mail fraud
    • organized crime
    • bribery
    • 4-10
  222. what type of damages can be awarded under the racketeer influenced and corrupt organizations act
    • treble damages - triple amount of damages
    • 04-10
  223. how often do paid tax preparers need to renew their preparer tax identification number
    • 1 year
    • 5-1
  224. what is a realistic possibility standard
    • 1/3 likelihood being sustained on merits (used for taxes)
    • 5-1
  225. what is a reasonable basis standard
    • 20% probability of being sustained on its merits
    • 5-1
  226. what is a more likely than not standard
    • 50% probability
    • 5-1
  227. how can a penalty for a tax preparer be avoided
    • adequate disclosure of the questionable position on the return basis for the position
    • showing that there was a reasonable basis for the position
    • 5-1
  228. what is the minimum position a CPA should recommend to take on a tax return
    • realistic possibility
    • 5-2
  229. when would a CPA make inquiries regarding a tax return
    • if information appears incorrect, incomplete, or inconsistent
    • 5-3
  230. what tax documents should a CPA refer to when feasible
    • past returns
    • 5-3
  231. when would the use of estimates be allowed on a tax return
    • if it is impractical to obtain exact data
    • estimated amounts appear reasonable
    • 5-3
  232. when would a CPA notify the IRS of an error in a past return
    • only with clients permission or
    • required by law
    • 5-3
  233. how should a CPA act if a prior return has an error regarding the client
    • wait to see how the client responds to the error to see if a professional relationship will continue
    • 5-3
  234. who may practice before the IRS
    • any CPA who is not currently under suspension or disbarment from practice
    • 5-4
  235. what is a contingent fee
    • fee based on results or a percentage of fees saved on a tax return
    • 5-4
  236. when is a contingent fee allowed
    • judicial proceedings arising from IRC
    • examination or challenge of:
    • original tax return
    • amended return if taxpayer received written notice from IRS within 120 days
    • 5-5
  237. when would a CPA be allowed to negotiate or endorse a tax return check
    • never
    • 5-5
  238. what is censure
    • public reprimand
    • 5-6
  239. when would a CPA be subject to censure, suspension, or disbar when preparing a tax return
    • practitioner is shown to be incompetent or disreputable
    • intent to defraud
    • willfully and knowingly misleads or threatens a client
    • 5-6
  240. who maintains the requirements for receiving a CPA and maintaining CPE
    • state board of accountancy
    • 5-6
  241. who does the IRS work for
    • US department of treasury
    • 5-6
  242. what does the internal revenue code govern
    • income taxes
    • payroll taxes
    • gift and estate taxes
    • excise tax
    • 5-6
  243. what disciplinary actions is available to the IRS
    • civil penalties (prohibit practice or impose fines)
    • criminal penalties (preparing fraudulent returns or making false statements)
    • 5-7
  244. who approves PCAOB pronouncements
    • SEC
    • 5-7
  245. who are the board members of PCAOB
    • 5 members of which 2 are CPAS and all are appointed by SEC
    • 5-7
  246. who do public accounting firms need to register with to perform audit functions
    • PCAOB board
    • 5-7
  247. how often does the PCAOB perform peer reviews
    • every year if more than 100 audit reports annually
    • every 3 years if under 100 audits performed annually
    • 5-7
  248. what does the PCAOB board do
    • establish audit standards
    • quality control and standard and ethic standards in preparation and issuing audit reports
    • inspects, investigates, and disciplines public accounting firms
    • 5-7
  249. who is required to review all audit reports
    • a second partner
    • 5-7
  250. what authority does the PCAOB board have
    • suspend auditors
    • revoke registration of accounting firm
    • monetary penalties
    • 5-8
  251. what are monetary penalties the PCAOB may charge
    • 100K for individual or 750K if intentional breach
    • 2m for an entity or 15M if intentional breach
    • 5-8
  252. how is the PCAOB board funded
    • fees imposed upon public companies
    • 5-8
  253. what functions is a public accounting firm not allowed to do for audit clients
    • I LAMB BASH
    • internal audit outsourcing reviews
    • legal services and expert services unrelated to the audit
    • appraisal or valuation services, fairness opinions
    • management functions
    • bookkeeping or other services related to accounting records
    • actuarial services
    • system design or implementation
    • human resource functions
    • 5-8
  254. how often do audit partners have to change
    • 5 years
    • 5-8
  255. what is the audit committee responsible for
    • hiring, retaining, and firing the audit firms
    • compensation and oversight of any audit work

    5-8
  256. when would an audit firm not be allowed to perform an audit
    • if CEO, controller, CFO, CAO or any person serving in the equivalent capacity was employed by audit firm during one year period prior to audit
    • 5-8
  257. who is responsible for a companies internal controls
    • officers of company
    • 5-8
  258. what is management required to report to officers with regard to internal controls
    • all significant internal control deficiencies
    • 5-8
  259. what is the claw back policy
    • executives are required to forfeit a bonus or incentive based pay or profits from the sale of stock received in prior 12 months prior to an earnings restatement
    • 5-9
  260. what are characteristics of a partnership
    • TUUNEL
    • transfer of ownership required agreement
    • under RUPA partnerships are separate legal entity
    • unlimited liability of partners for partnership debt
    • not a taxable entity
    • ease of formation, can be very informal
    • limited duration
    • 6-1
  261. what is meant by a partnership is a legal entity
    • may sue and be sued
    • may own property in partnership name
    • 6-1
  262. what are basic rights of partners in a partnership
    • profits
    • property
    • participation (management right - vote/make contracts/debt)
    • 6-1
  263. what is a partnership interest
    a partner has an equal share of the profits and surplus generated by the business
  264. of the basic rights for partnership what rights are transferable
    • profits (interest)
    • 6-1
  265. what happens to a partnership if a property is purchased with partnership funds
    • property belongs to the partnership.
    • 6-1
  266. what does management right mean to a partner
    • has a right to participate in the management of the business
    • has a right to inspect books
    • make contracts and vote on partnership action
    • 6-2
  267. what are the different ways a partnership can be formed
    • written
    • oral
    • implied
    • 6-2
  268. when would a partnership be required to be in writing
    • GROSS
    • goods sold over $500
    • real estate sales
    • over one year required to perform contract
    • surety ship
    • statements in consideration of marriage
    • 6-2
  269. what would cause a implied partnership to be formed
    • when two or more persons share profits from a venture
    • 6-2
  270. how would a person show that a partnership was not formed
    • partner does not use partnership property and they do not participate at the management of the business
    • 6-2
  271. what names can be used for partnership and what forms need to be formed
    • can use names of current and former partners without approval
    • a fictitious name would need a fictitious name statement given to the appropriate government agency
    • 6-2
  272. what are the different types of authority
    • actual
    • apparent
    • unauthorized action
    • 6-2
  273. what are the different types of actual authority
    • express and implied
    • 6-2
  274. what are the differences between express and implied
    • express - explicitly states person has authority
    • implied - assigned tasks which required authority to carry out duties
    • 6-2
  275. what is implied authority
    • good faith 3rd party reasonable assumes you have authority
    • 6-2
  276. when would an unauthorized transaction cause a partnership to be liable
    • when ratified
    • 6-2
  277. what must occur for an unauthorized action to be ratified
    • principal (partnership) must be fully disclosed
    • must know details of contract
    • must ratify before 3rd party withdraws
    • 6-2
  278. what contracts would actual authority be required
    • ASAP
    • admitting a new partner
    • selling or pledging property
    • admitting or submitting a legal claim
    • promising to pay debts of another
    • 6-3
  279. what percent of consent is required for a new partner to be admitted into a new partnership
    • 100%
    • 6-2
  280. what is the reasoning for unanimous decision for admitting a new partner
    • each partner has agency power and is entitled to share of the profits
    • 6-2
  281. can a partner sell property or inventory without another all other owners consent
    • property - no
    • inventory - yes
    • 6-3
  282. what are the fiduciary duties of partners
    • duty of loyalty
    • duty of care
    • partner refrains from competing with the partnership
    • partners have a duty of good faith and fair dealing in the discharge of their duties
    • 6-3
  283. what does duty of care refer to for a partners fiduciary duty
    • refrain from engaging in gross negligent or reckless conduct, intentional misconduct or knowingly violate the law
    • 6-3
  284. what are/aren't partners liable for in a partnership
    • joint & several liable for contracts and debts
    • jointly and severally liable for torts
    • not liable for crimes by other partners
    • 6-4
  285. how are damages collected from a partnership when breach of a contract occurs
    • go after the partnership then individual partners
    • 6-4
  286. how are damages collected from a partnership when a tort occurs
    • go after partners and partnership in any order they choose
    • 6-4
  287. what is a silent partner
    • a partner that does not participate in management of partnership
    • 6-4
  288. what is a silent partner liable for
    • unlimited liability same as other partners
    • 6-4
  289. if a new partner starts what are they liable for
    • new debts created after joining - unlimited
    • old debts not liable for, however, capital contributed is accessible by creditors
    • 6-4
  290. what is a retired partner liable for
    • new debts - liable if proper notice of retirement isn't given unless constructive notice is given
    • 6-5
  291. what is novation in a partnership
    • releases retired partners from prior debt created by partnership
    • 6-4
  292. how are profit and losses shared in a partnership if there is not an agreement
    • equally among partners
    • 6-5
  293. what happens if a loss reduces a partners liability to zero
    • partners is personally liable for debt.
    • 6-5
  294. what is the definition of a dissolution
    • change in a relationship of the partners when a partner ceases to be associated with the carrying on of the business.
    • 6-5
  295. what is the entity theory
    • conceptual basis for continuing the firm itself despite a partner withdrawal from the firm
    • 6-5
  296. what does RUPA stand for
    • revised uniform partnership act
    • 6-5
  297. how does RUPA affect partnership dissolution
    • partnership does not dissolve if a partner leaves unless remaining partners agree to disoolve or there is only one partner left
    • 6-5
  298. what is a partnerhsip at will
    • partnership without a specified duration
    • 6-5
  299. what annual information form does a partnership file
    • form 1065
    • 6-5
  300. how long do remaining partners have decide to keep partnership running if a partner dies, declaries bankruptcy, or withdraws
    • 90 days
    • 6-6
  301. what is requried to form a partnership
    • consent among members of partnership
    • 6-5
  302. what is required to form a limited partnership
    • government approval on a valid statue and a filing of articles of limited partnership
    • 6-6
  303. what rights is a limited partner given
    • right to interest (profits) but not property or management
    • 6-6
  304. how many partners are requried for a limited partnership
    • one general partner and one limited partner
    • 6-6
  305. what can a limited partner cote on
    • dissolution of patnership
    • loans of paternship
    • removeal of general partner
    • 6-7
  306. how is a new partner added to limited partnership
    • written agreement of all parnters unless agreement provides otherwise
    • 6-7
  307. can a person be a limited partner and general partner in a partnership
    • yes
    • 6-7
  308. who owes fiduciary responsibility for a limited partnership
    • general partner owes duty to limited and other general partners
    • limited parter does not owe fiduciary duties
    • 6-7
  309. can a limited partner be a creditor
    • yes and an be secured or unsecured
    • 6-7
  310. can genereal partnerships combine/conver, merge with limited partnership
    • yes
    • 6-7
  311. how are profits shared in a limited partnership if there is not a certificate agreement
    • shared based on eprcetnages of capital contributinos
    • 6-7
  312. how are LLCs formed
    • filing with secretary of state
    • 6-7
  313. how are multiple member and single member LLC treated
    • multiple treated as partnership
    • single treated as sole proprietership
    • 6-7
  314. what duty of care do owners and managers owe in a LLC
    • not be grossly negligent and a duty of loyalty
    • 6-7
  315. how is a LLC taxed
    • can be taxed as a partnership (form 1065) or
    • as corporation (form 1120)
    • 6-7
  316. how is a LLC terminated
    • withdraw of any member
    • passage of 30 years
    • state law may limit life
    • 6-7
  317. how must approve a LLP
    • state government (articles)
    • 6-8
  318. what are similarities between LLP and LLC
    • gratned limited liablity states under state statues
    • easy to orgnanize (compated to corp.)
    • treated as partnership for federal tax purposes (if elected to noe be treated as corp)
    • similar state franchise taxes
    • 6-8
  319. how are liability defferent between LLP and LLC
    • LLP is limited liable for malpractive or negligence and unlimitedly liable for contracts/debt
    • LLC has limited lialbity for contracts and debts and unlimited liability for malpractice or negligence
    • 6-9
  320. how mayn partners must a LLC have
    • 1
    • 6-8
  321. what are the differneces between a LLC and LLP regarding ease of formation
    • LLP can covnert partnership to LLP by filing with Secretary of State
    • LLC must create a new entity
    • 6-8
  322. what is a joint venture
    • simlary to partnership and death does not dissolver
    • 6-7
  323. what is the difference between a LLC and LLP regarding partnership interest, property use, management
    • LLC - has partnership interest, has used of property, has maangement rights
    • LLC has interest, no property rights, no management rights
    • 6-9
  324. what management rights does a LLC partner have
    • can look at books and vote
    • 6-9
  325. what is the designation of owners of a LLP, LLC, & Corp
    • LLP - partners
    • LLC -mebers
    • Corp - shareholders
    • 6-10
  326. who has aurhoity to bind (agent) for genearl partnership, limited PS, LLP, LLC, Corp
    • General - partners
    • limited PS -general partners
    • LLP - parnters
    • LLC - managers
    • corp - officers/directors
    • 6-10
  327. what act governs a C-corp
    • model business corpation act
    • 6-11
  328. what are characteristics that distinguish a C-corp
    • EL TIC
    • ease of transfer
    • limited liability
    • taxation
    • independent life
    • centralized management
    • 6-11
  329. define the following for C-corp:
    ease of transfer
    limited liability
    taxation
    independent life
    centralized management
    • ease of transfer - ownership changed by transfer shares
    • limited liability - sharesholders not responsible for debt
    • taxation - corp files and pays its own taxes
    • independent life - death of shareholder doesn’t casue dissolution
    • centralized management - controlled by board of directors
    • 6-11
  330. what is the definition of perpetuity
    • thing that lasts forever
    • 6-11
  331. what are the qualifications to be considered an S-Corp
    • LORDS OF
    • limited liability
    • one hundred shareholders
    • resident or citizen of US (shareholders)
    • domestic corp (cannot be forein)
    • shareholders must be individuals
    • only one class of stock
    • formal creation
    • 6-11
  332. how long does it take a S-corp to reelect S-corp status if it has been revoked
    • 5 years
    • 6-11
  333. how is a closely held corporation
    • stock is not offered to public and has less than 50 shareholders
    • 6-11
  334. what is a domestic corpation
    • the state where a corp receives its charter in which it incorporated
    • 6-11
  335. what is a foreign corp
    • a corp operating in a state other than the state that provided the charter
    • 6-11
  336. what are the oeprating requirements for a foreign corp
    • file a certiifcate of authority if it wishes court protection (can sue)
    • 6-11
  337. what is a promoter
    • helps set up a corp
    • 6-12
  338. is a contract a promoter sets up binding
    • no inless board of direcots elects to adopt it
    • 6-12
  339. what liabiltiy does a promoter have
    • personnally liable for any contract prioer to adoptino (from board) and remains laible unless released
    • 6-12
  340. what is a novation
    • substituion of a promoter for the new corp (releases the promoter of liablity)
    • 6-12
  341. what is filed for a corp to be formally created
    • articles of incorporation
    • 6-12
  342. what items are included on an articles of incorporation
    • name
    • nature & purpose
    • term
    • name and address
    • capitazaiont
    • initial board
    • registered agent
    • 6-12
  343. what is does the capitalization portion of the articles of incorpation refer to for a Corp
    • amoutn and types of shares the corp wants to be authorized to issue
    • 6-12
  344. what is a registered agent
    • place where state may serve court papers
    • 6-12
  345. what are by-laws
    • rules and regulations that govern and help to guider internal managemenr perform its duties
    • 6-12
  346. who adopts the by-laws
    • incorporators or board
    • 6-12
  347. what are the board of directors in charge of
    • general operstion of the corp
    • 6-13
  348. how can vote by proxy
    • shareholders can but board of directors cannot
    • 6-13
  349. what is the board of directors able to do
    • adopts by laws
    • select officers
    • reacquire treasury stock
    • declare dividends
    • issue stock
    • 6-13
  350. what is the difference between treasury stock and cancelled stock
    • treasury stock is authorized, issued, but no longer outstanding
    • canceled stock is no longer issued or outstanding
    • 6-13
  351. what securities can a board issue
    • bonds
    • 6-14
  352. when is a board not allowed to issue dividends
    • if the company is insolvent or declaring will lead to insolvency
    • 6-14
  353. what is the maximum amount of dividends that a board can dclare
    • higher of ompanys retained earnings or current period earnings
    • 6-14
  354. what is the difference between par value and state value of stock
    • par value - set under certificate of incorporation
    • state value - set up by board
    • 6-14
  355. what are the advantages of preferred stock
    • paid dividends before common
    • get paid before common during a liquidation
    • dividends paid in arrears
    • particpating
    • 6-14
  356. what is the definition of participation in regards to preferred stock
    • if common stock get dividedn that is a higher rate on its par value than the stated rate on preferred then preferred gets the higher rate
    • 6-14
  357. what are the different tyupes of dividends that can be offered to shareholders
    • cash
    • property (FMV @ declaration date)
    • Scrip
    • Liquidating
    • stock - Small (FMV) / Large (Par)
    • Stock split
    • 6-15
  358. what is the difference between a small and large stock dividend
    • small - less than 20-25%
    • large - more than 20-25%
    • 6-15
  359. what dividends do not reduce stockholders equity
    • stock dividends
    • stock splits
    • 6-15
  360. what fiduciary duty are board of direcots bound to
    • act loyally in the best interest of corp and shareholders
    • 6-15
  361. what is the doctrine of respondeat superior
    • an employer is responsible for the torts committed by employers in the normal scope of duties
    • 6-15
  362. what are directors and officers not allowed to do in a corp
    • CHEATS
    • compete with the corporation
    • have an interest that is in conflict of corp interests
    • engage in insider trading
    • authorize transactions that are detrimetnal to minority shareholders
    • take advantage of corp for personal gain
    • sell control over the corp
    • 6-16
  363. what is the business judgment rule
    • principle that protects directors from peraonl liability for acts performed in good faith
    • 6-16
  364. what voting rights are given to shareholders
    • BALD Looks Cool
    • board of directors
    • amedn the articles of incorp and charter
    • liquidating dividends
    • dissolve corporation
    • loans to directors
    • consildations/mergers
    • 6-16
  365. what is appraisal right
    • right of shareholders to get stock appriased if disagree with merger
    • 6-16
  366. what is preemptive right
    • must offer new issued stock to current stock holders first so their stock is not dilluted
    • 6-16
  367. when would SEC peirce a corparations viel
    • fraudulent corporation
    • commingling funds
    • undercapitalized
    • 6-16
  368. when is a shareholder allowed to inspect books
    • when there is a reasonable purpose (normally 5% ownership or owned stock for 6 monhts)
    • 6-17
  369. what is a derivative lawsuit
    • shareholder can sue on behalf of the corptaion if harmful actions against the company are not countered by the board
    • 6-18
  370. what is watered stock
    • stock issued for less than its par value
    • 6-18
  371. what liability does a shareholder have when purchasing watered stock
    • liable for difference between purchase price and par value
    • 6-18
  372. what federal taxes are assessed by an employer
    • FUTA
    • FICA
    • 7-1
  373. when would unemployment benefits not be paid to employees
    • left voluntarily
    • refuses to accept equivelant work that has been offered
    • dismissed for illegal activities
    • 7-1
  374. what is vesting
    • when company pays retirement an employee can keep 100% after a period of time
    • 7-1
  375. what is the family medical leave act
    • companies with 50 or more employees get up to 12 weeks in 12 monhts of unpaid leave for family or medical resaons
    • 7-2
  376. what laws die the fair labor standar act create
    • minimum wage
    • prohibts child labor for certain occupations
    • 40 hour workweek
    • 7-2
  377. what is the labor-management relationsa act or taft hartley act
    • prohibits an employer from requiring union membership of all employees
    • 7-2
  378. when must a company start keepint recored of injury and illness for each employee
    • have 11 or more employees
    • 7-2
  379. what is the definition of
    conitributory negligence
    assumption of risk
    negligence of fellow employees

    and what do they have in common
    • eligeible for workers comp
    • contributory neglignece - employees own carelessness/ or violates workplace rules
    • assumption of risk - employee was aware of dangers of oocpation and signer a waiver of liabillty
    • negligence of fellow employees - reulst from calress or recless violation of another employee
    • 7-3
  380. when would a worker not be able to collect workers compensations
    • BIND
    • brawling
    • intoxiation
    • not job related
    • deliberate self infliction
    • 7-3
  381. what might workers compensation benefits include
    • burial expense
    • cost of prosthetic devices
    • monthly payments to surviving dependednt
    • 7-3
  382. what are the different anti-trust laws
    • sherman clayton antitrust
    • clayton act
    • ferdeal trad commission
    • robinson patman act
    • 7-4
  383. what did the following acts do:
    sherman clayton antitrust
    clayton act
    ferdeal trad commission
    • sherman clayton antitrust - prohibits contracts, combinations, and consipracites that restain intersat or foreign trade and prohibits monopolizations
    • clayton act - outlaws discriminaiton in prices, exclusive adn tying contracts, intercorporate stockholdings
    • ferdeal trad commission - blanket prohibiiton against unfair methods of competition
    • 7-4
  384. when is the c-corp tax return due
    • 2.5 monhts after year end
    • 8-1
  385. what is the value of stock if cash and property given to a corp to gain 80% of control
    • tax free
    • carryover basis if property is subject to det
    • carryover holding period
    • 8-1
  386. how are services taxed if given for stock for a corp
    • taxable income at FMV of stock
    • wage expense for corp
    • 8-1
  387. what are the two ways property can be valued when given for stock to a corp
    • tax basis - (no gain or loss but only if 80%)
    • FMV - (at date of contribution) gain reported
    • 8-2
  388. what is the calculation to determine sharehlders basis in stock received if 80% of control
    • adjusted basis of propert transferred
    • +recognized gain
    • +cash paid
    • +liabilities assumed
    • +transaction costs and fees
    • -cash received
    • -FMV of property received
    • -liablites transferred
    • 8-3
  389. what is the calculation to determine corporations basis in stock received if 80% of control
    • adjusted basis of the property in the hands of the transferor
    • + gain recognized by the transferor
    • 8-3
  390. what is the the formula for the corporate income tax return
    • gross income (worldwide)
    • -oridnary deductions
    • =income before "sepcial deductions"
    • -charitable contribution
    • -dividend received deduction
    • =taxable income
    • X tax rate
    • =gross tax liability
    • -foreign tax credit
    • =net regular tax liabilty
    • +personal holding company tax
    • +accumulated earnings tax
    • + alteranative minimum tax
    • =total tax liablity
    • 8-4
  391. when is revenue recognzed for a corporation
    • recognized at the earlier of when earned or collectd
    • 8-5
  392. when are life insurance proceeds deductable and not dedcuttable
    • deducatble - if proceeds go to benefit family
    • not - proceeds go to corp
    • 8-5
  393. what are the two tests to see if an item is deducatlbe for a corp
    • meets both all events test and
    • economic performance test
    • 8-5
  394. what is the differnece between all events test and economic performance test
    • all events - liability exists and and the amount can be determined reasonably accuracy
    • economic perfomance test - property or services are provided when property or services are performed
    • 8-5
  395. how much of organizational expenses are deducatlbe for a start-up corp
    • 5,000 (for each organization and start-up costs)
    • 8-5
  396. how long are start up costs amortized
    • 180 monhts (15 years)
    • 8-5
  397. what stock costs are not deductablw
    • A SLIP
    • accounting fees
    • selling costs
    • legal fees
    • issuing costs
    • printing costs
    • 8-5
  398. what is the maximum amount of salaries that are deducatble
    • $1M for each of the 5 highest paid executives
    • 8-6
  399. what estimated losses are not deductible intil occurred
    • bad debt
    • warranty costs
    • lawsuits
    • marketable securities
    • inventory
    • 8-9
  400. when is interest expense not deducatlbe for a corp
    • loan proceeds used for tax-exempt investmnets
    • 8-6
  401. what employee expenses are deductable for a corp
    • 50% of meals and travel
    • all travel costs
    • 8-6
  402. what is the amoun of casualty loss for a corp
    • property adjusted basis immedialty before the casualty
    • 8-6
  403. how often is impairment tested for goodwill, franchise, and trademarks for a corp
    • annaully
    • 8-6
  404. how long can research and development costs be amortized
    • can be expensed immedialty or over a minimum of 60 monhts
    • 8-6
  405. what amount of dividend is allowed to be deducted for a corp (dividend received deduction)
    • <20% - 70% deductable
    • >20 to 80% - 80% deductable
    • >80% - 100% deducatble
    • 8-6
  406. when would an investor not qualify for a dividend reimbursement deduction
    • froma foreign company
    • borrowed money to buy the investment
    • recevied from a tax exempt organization
    • owned less than 46 days
    • 8-7
  407. what is income is multiplied when getting the dividend reimbursement deduction
    • dividnd income
    • 8-7
  408. how much is allowed for a charitablt contribution for a corpoation
    • 10% for adjsuted tax income
    • 8-8
  409. what is adjusted tax income
    • net income adjusted for:
    • charity
    • dividend reimbursement deduction
    • net opearitng loss carryback
    • capital loss carryback
    • 8-8
  410. how long can you carryforward a chartibalt contrubitno for a corp
    • 5 years
    • 8-8
  411. when can a pledge be accrued for a charitable contrubioton for a corp
    • paid within 2.5 monhts
    • 8-8
  412. what is the carryback/forward for a capital loss for a corp
    • back 3 years
    • forward 5 years
    • 8-8
  413. what is the carryback/forward for a net operationg loss for a corp
    • back 2 and forward 20
    • 8-8
  414. what costs are not dedcutable toa corp for income tax purposes
    • federal income tax
    • government fines and penalties
    • costs of issuing stock
    • lobbying costs
    • compensation
    • club dues
    • 8-8
  415. what is the calculation for the foreign tax credit for a corp
    • US tax liability X foreign income / worldwide income
    • cannot exceed actual forign taxes paid
    • 8-9
  416. what is the accumulated earnigns tax
    • used to penalize corps. That accumulate earnings beyond the resaonable needs to expansion, retirement of debt and working capital
    • 8-9
  417. how can a corporation reduce or eliminate the accumulated earnings tax
    • pay:
    • actual dividends
    • consnt dividedns
    • paid personal holding tax
    • 8-10
  418. what is the tax % on undistributed income for accumulated earnings tax
    • 20%
    • 8-10
  419. what is the safe harbor (max amount) for accumulated earnings tax that a corp is able to have
    • $250K for manufacturing
    • 150K for persaonl service corp
    • 8-10
  420. what is a consent dividend
    • hypothetical dividedns you pay taxes on, even though no moye was actually received
    • 8-10
  421. what is a persaonal holding copmany tax
    • using a corporation to shelter certain types of passive income
    • 8-10
  422. when would a corp be subject to a personl holding company tax
    • 5 or fewer individuals own more than 50% stock and
    • 60% or more of revenue from passive source (taxalbe interest, dividedns, rent and royalty income)
    • 8-10
  423. what is the tax percent for undistributed persaonl holding company income
    • 20%
    • 8-10
  424. how can a corp avoid the personal hlding tax
    • pay actual dividend or
    • consent dividend
    • 8-10
  425. what are the names of the supplementary schedules
    m-1
    m-2
    m-3
    • m1 - reconcilaiotn of book income to tax income
    • m2 - analysis of unappropriated retained earnings per books
    • m3-reconciliation of finacial accounting income with taxable income
    • 8-11
  426. whata the M1, m2, m3 schedules used for
    • m1 - idnetify differences between book and taxable income to IRS
    • m2 - used to determine if a prior period adjustment might cause a prior return to be amended
    • m3 - for coprrs with assets of $10M or more and is more detailed than M1
    • 8-10
  427. when would a corp not be subject to a underpayment estiamted tax penalty
    • underpayment is under $500
    • installments each quarter coer the tax on the income to date
    • estimated tax payments equal at least 100% of the current year liability
    • payments equal 100% of prior year tax liability
    • 8-12
  428. when would a corp not be able to use the prior year tax liablity as a reason to escape the underpayment estimated tax liablity
    • if no liablity in previous year
    • corp had taxalbe income of $1M in any of preceding 3 years
    • 8-12
  429. what is the time frame a corp can claim a refund or overpaying estaimed tax liablity
    • 3 years after the original return was due (including extensions)
    • 2 years after the payment of tax
    • 8-12
  430. what is the statue of limitations for a corp for taxes that the IRS can come after you
    • 3 years unless:
    • omitted gorss income is greater than 25% (6 years)
    • fruad (unlimited
    • 8-12
  431. what is the penalty for a corp if a tax underpayment is the result of fraud
    • 75% of the portion of underpaymnet
    • 8-12
  432. how does a corp determine if a corporation is distribution taxable or a return of capital
    • difference betweeen current earnings & profits and accumulated earnings & profits
    • 8-12
  433. what is the difference between current earings and profits and
    acumulated earnings and profits
    • current - similar to net income
    • accumulated - simlar to retained earnings
    • 8-12
  434. how is amount of accumulated earnings and profits determined
    • higher of current earnings and profits
    • sum of current and accumulated earnings and profits before distribution
    • 8-12
  435. what are the different formulas to determine taxable portion of dividend when using current earnings & profits and accumulated earnigns & pfotis if a shareholder received 100 cash distribution
    8-12
    • Current E&P + - + -
    • Accumulated E&P- + + -
    • dividend portion+ Net + 0
    • 8-13
  436. how are property dividedns taxed when they are non-liquidating to a corp and shareholder
    • corp - taxe on gain (capital gain), no loss is deducted
    • shareholder - taxable up to earnings and profit
    • 8-14
  437. how are property dividedns taxed when they are liquidating to a corp and shareholder
    • corp - ordinary gain (capital if stock), ordinary loss (as if sold)
    • shareholder - capital gain, capital loss
    • 8-14
  438. what is the value given to property that is distribtued as a dividend
    • FMv of property received.
    • 8-14
  439. what value is given to stock when a merger/acquisiton occures
    • new shares are at the carryover basis
    • 8-15
  440. what are the different types or reorganzaiona for a corp
    • type A: mergers or consolidations
    • type B: use of voting stock to acquire at least 80% of the nonvotingshares of target corp
    • type C: use of voting stock to acquire all of targests net assets
    • type D: transfer of assets by an acquiring asset to acquire contorlling interest in a target corp
    • type E: recapitaliztion to change hte capital strucutr of a single corp
    • type F: chnage of identity, form, or state of incorporation
    • type G: transfer of assets of an insolvent corp to former creditors
    • 8-15
  441. what percent of stock must be owned to file a consolidated return
    • 80%
    • 8-15
  442. can C-corp and S-corp file a consolidated return
    • no
    • 8-15
  443. what needs to be elimiated if corp chooses to file a consolidated return
    • intercompany profits
    • interest
    • dividends
    • 8-15
  444. what are advantages of of section 1244 stock
    • if appreciate is considered capital gain
    • if value declines loss is ordinary
    • up to 50,000 ordinary loss and rest is capital
    • only applies to first $1M
    • must be sold by original purchaser
  445. how does stock get qualified as 1244 stock
    • issued by domestic corp
    • issued to individual or partnership (not for services)
    • 8-16
  446. what is the calculation for corporate AMT
    • regular taxable income
    • +- adjustments and preferences
    • =AMTI before ACE adjustment
    • +- adjusted current earnings (ACE) adjustment
    • =AMTI before exemption
    • - expemption
    • =AMTI
    • X tax rate
    • =tentative mnimum tax
    • - regular tax
    • =AMT
    • 8-16
  447. what are the adjustments and preferences for AMT for a corp
    • PILE
    • private activity bond interest
    • installment sales of inventory - accrual accounting
    • long term contract income calculated using the % completion method
    • excess deprecaiton on personal property over 150% declingin balance
    • 8-16
  448. how are adjusted current earnings calculated for corporate AMT
    • SLIM
    • seventy percent of dividend received dedcution (80% and 100% are not added back)
    • life insurance proceeds from key employee
    • muni bond interest

    • ADD ALL TOGETHER AND MULTIPLY BY 75% TO GET ACE
    • 8-16,17
  449. what is the calculation for the exemption for corpate AMT
    • 40000-(25% X (AMTI before exemption - 150,000))
    • NOT TO EXCEED $40k
    • 8-16
  450. what are the conditions to be classified as a S-corp
    • IN ROD
    • shareholders must be individual, grantor, ceratain estate/trusts
    • no more than 100 shareholders
    • shareholders must be resident or citizen of US
    • only one class of stock
    • domestic corp for the S-Corp

    9-1
  451. what is meant by one class of stock for an S=corp
    • gives equal amount of income to each shareholder
    • 9-1
  452. what vote is required to turn a corp into a s-corp
    • 100% of stockholders
    • 9-1
  453. what is the definition of net basis
    • amount of stick a shareholder has in a corp
    • 9-2
  454. what is the calculation to determine net basis for a s-corp
    • initial basis
    • +- % income/loss
    • + muni bond interest
    • +- seperately state item
    • -distributino received
    • = net basis
    • 9-2
  455. what method is used to calculate income for an s-corp
    • average daily basis
    • 9-2
  456. what is the limitation of a loss for an s-corp when determining basis
    • limited to amount invested + amount loaned to company
    • cannot go below zero
    • 9-2
  457. what is a seperatly stated item when trying to calculate net basis of s-corp
    • any amout that can hit a limit on individual tax return
    • examples are:
    • capital gain/loss
    • seciont 1231 gain/loss
    • section 179 deduction
    • rent & royalty
    • charitbale contribution
    • interest income on investment
    • 9-2
  458. what is an accumulated adjustment account
    • cumulative balance of undistributed net income and dedcutions for S corp
    • 9-4
  459. what vote is required to terminate an s-corp
    • 50% of shareholders
    • 9-4
  460. what is a built in gains tax
    • c-corp elects s-corp stats and FMV of assets exceeds its basis
    • 9-5
  461. when are built in gains taxable
    • if assets are sold within 10 years
    • 9-5
  462. when does a partnership have to file taxes
    • 4.5 months
    • 10-1
  463. how long is the extension gigven for a partnership
    • 5 monhts
    • 10-1
  464. how is the tax year chosen for a partnership
    • tax year of partners or majority of partners
    • 10-1
  465. what is the definition of outside basis
    • partner basis in the partnership
    • 10-1
  466. what is the definition of inside basis
    • partnership basis in their assets
    • 10-1
  467. what is the calucaltion to determine the ending outside basis for a partner in a partnership
    • initial outside basis
    • +- % income/loss
    • + muni bond interest
    • +- seperately state item
    • -distributipn received
    • +your % of partnership liablitles
    • -liabiliteis contributed to partnership
    • = ending outside basis
    • 10-2
  468. what form does a partnerhsip file for tax rturn
    • form 1065
    • 6-5
  469. what value is given to property given to a partnership
    • partners tax basis
    • 10-2
  470. what happens if a partner contributes property that would casue basis to be reduced to 0
    • partner reports gain of the amount in which the basis would go below 0 and partners basis is 0
    • 10-3
  471. how much $ can a partnership deduct as organizational expenditures for the tax year in which it began
    • $5K
    • 10-4
  472. how long are startup organzational expenses for a parntership amortized foer
    • 180 monhts (15 years)
    • 8-5
  473. what items are stated seperatlye on a K-1 for a partner
    • capital gains and losses
    • section 1231 gains and losses
    • dividends and interest
    • charitagle contrubitons
    • passive activites
    • section 179 depreciation election
    • tax credits
    • 10-4
  474. what happens if a partnership has a ending tax year different than majoarity of partners
    • the 3 month (or 2, or 1) of partership income is deferred into the following year
    • 10-5
  475. how are cash and property distributions in a partnership handled when it reduces the partners basis to 0
    • cash distribution - listed as gain on partners return
    • propert - basis of distributed asset is reduced to equal the parnters basis in the partnership prior to distribution
    • 10-6
  476. what ist he amount realzied when a partner sells tehir interest to another party
    • sum of cash and property received + relief from debt
    • 10-8
  477. what gains/losses are reported when a partner terminates from the partnerhsip
    • ordinary gain/loss for inventory and receivable
    • captial gain for everything else
    • 10-8
  478. reread 10-9

  479. what are the different ways a partnership can terminate
    • operations of bhte business are discontinued
    • business is reduced to one partners
    • 50% or more of partnership interests change hands within a 12 monht period
    • 10-9
  480. how is a parntership that splits into two differnet partnerships treated
    • the partnerhsip that gets the majoarity of interests is considered a continuation of that partnership and theo thoer partnerships are treated as brand new businesses
    • 10-9
  481. what happens if two partnerships merge and neither partners gets a majority of interests
    • all previous partnerships dissolve and the merged partnership is a new partnership
    • 10-10
  482. what can cause a LLC to terminate
    • withdrawl of any member
    • passage of 30 years
    • state law
    • 10-10
  483. what is the definition of a contract
    • agreement between parties that may involve either a prmoise being exchanged for a promise or act
    • 11-1
  484. what are the differences between a bilateral and unilateral contract
    • bilateral - two promises are made (promise for a promise)
    • unilateral - promise for an act
    • 11-1
  485. when are contracts formed for a bilateral and unilateral contract
    • bilatearl - promises are exchanged
    • unilatearl - performance is completed
    • 11-1
  486. where was the uniform commerical code derived from
    • statutory law (sale of gooods)
    • 11-1
  487. what is statutory law
    • body of laws created by legistaltive statues
    • 11-1
  488. what is required for the formation of a valid common law contract
    • ofer
    • acceptance
    • consideartion
    • lack of defenses
    • 11-1
  489. what are the definite terms that must be implied for an offer
    • price to be paid
    • parties
    • nature of the subject matter
    • quantity involved
    • time for performance
    • 11-1
  490. what is the definition for intent in a contract
    • what a reasonable person believes
    • 11-1
  491. what terms of an offer must be defined for a cotnract
    • quantity
    • price
    • time of contract
    • 11-1
  492. what is a quasi contract
    • implied in contract when the court decides that a contract exists
    • 11-1
  493. what is an example of an unintentional contract and woulf be be considered an offer
    • made in jest or anger
    • advertisements
    • 11-2
  494. what items would terminate an offer
    • RECORD
    • rejection
    • expiration
    • counteroffer
    • operation fo law
    • revocation:
    • direct or indirect
    • 11-2
  495. when would operation of law terminate a contract
    • death or insanity of either parter
    • destruction of subject matter
    • illegality of subject matter
    • 11-2
  496. how are inquiries treated for a contract
    • treated as asking a question and leaves the oringal offer on the table
    • 11-2
  497. what is the difference between executor and executed when related to a contract
    • executor - certain duties still need to be perfromed
    • exectued - all duties have been performed
    • 11-2
  498. what are the two important rules in regards to acceptance of an offer
    • mirror image rule
    • early acceptance rule
    • 11-2
  499. what are the differences between
    mirror image rule
    early acceptance rule
    • mirror image rule - accep all termns of condition without alteration
    • early acceptance rule - acceptance is effective when transmitted or received
    • 11-2
  500. what is a bilateral contract
    • a contract that that can be accepted by a promise of an action (normally your cannot promise to do an action and instead must perform the action for the contract to be official)
    • 11-3
  501. what is a unilteral contrac
    • contract that can only be accpeted by actual perfromance
    • 11-3
  502. what is consideration for a contract
    • both parties must provide something of value
    • 11-5
  503. what are different ways that a contract can be "legally sufficient" where consideraiton is concerned
    • paying or lednign money
    • transferring or lending property
    • rendering services
    • relinquishing the rights to receive money, property, or services
    • waiving the right to take certain action
    • 11-5
  504. what are past condition and pre-exisitng duty
    • past consideration - actions taken before the contract was formed
    • pre-existing duty - obligation which the party alread had before the contract was perfomed
    • 11-6
  505. when would pre-exisitng duty allow for modificaiton of a contract
    • when both parties are providing new consideration
    • 11-6
  506. what is the differnece between a voidable and void contract
    • voidable - one or more parties may escape the contract
    • void - contract cannot be enforced by either party
    • 11-9
  507. what are difference ways a contract cane be voidable
    • duress
    • undue influence
    • misrepresentation
    • mistake
    • capacity
    • 11-9
  508. what is the defintino of duress
    • forced by threat to do something
    • 11-8
  509. what is the defintion of undue influence
    • violate/abuse a relationship of trust or confidence
    • 11-8
  510. what is innocent misreprestiaon
    • enterest into a party after receiveing inaccurate informatino about relevnat matters from the party
    • 11-8
  511. what is fraudulente misrepresentation
    • similare to innocent misrepresneation except the person providing infomration had actial or construcitve knowledget that the information was incorrect
    • 11-8
  512. what must a person provie for innocent misrepresentation
    • material misrepresentation
    • info relied upon
    • loss occurred
    • error caused by misrepresentation
    • 11-8
  513. what must a person prove for fraudulent misrepresentation
    • material misrepresentation
    • info relied upon
    • loss occurred
    • error caused by fraud (Scienter)
    • 11-8
  514. what would and would not cause a mistake to cause a voidable contract
    • material - voidable
    • immartieal - not voidable
    • 11-8
  515. what are different ways a person would lack capacity for a contract
    • minor
    • intoxiation
    • imcompetence
    • 11-9
  516. what are different ways a contract is considered void
    • extreme duress
    • fraud in execution
    • illegal subject matter
    • incompetent person
    • 11-9
  517. what is the definition of extreme duress
    • physical threat of force
    • 11-9
  518. what is the definition of fraud in execution
    • enters into a contract without realizeng they are
    • 11-9
  519. when would a incompenet person cause a contract to be void
    • when a person is labled insane by the courts
    • 11-10
  520. what is the statue of frauds
    • requires contract to be in writing
    • 11-10
  521. what contracts would fall under statue of frauds
    • GROSS
    • goolds sold for over $500
    • real estate sales
    • over on year required to perform contract
    • suretyship
    • statement in consideration of marriave
    • 11-10
  522. what is a suretyship
    • guarantee debt of another
    • 11-10
  523. if a contract is considered indefinite duration would it fall under statue of frauds
    • no
    • 11-10
  524. when would sale fo goods be enforcable if not in writing
    • SPAM
    • specifically manufactured goods
    • partially performed contract
    • admit in court
    • merchant does not object withing 10 days
    • 11-11
  525. what is parol evidence rule
    • prohibits the use of oral or written evidence that contradicts the temrs of the written contract
    • 11-11
  526. when would parol eveidence rule not prevent the introduction of eveidence
    • subsequent oral modifiation of the contract
    • fraud in execution of contract
    • oral discussion prior to the agreement that clarify ambigous or missing terms in the written contract
    • 11-12
  527. what is entirerty cause
    • clasu caliming that there are not agreements other than those contained within the contract
    • 11-12
  528. when would a right and duty not be allowed to be delegated for a contract
    • contract prohibits it
    • duty is persoanl in nature
    • materailly alters the rights and responsibility of the other party
    • involves specialized personal services
    • 11-12
  529. what is novation
    • assignor (original contract) is liable on a contract unless the other party to the contract accepts the assignee in place of the assignor
    • 11-13
  530. when would a third party have rights to enforce a contract
    • assignment (assigned rights to them)
    • intended third party beneficiary
    • 11-13
  531. what are two types of intended beneficiarues for a contract
    • donee beneficiary
    • creditor beneficiary
    • 11-13
  532. what are the differnece between
    donee beneficiary
    creditor beneficiayr
    • donee - receiveing the beenfits as a gift
    • creditor - receiveing benefits to settle a debt
    • 11-13
  533. what are the differnet ways a contract can be discharged
    • performance
    • agreement
    • operatyion of law
    • breach
    • 11-14
  534. what are the different ways that performance can discharge a contract
    • full performance
    • substantial performance - is used similar materials that are not substandard
    • 11-13
  535. what are the different agreements that can discharge a contract
    • recission
    • accord and satisfaction
    • novation
    • 11-13
  536. what are the definition of :
    recission
    accord and satisfaction
    novation
    • recission - parties restored to their original position
    • accord and satisfaction - perfomance of the substitued duty is the "satisfaction" that discharges the original duty
    • novation - one party accepts third party in place of original
    • 11-13
  537. what opertions of law would cause a discharge
    • impossibility
    • death or incapacity
    • bankruptcy
    • illegality fo the servies to be performed
    • 1-14
  538. what is anticpatory breack of contract
    • one part lets the other party know that performance will occur
    • 11-14
  539. what can a person due if an anticipatory breach occurs
    • cancel the contract
    • sue for compensatory damages
    • 11-14
  540. what is anticpatory repudiation
    • party can sue at once or wait until after performance is due
    • 11-14
  541. what is liauqidation damanges clause
    • clause that specifies amount that will be awarded in case of breach of a contract
    • 11-14
  542. what are the definitions of
    compensatory damages
    consequential damanges
    nominal damages
    punitive damages
    specific perfromance
    • compensatory damages - direct losses/profits
    • consequential damanges - indirect costs and anticipated losses
    • nominal damages - no real provable loss
    • punitive damages - punish
    • specific perfromance - availabe for unique proerty (patenets)(not for personal service)
    • 11-14
  543. what is thet statue of limitations for a contract
    • generally 4-6 years
    • begins at date of breach
    • 11-15
  544. whata re needed to make a sales contract binding
    • offer
    • acceptance
    • consideration
    • 12-1
  545. what can the terms of a sales contracct be based on
    • standard trade practive
    • past experience
    • 12-1
  546. what must be explicitly stated in sales contract
    • type and quantity of goods involve
    • 12-1
  547. how can quanitity be given in a sales contract
    • specifically stated
    • outpue contract
    • requirement contract
    • 12-1
  548. what is the differfence between an output contract and requirement contract
    • output - buyer agrees to purchase as much as the seller is able to produce for a specified period of time
    • requirement contract - seller agrees to supply all needs of the buyer for a specified period of time
    • 12-1
    • 12-1
  549. what items need to happen for a firm offer to be created
    • signed
    • up to 3 monhts
    • merchant
    • 12-1
  550. how must sign a sales contract for a firm offer
    • offeror
    • 12-1
  551. what is the definition of a merchant
    • dealer in goods involved in transaction
    • 12-1
  552. what changes can be made in a sales contract for it to still be considered the original offer
    • minor changes (payments terms, change a warranty)
    • 12-2
  553. what changes would be considered a coutneroffer for a sales contract
    • major changes (material price increase, quantity, delivery date)
    • 12-2
  554. what is the difference between with rserve and without reserve for a sales contract
    • with - right to withdraw goods prior to acceptance
    • without - goods cannot be withdrawn
    • 12-2
  555. how does consideration effect a sales contract for a modificaiton of an existing contract
    • contract continues even if there is no consideration from on party
    • 12-3
  556. what parties of a sales contract is bound by silence for a sales contract
    • merchants only
    • 12-3
  557. what does bound by silence refer to for a sales contract
    • if a merchant does not object to changes the contract will continue
    • 12-3
  558. what happens in a sales contract if additional consideration (modificaiton of a contract) changes price of goods from 450 to 500
    • contract must now be in writing
    • 12-4
  559. when do title and risk pass from merchant to consumer
    • title - when contract forms
    • risk - merchant (goods received by buyer)
    • risk - non merchant (goods tendered to buyer)
    • UNLESS STATES IN CONTRACT
    • 12-5
  560. what is the differnce between FOB Shipping and FOB destination
    • Shipping - once shipped title passes
    • desitaiton - once arrived title passes
    • 12-5
  561. what is a bailment
    • owner of goods entrusts goods to antoher party
    • 12-6
  562. what following items would cause title and risk to not trasnfer to purchaser
    • goods do not exist
    • goods are not identifies to the contract
    • 12-6
  563. what is the difference between sale on approval and sale or return
    • sale on approval - buyer obtains goods for use and can choose to purchase them later (normally 30 days)
    • sale or return - buyer is given right to cancel sale if they are unable to resell goods
    • 12-7
  564. what happens to title and risk when a buyer rejects delivery and buyer revokes acceptance
    • rejects - title is with seller risk goes to seller if defective otherwise stays with seller
    • revokes - title and risk go to seller if a valid reason
    • 12-7
  565. what are the different types of warranties
    • implied warranty of title
    • express warranty
    • implied warranty of merchantability
    • implied warranty of fitness for particular purpose
    • 12-8
  566. what are the differences betwee
    implied warranty of title
    express warranty
    implied warranty of merchantability
    implied warranty of fitness for particular purpose
    • implied warranty of title - automaticall exists in all sales (disclaimer must be explicit in contrac(
    • express warranty - any statement or claim that become a "basis of the bargain" (cannot be discalimed)
    • implied warranty of merchantability - seller warrants items are in fair condition for their ordinary purpose (discalimer may use lagnuage "as is" or "with all faults")
    • implied warranty of fitness for particular purpose - buyer relies on sellers judgement in selecting the product (disclaimer must be in writing and use langauge such as "as is" or "will all faults")
    • 12-8
  567. when needs to be demonstrated to used breach of warranty defense
    • express or implied warranty that was not effectively discalimed
    • injury or illness resulted from the breach
    • 12-10
  568. what must a plaintiff prove for a product liability case
    • absense of due care by defendant
    • defect in the product caused by carelessness
    • damages to the plaintiff result from the defect
    • 12-10
  569. what must a plaintiff prove for a strict liablity case
    • defec or unreasonable danger in the product
    • damages caused by danger
    • defendant is in the business of selling the product
    • 12-10
  570. can contributory negligence be used in a strict liability case
    • no
    • 12-10
  571. what are sellers remedies for a breach of sales contract
    • right to resell goods
    • right to stop the carried from delivering goods
    • cancel the contract
    • recover damages (incidental or consequential)
    • 12-12
  572. what are buyers remendes for breach of contract
    • acceo all, some or none of the goods
    • cover
    • specific performance - very unique goods
    • recover damages
    • recission of contract
    • 12-12
  573. what does cover refer to in breach of a sales contract
    • purchase substitue goods and revcover the excee paid from the seller
    • 12-12
  574. what is the right of replevin
    • claim ownership of goods if in your possession
    • 12-12
  575. if a strike occurs are parties in sales contract still liable
    • yes
    • 12-12
  576. what is the statue of limitate on sales contracts
    • 4 years from date of breach
    • 12-12
  577. when can an agent act on the princpials behalf
    • when given authoirty from principal
    • 13-1
  578. what is required for an agetn to work for a principal
    • agent must have sufficient metnal and physical ability to carry out instructions
    • 13-1
  579. what is required for an agency to rowk for a copmany
    • meeting of the minds - no contract or consideration need be offered
    • 13-1
  580. when would an agency contract need to be in wirting
    • real estate sales
    • agency to run for a period exceeding over one year
    • 13-1
  581. what fiducuairy duty is required by an agent
    • act loyally
    • act in best interest
    • 13-1
  582. what are different types of authority an agent can be given
    • actual
    • apparent
    • ratified
    • 13-2
  583. what are the difference between
    actual authority
    apparent authority
    ratificaiton
    • actual (implied) - assigned tasks that require authroity to carry out
    • acrual (express) - explicitly stated
    • apparent - good faith 3rd party assumes you have
    • ratification - gives authroity after autority has been made
    • 13-3
  584. who is liable when an agent is acting for a pricinpal that is
    fully disclosed
    partially discoled
    undiscolsed
    • fully - principal
    • partially - princial and agent are jointly and severally liable
    • undiscoled - princiapl (if known) and agent
    • 13-3
  585. what are the different types of agents and what are their definitions
    • general agent - broad authroity to act in a variety of transactions
    • special agent - authoirty limited to a single or series of transactions
    • sub-agent - agnet appointed by another agent
    • 13-3
  586. how is an agent who has authoirty terminated
    • agreement - completed or time lapsed
    • unilateral - dismiss the agent or agent resigns
    • operation of law
    • 13-4
  587. what is an agency coupled with an interest
    • arrangmenet where agent has legal right to subject matter
    • 13-4
  588. can an agent coupled with an interest be terminated unilateral by the principal
    • no
    • 13-4
  589. what are agents and princpal laible for
    • agents - torts and criminal acts
    • princiapl - torts (within scope of agency)
    • 13-4
  590. what is the difference between real and persaonl property
    • real - fixed to one specific lovation
    • personal - all other property
    • 14-1
  591. what are fixtures
    • personal property that gets affixed to real property
    • 14-1
  592. what are the ways to take possession of personal property when not specifically purchased
    • CAR PIT
    • confusion (identical goods that are commingled)
    • accession (imporving)
    • receive as a gift
    • production of property
    • inheritnace or will
    • take possession of property that is not owned
    • 14-2
  593. what is required to a deed to be effective
    • names of grantor
    • intent
    • description
    • delivered to purchaser
    • gratnro signature
    • 14-2
  594. what are three types of deeds
    • quitclaim
    • grant
    • warranty
    • 14-2
  595. what are the difference between the following deeds
    quitclaim
    grant
    warraty
    • quitclaim - no warranties whatsover and is "as is" (primarily used for gifts and inheritance)
    • grant - transferor have done nothing to create any impairments of title during their period of ownership
    • warranty - transferee guaranteed full rights of use of property
    • 14-3
  596. what is a notice-race jurisdiction
    • person who first files calim to property has title to it
    • 14-3
  597. when would a later claim prevail in a notice-race jurisdiction
    • later claimant recoreds first and did not know about the earlier claim
    • 14-4
  598. what are the differnet forms of concurrent owenrship
    • tenancys in common
    • joint tenancy
    • tenancy by the entirety
    • 14-4
  599. what is the difference between
    tenancys in common
    joint tenancy
    tenancy by the entirety
    • tenancys in common - two persons with separate interest in same property
    • joint tenancy - right of survivorship
    • tenancy by the entirety - joint interest held by hisband and wife
    • 14-5
  600. how are rights transferable when a tenancy in common occurs
    • transferred without consetn of others and has no impact on current or previous rights
    • 14-4
  601. how are rights transferable when a joint tenancy occurs
    • if death - the interest transfers to other joint tenants
    • if transferred - right of survivorship no longer applies betewwn transferee and other joint owners
    • 14-5
  602. what is needed for a mortgage to be effective
    • written
    • description
    • signed by mortgagor and delivered to mortgagee
    • 14-5
  603. what acions are available to buyer if a property is sold and is not enough to cover the mortgage
    • if buyer assumes mortgae then buyer is liable
    • buyer takes subject to mortgage wihtout assuming then buyer acknoledges the priority of the mortgagee on the porperty
    • agree to novation - byer is acceptin peronl liablity on it in exchange for mortgagee releasing the seller from liability
    • 14-6
  604. how long is a copyright valid for
    • 70 years
    • if created for fir - 95 years from publication or 120 after createion whichever is first
    • 14-7
  605. what is the fair use doctrine
    • limited purpose without violation of copyright
    • 14-7
  606. when would fair use doctrine be allowed
    • teaching and research activities
    • news reporting
    • review or critique puposes
    • 14-8
  607. what is covered under a computer software copyright
    • computer program readale by humans
    • binary language read by computer
    • computer databaes
    • finnancial and buseiness model
    • 14-8
  608. how long is a copyright by a corporation and business valid for
    • 100 years from creation or 75 years form its publication
    • 14-8
  609. what is the term for a patent
    • 20 years from the date of filing
    • 14 years for design patent
    • 14-8
  610. what is the term for a trademark
    • indefinently but must be renewed every 15 years
    • 14-8
  611. what is a trust
    • established for purpose of benefiting specific individual or charities without given them current control of the principal of the trust
    • 15-1
  612. what are estates
    • created at teim of persons death to temporarily hold the property of the decendetn until it can be distributed to heirs
    • 15-1
  613. who is responsible for filing income tax return for estate
    • executor
    • 15-1
  614. what is the differnce between intestate and testae
    • womeine dies without a written will
    • testate - somone dies with a will
    • 15-1
  615. wahat is the difference between form 1041 and form 706
    • 1041 - report income of the estate received after the decendents date of death
    • 706 - for of property tax on value of the decedent estate at the time of death
    • 15-2
  616. what is probate
    • settling an estate
    • 15-2
  617. what is the difference between an executor and administrato
    • exector - names be decedents will
    • administrator - namedd by courts
    • 15-2
  618. what responsibilites does a execturo have
    • paying debts of decedent
    • filin all necessary tax returns
    • distriubtinog remaining assets to the appropriate beneficiaries
    • 15-2
  619. what are the fiduciary ditues fo a trustee
    • act loyally
    • due care
    • distribute income and pirncipal according to terms
    • keep accurate reocrds
    • 15-2
  620. what are the types of beneficiaries for a trust
    • remainder
    • income
    • 15-2
  621. what are the difference between a remainder and income beneficiary
    • remainder receives principal of trust
    • income receives earnings of trust
    • 15-2
  622. what would a reminater beneficiary get from a trust
    • CAMP PICS
    • cpaital gains
    • all assets contributed to the trust
    • mortgage premium paymnets
    • property acquired in exhcnage for trust corpus
    • process from sale of corpus
    • insurance proceeds
    • capital improvements
    • stock dividends
    • 15-3
  623. what would a income beneficary get from a trust
    • CRIMP ID
    • cash dividends
    • rental income/expense
    • interest income
    • muni bond interest
    • property taxes
    • income statemetn items
    • depreciation
    • 15-3
  624. what is a inter vivos trust
    • assets transferred to a trust while person is living
    • 15-33
  625. what conditions must be present for a valid trust
    • BRATS
    • beneficiary
    • reasonable intent
    • assets
    • trustee
    • specified life
    • 15-4
  626. what is considered reasonable intent for a trust
    • valud purpose for creation of trust and is usually the seperation of control of assets from the benefits
    • 15-3
  627. what will cause a trust to fail reasonaable intent test
    • when there is one beneficiayr
    • purpose is impossible to fulfill
    • 15-3
  628. what is the speficied life on a trust
    • must have a spedicifed termination point, expressed in years of in the length of life in bein at the time trust is creased
    • 15-5
  629. define:
    intervivos trust
    spendthrift trust
    resulting trsut
    cy pres trust
    constructive trust
    • intervivos trust - created between lvigin people
    • testamanet trust - created through execution of will
    • spendthrift trust - prohibits assets from being pledged to pay the debts of a beneficiary
    • resulting trsut - created by courts due to the failue of express trust
    • cy pres trust - failure of a charitable trust and is designed to acheive a similar goal
    • totten ot tentative trust -
    • constructive trust
    • real estate investment trust
    • 15-4
  630. when would a trust be revocable
    • reserve rights
    • end of term
    • occurrence of an event
    • purpose accomplished
    • consent of trustor, all beneficiaries, remainderman, and courts
    • 15-5
  631. what is the difference between per capita and per stirpes
    • per capita - equal to each person
    • per stirpes - each at the level of first generation
    • 15-5
  632. when are estimated quartelry tax payments due for an estate and trust
    • estate - not for first 2 years but due after that
    • trust - from beginning of creation
    • 15-5
  633. what amout of personal expemptions are allowed for a trusts and estates
    • complex trsut - $100
    • simple trust - $600
    • estates - $600
    • 15-6
  634. what is the difference between a grantor trust, simple trust, and complex trust
    • grantor - grantor can withdraw assets at any time
    • simple - makes annual distributiosn exactly equal to distributable net income
    • complex - something other tan simple
    • 15-6
  635. what si distributable net inome
    • maximum amount that can be taxed to the beneficiary
    • 1-7
  636. how is distributable net income different from taxable income
    • includes tax exempt income (muni bond interest)
    • excludes capital gains
    • actual distribuions of DNI rex taxalbe income
    • 15-7
  637. what are the main differences for a the calcuatoin of a fiduciary income tax return
    • no limit on charitable deductions
    • income paid before person died is included
    • trustee fees are deductable
    • deddcution fo distribution of distributable net income
    • 15-8
  638. what gifts constitute for a gift tax
    • cash
    • property
    • loan $
    • sell car
    • irrevocable trust
    • 15-8
  639. what gifts are not considered part of the gift tax
    • life insurance
    • charity
    • political contribution
    • revocable trust
    • 15-8
  640. when would gifts be considered as an exclusion
    • support minors
    • marital deductions
    • educqation and medical bills paid to school/hopsital
    • 15-8
  641. what form is used fto file for taxable gifts
    • form 709
    • 15-8
  642. what is the formula to calucalte the tax dur for gifts
    • gross gifts
    • -exclusions
    • =taxable gifts
    • +taxable gift over the years
    • + taxable estate
    • =total taxable transfer
    • x tax rate
    • -unified credit
    • -other credits
    • -prepayments
    • =tax due
  643. what is the tax form for the tax due for gift tax
    • form 706
    • 15-8
  644. what is the calucaiton to determine the taxable estate
    • all assets
    • +life insurance poroceeds
    • +revocable trust
    • + 1/2 of property with spouse
    • =gross estate
    • -charity
    • -marital deduction
    • -liabilites/expenses (medical, mortgages, admin exp, funeral)
    • =taxable estate
    • 15-8
  645. what is a uncompleted gift (no interest)
    • revoable transfer of the right to access wealth at a future time
    • 15-9
  646. what is the top tax bracket for the estate and gift tax
    • 35%
    • 15-10
  647. when is the estate tax return due
    • 9 monhts after date of death
    • 15-10
  648. how much can a person give in one tax year for a gift tax
    • $14K
    • 15-9
  649. what ist he maximum amount of estate tax that is considered no taxable
    • $5.25M for SFJ with a maximum tax rate at 40%
    • 15-10
  650. what is considred a receviable for a decendent
    • amounts earned by decendednt but not paid until after their death
    • 15-10
  651. what value is given to assets for an estate
    • fair market value at time of death
    • 15-11
  652. what is the alternative valuation date
    assets are valued at time of distribution or dale from the estate and items not sold are valued at fair market value exactly 6 monhts after death.15-11
  653. when woulr property from a decentednt reatin the original donors basis
    • when propert is appreciated received within one year of death
    • 15-11
  654. when would an estate be liable for estate taxes
    • if taxable estate exceeded the lifetime exlusion
    • 15-11
  655. what are allowable deductions for estate
    • state death tax deduction
    • marital deductions
    • charitable deduction
    • funeral expense
    • casualty and tehft loss
    • administrative expenses
    • liabilities of the estate
    • 15-12
  656. when would charitable expense be allowed to be a deduction for an estate
    • if authorized by the decendent in their will
    • 15-11
  657. what is the generation-skipping tax
    • imposed when the decedents estate is transferring substational property to beneficieiares at least two geneatrtions below the decendent
    • 15-12
  658. what does MACRS stand for
    • modified acceledated cost recovery
    • 16-1
  659. what are the significant differneces between GAAP and MACRS
    • cost of the assetis dedcuted over a state recovery period that is shorter than the estimated useful life of the asset in most cases
    • recoverd for new and used property is identical
    • salvage value is ignored
    • 16-1
  660. what is the recovery period for real property (1250)
    • 27.5 years for residentail rental property
    • 39 years for most other buildints (business and investment realty)
    • 16-1
  661. what method of deprecaiton is used for real property (1250)
    • straight line
    • 16-1
  662. what is mid-monht convetion
    • only depreciate the real property for half the monht when placed in service and hald in the monht of disposal
    • 16-1
  663. what is the recovery period for tangible property (1245)
    • 3 years for small tools, software
    • 5 years for autos, light trucks, copiers, computers & printers
    • 7 years for moths other personal property, equipment, office furniture
    • 16-1
  664. what is mid quarter convetion for tangible property (1245)
    • if acquire 40% of its assets in the final 3 monhts of the year
    • 16-1
  665. what is the primary method of MACRS depreicaiton for tankgible property (1245)
    • double declining
    • 16-2
  666. when does depreciaiton typucally start for tangible property (1245)
    • half year convention
    • 16-2
  667. what si section 179 dedcution
    • allows for immediate expense of certain depreciable property instead of capitalizeing it
    • 16-2
  668. how much can a corp expense for section 179 deduction
    • 500,000 for each item and phased out $ for $ when all pruchases exceed $2M
    • graph on updated material page 32
    • 16-2
  669. what is the useful life of an intangible (section 197)
    • 15 years - most intangibles
    • 16-3
  670. how much can be expenses immediately for intangible (section 197)
    • $5K
    • 16-3
  671. what is the formula to calculate depletion expense per year using the cost method
    • adjusted basis / estimated recoverable units X units sold
    • 16-4
  672. what is the formula to calculate depletion expense per year using the percentage method
    • a statutory percentage X gross income
    • 16-4
  673. what are the differnet types of assets that a corporation will hold
    • ordinary income assets
    • section 1231 assets
    • capital assets
    • 17-1
  674. what is an oridinary income asset for a corp
    • assets acquired with the intention ofbeing sold
    • i.e inventory, artistic works, receivables
    • 17-1
  675. what is a section 1231 asset
    non-current business assets tht are used in the trade or business
  676. what is the difference between section 1231, 1245 & 1250 property
    • 1231 - depreciable and real property held for more than one year
    • 1245 - decpreciable assets held by a business for integral use
    • 1250 - real estate and real property
    • tax department journal
  677. how are a gain & loss recorded for section 1231 property
    • gain - long term capital gain if held more than 1 year otherwise it is ordinary
    • loss - ordinary income
    • 17-1
  678. what is a capital asset (non-business asset_
    • item used for personal use that does not meat the guidelines of a ordinary income asset or 1231 asset
    • 17-1

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cpa-reg
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