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  1. In accordance with the AICPA’s Statements on Standards for Tax Services (SSTSs), when a reasonable basis exists for omission of an answer to an applicable question on a tax return,
    However, given reasonable grounds for the omission, the taxpayer is not required to provide an explanation on the return, although the member must consider whether the omission may cause the return to be incomplete.
  2. Membership in the AICPA is terminated without a hearing for
    Termination of membership without a hearing occurs upon the filing with the AICPA of a final judgment of criminal conviction of the following offenses: (1) a crime punishable by more than one year of imprisonment (a felony), (2) willfully failing to file a legally required individual tax return, (3) filing a fraudulent tax return on the member’s or a client’s behalf, or (4) willfully aiding in preparing a fraudulent tax return for a client. Furthermore, membership is terminated without a hearing if the member’s CPA certificate or license or permit to practice as a CPA or to practice public accounting is revoked as a disciplinary measure by an AICPA-approved governmental agency or other organization. A governmental agency is eligible for approval if it has power to prohibit a member from practicing before it or serving as a director, officer, or trustee of an entity (e.g., the SEC). A nongovernmental organization may be approved if it has authority under a statute or regulation to regulate accountants (e.g., the PCAOB).
  3. Which of the following is implied when a member of the AICPA signs the preparer’s declaration on a federal income tax return?
    Conduct Rule 102 states, “In the performance of any professional service, a member shall not knowingly misrepresent facts or subordinate his/her judgment to others.”
  4. does not practice before IRS
    • prepare less than substantially all of tax return
    • appear as witness for person
  5. what is an enrolled agent
    an individual other than attorney or CPA who is eligible, qualified, and certified as authorized to represent another in practice before the IRS. Issued by IRS to individuals passing the EA exam
  6. contingent fees can be charged
    • IRS examination of original/amended return,
    • claim for refund/credit
  7. allowable advertising for fees are
    • fixed fees for specific routing services
    • range of fees for particular services
    • initial consulting
    • hourly rates
    • availability of written fee schedule
  8. what is a covered opinion
    • written advice by a practitioner concerning one or more federal tax issues
    • transaction the IRS has determined is a tax-avoidance transaction
    • partnership or other entity or investment plan that has tax avoidance or evasion as a principal purpose
    • same as 2 except avoidance/evasion is a significant purpose and written advice is relieve opinion or marketed opinion
  9. what is a reliance opinion
    conclude more likely than not that the issue would be resolved if challenged
  10. what is a marketed opinion
    used by promoter to market an investment
  11. Circular 230 suspension/disbarment occurs when
    • conviction of offence with dishonesty/breach of trust
    • providing false/misleading info to Treasury dept.
    • negotiating/not promptly remitting refund check
    • circulating/publishing libelous/malicious/abusive matter
    • suspension from practices as CPA
    • conviction of felony that renders unfit to practice
    • attempting to bribe IRS
  12. secretary of treasury can suspend disbar authorized person who
    • incompetent/disreputable
    • refuses to comply with rules/regulations
    • intends to defraud by deceiving/misleading/threatening claimant
  13. according to the small business & work opportunity act of 2007 a position will be treated as unreasonable unless
    • there is or was substantial authority for the position or,
    • the position was property disclosed and had a reasonable basis
    • for tax shelters it is based on a position that is more likely than not to be sustained on its merits
  14. what happens when the standards for the taxing authority differ from AICPA standards
    comply with the more stringent standards
  15. reasonable grounds for omitting an answer on tax form
    • information is not readily available and the answer is insignificant with respect to taxable income/loss of liability
    • uncertainty about the meaning of question
    • answer is extensive, information will be supplied upon examination
  16. who is responsible for supplying estimates
    taxpayer is responsible for supplying estimates
  17. errors on tax forms include
    • positions/omissions/accounting methods that do not need AICPA standards
    • positions on prior returns no longer meeting standards because of retroactive legislation/judicial decisions/pronouncements
  18. giving advice
    not obligated to tell client subsequent developments affect previous advice but must tell client when implementing plans associated with advice by a specific agreement
  19. written advice
    should be given when an item is important, unusual, or complicated transactions
  20. what is a non-signing tax return preparer
    gives sufficient information/advice so completion of return is merely mechanical and information given is substantial (preparing partnership return which is then handed to partner)
  21. what is considered substantial advice for non-signing tax return preparer
    • more than 10,000 or
    • more than 400,000 and also more than 20% of gross income on the return
  22. what does disclosure for a tax position do for tax return preparer
    may shield preparer from liability for a non-frivolous position without a more likely than not chance of success. However, a preparer is theoretically not required to notify IRS when tax liability is understated.
  23. tax returns must be held for
    3 years after close of return period alternatively the preparer can retain a list of names, ID numbers, tax years, and types of returns
  24. what is considered negligence for a tax return
    failure to make reasonable attempt to comply with the provision of the internal revenue laws or to exercise ordinary and reasonable care in the preparation of the return
  25. what are the different penalties that can be assigned to a return prepare
    • without a reasonable belief that it is more likely than not to be sustained on its merits - $1,000 or 50% income
    • willful or reckless conduct (negligence) - $5,000 or 50% of income
  26. frivolous return is one that
    • omits information that determines taxpayers liability
    • shows substantial incorrect tax
    • based on frivolous position
    • based on desire to impede tax collection
  27. fraudulent return is one that
    willful/deliberate action that is intended to obtain unauthorized benefit
  28. what is the amount of the penalty for disclosing tax return information without the clients consent
    $250 per disclosure w/ a maximum of $10,000 per year
  29. how is consent given for a preparer to disclose tax information on a clients return
    must be in writing
  30. what penalties can the state board inflict
    revoke/suspend license through administrative proceedings
  31. who are state CPA societies and what punishment can they inflict on a CPA
    are voluntary and can admonish/suspend/expel members
  32. AICPA disciplinary process
    • professional ethics division
    • joint trial board
    • joint ethics enforcement program
  33. what does the professional ethics division do
    • investigates ethics violations
    • imposes sanctions in less serious cases
  34. what does the joint trial board to
    may acquit/admonish suspend or expel CPA
  35. joint ethics enforcement program involves
    • matters of national security
    • involving 2 or more states
    • those in litigation
  36. when is a member automatically expelled without a hearing from AICPA
    • committing a felony
    • willfully failing to file a tax return
    • filing a fraudulent tax return on the members behalf
    • aiding in preparing a fraudulent return for a client
  37. what does expulsion from AICPA not bar a CPA from doing
    practice public accounting
  38. what does the joint ethics enforcement program do
    handles matters of national concerns involving two or more states and those in litigation
  39. what punishments can the IRS impose
    • may prohibit accountant from proactive before IRS
    • may impose fines
  40. how long does a firm have to correct a error found by PCAOB
    firms has 12 months to correct error found not in compliance with PCAOB standards
  41. who has oversight authority over PCAOB
    SEC
  42. who does the IRS notify if disbarment or suspension occurs
    A notice of disbarment or suspension of a certified public accountant from practice before the Internal Revenue Service is issued to IRS employees, interested departments and agencies of the federal government, and state licensing authorities.
  43. The confidentiality privilege given to non-attorney tax providers may be asserted to prevent disclosure of information to which regulatory bodies
    The confidentiality privilege is extended to certain non-attorneys. However, the privilege may not be asserted to prevent the disclosure of information to any regulatory body other than the IRS.
  44. If an ethics complaint is filed against a CPA, the matter
    Under the Joint Ethics Enforcement Program (JEEP), the AICPA and most state societies have agreements that permit referral of an ethics complaint either to the AICPA or to a state society. However, the AICPA handles matters of national concern, those involving two or more states, and those in litigation.
  45. The Securities and Exchange Commission (SEC) may discipline accountants. Under its disciplinary powers, the SEC may suspend an accountant’s right to practice before it. What is a basis for suspension?
    The SEC may suspend or permanently revoke the right to practice before the SEC, including the right to sign any document filed by a registrant, if the accountant (1) does not have the qualifications to represent others; (2) lacks character or integrity; (3) has engaged in unethical or unprofessional conduct; or (4) has willfully violated, or willfully aided and abetted the violation of, the federal securities laws or their rules and regulations. Suspension by the SEC also may result from (1) conviction of a felony, or a misdemeanor involving moral turpitude; (2) revocation or suspension of a license to practice; or (3) being permanently enjoined from violation of the federal securities acts
  46. A member of the AICPA who is engaged to prepare an income tax return has a duty to prepare it in such a manner that the tax is
    A member of the AICPA should serve to the best of his/her ability and with professional concern for the taxpayer’s best interests, consistent with responsibilities to the tax system. Within the limits of the law and ethical practice, the member should strive for the legal minimum tax, not for tax evasion.
  47. Which entity has the authority to prohibit an individual from practicing public accounting?
    A state board of accountancy.
  48. Identify the item below that does not describe information a preparer must maintain about every return prepared.
    The date the return or claim for refund was prepared.
  49. Members of the AICPA often provide advice to taxpayers. When subsequent developments affect advice previously provided with respect to significant matters, a member
    The member is not obligated to communicate with a taxpayer when subsequent developments affect advice previously provided with respect to significant matters except (1) while assisting in implementing procedures or plans associated with advice provided or (2) in accordance with an obligation undertaken by specific agreement (TS 700, Form and Content of Advice to Taxpayers).
  50. who does not have to be a tax return preparer and can still go before IRS as representation
    • employee
    • fiduciary
    • person preparing refund claim
  51. from whom may a practitioner not assist or accept assistance from
    1. A practitioner may not assist or accept assistance from any person or entity that the practitioner knows has obtained clients in violation of Circular 230’s advertising and solicitation rules.
  52. what are the objectives and goal of the 1933 Act
    • objectives: disclose to potential investors all material information & prevention of fraud
    • goal: provide investors with adequate info to make an informed decision
  53. define:
    non-reporting issuer
    unseasoned issuer
    seasoned issuer
    well-known season issuer
    • non-reporting issuer - need not file reports under the 1934 act and uses detailed S-1
    • unseasoned issuer - reported for at least 3 consecutive years under the 34 act and uses s-1
    • seasoned issuer - filed at least 1 year had market capitalization of at least 75M uses form S-3
    • well-known season issuer - filed at least 1 year and worldwide market capitalization of at least $700M or has issued for cash in a registered offering at least $1B of debt of PS in past 3 years and uses S-3
  54. what are the rules to be considered an insider trader
    • Insider trading under Rule 10b-5 is the purchase or sale of any security by an individual who
    • 1. Has access to material, nonpublic information;
    • 2. Has not disclosed it before trading; and
    • 3. Has a fiduciary obligation to the issuer, the shareholders, or any other source of the information.
  55. what is the phase-out for personal exemption
    2% for each 2,500 over 300K MFJ, 275K HH, 250K single
  56. what amount of a tax refund is the taxpayer supposed to include
    taxpayer received a tax benefit in a prior year, and amounts recovered during the tax year that did not provide a tax benefit in the prior year are excluded
  57. when can a person have an exemption for their spouse when MFS
    Normally, a joint return must be filed. However, a taxpayer filing as married filing separately may deduct an exemption for the spouse if the spouse has no gross income and is not a dependent of another taxpayer.
  58. how is discharge of indebtedness treated
    Discharge of indebtedness can result in gross income. Gross income includes the cancelation of indebtedness when a debt is canceled in whole or part for a consideration. If a creditor gratuitously cancels a debt, the amount forgiven is treated as a gift.
  59. what are the different types of relationship for qualified dependent
    blood, grandparents, uncles/aunts, nephews/nieces
  60. what is the amount of exemption for 2013
    3900
  61. what income is excluded from calculating exemptions
    social security income for low tax payers, tax-exempt interest income
  62. what is the foreign earned income exclusion amount
    exclude up to 97,600
  63. what is the calculation to determine the taxable portion of SS
    • provisional income (AGI + tax exempt interest + excluded foreign tax +50% of SS benefit)
    • if provisional income falls between base amount (32,000 MFJ, 25,000 S, HH) and adjusted base amount (44,000 MFJ, 34K S, HH) then X 50% of SS benefits otherwise if provisional income is over adjusted base and base amount then X 85% of SS benefits included
  64. when is a foreign allocation for business related expenses not required
    • trip is for no more than 1 week
    • personal vacation was not the major consideration,
    • and personal time spent on the trip is less than 25% of the total time away from home
  65. how are bad debts treated for write offs
    • partially worthless business debt written off as ordinary loss
    • partially worthless non-business bad debt is not deductible
    • wholly worthless nonbusiness debt is short term capital loss
    • worthless corporate securities generally treated as capital loss
  66. what is the write off method for bad debt
    use specific write off method for bad debt for tax purposes
  67. how are loan points treated
    • points treated as interest and must be amortized
    • ordinary points on acquisition indebtedness of principal residence may be treated as currently deductible
  68. what is the amortization for start up costs
    start up costs are amortized over 180 months
  69. what political items are deductible
    • appearing before and communication with an y local council or similar governing body is deductible
    • up to 2,000 for activity at the state or federal level
  70. who does the domestic production activities deductions apply to
    applies to manufacturing, production, extractions activities in US
  71. what amount of the domestic production activities deduction is deductible
    • lesser of:
    • 9% qualified production activities income
    • 9% taxable income of taxpayer
    • 50% w-2 wages related to qualified productions activities income
  72. what is the maximum wages for FICA taxes
    • SS - based on capped wage limited of 113,700
    • Medicare - unlimited
  73. what is the Medicare tax %
    Medicare tax is 3.8% (1.45% + 1.45% ) add an additional .9% if make over 200K
  74. what is the SS tax %
    so tax is 6.2% + 6.2% of first 113,700
  75. what is the tax percent for unemployment
    6% on first 7000 less applicable tax rate of state unemployment taxes
  76. how much can a an employee exclude for employer provided transit passes and transportation and also employer provided parking
    • $245 per month for transit passes and transportation
    • $245 for parking per month
  77. what amount can an employer exclude for education assistance
    employer can exclude 5250 for providing educational assistance
  78. what amount is the dependent care exclusion
    dependent care assistance is 2.5K or 5K and dependent must be under 13 or disabled
  79. when can an employee recognize long term capital gain for an incentive stock option
    if stock is sold 2 years or more after the option was granted and 1 year or more after the option was exercised
  80. what is included in farm income
    • gains from sale (livestock, produce, grain)
    • distributions from a farm cooperative
    • payments from agricultural program
    • commodity credit corporation loans secured by pledged crops
    • crop insurance proceeds
    • customer hire or machine work
    • other income (tax credits, bargaining income, discharge of indebtedness, excess depreciation
  81. what is included as farm expense
    • car and truck expense
    • conversation of soil or erosion protection (25% of gross farm income)
    • customer hire/machine work
    • depreciation/sec 179
    • employee benefit programs
    • feed
    • freight/trucking
    • insurance
    • interest (business mortgage and other business interest)
    • labor
    • rental/leases
    • repairs and maintenance
    • taxes
    • utilities (1st phone line is 100% personal)
    • misc. (chemicals, fertilizers, gas, set
  82. what amount can educators claim for deduction
    educators can claim $250 annually for unreimbursed expenses
  83. what amount can an individual contribute to a health savings account
    3,250 for self & 6450 for family (8450 for over 55)
  84. how much can an individual deduct for a qualified retirement plan
    lesser of $51K or self employment earnings (earnings minus deductible part of self employment taxes) X 20%
  85. how much can an individual contribute for a qualified retirement plan
    lesser of 100% of self employment earnings (earnings minus deductible part of self employment taxes) or $51K
  86. how much can a person contribute to an IRA
    5.5K or 6.5K if 50 and over
  87. what is the phase-out for IRA
    • single, HH (59-69)
    • MFJ (95-115 if covered by retirement plan, 178-188 if spouse is covered by retirement plan)
  88. how much can a taxpayer deduct for higher education
    • 4,000
    • 2,000 (AGI is 65-80(130-160 MFJ))
    • 0 if over 80 or 160
  89. what is the calculation for student loan interest
    2,500 X (AGI-60000) / 15K
  90. what deduction is allowed for the employer provided transit and parking
    Up to $245 per month may be excluded for the value of employer-provided transit passes and transportation in an employer-provided “commuter highway vehicle” between the employee’s residence and place of employment. Additionally, up to a $245-per-month exclusion is available for employer-provided parking. Employees may use both of these exclusions.
  91. when is fica required for household employees
    do not pay FICA for household employees unless make over 1800 during year
  92. how much can a person cotnribute to health savings account
    • single can contribute 3,250 to HAS or 4,250 if over 55
    • family can contribute 6,450 to HAS or 8,450 if over 55
  93. what are phase outs for student loan interest
    phase outs for student loan interest start at 60K to 75K or 125K to 155K
  94. what is the calculation for the credit for elderly/disabled
    15% X initial base amount (7500 MFJJ, 3750 MFS, 5000 of other qualified tax payers
  95. what is the fomrualt to calculated general business credit
    net income tax - (greater of tentative minim tax/25% of net regular tax over 25,000)

    net income tax = regular income tax + alternative minimum tax liability - nonrefundable credits other than general business credit
  96. what is the carryforward/back for the general business credit
    carried back 1 year and forward 20 years
  97. when are passive activity loss deductable
    can only right off against passive activity income
  98. what is the phase out for passive activity loss
    passive activity loss is phased out when agi is 100,000 and entirely phased out at 150,000
  99. what are the nonrefundable person credits
    Nonrefundable personal credits include the Foreign Tax Credit, the Child and Dependent Care Credit, the Lifetime Learning Credit, the Retirement Savings Contribution Credit, the Child Tax Credit, the Credit for the Elderly or the Disabled, and the General Business Credit.
  100. what is the carryforward/back for the foreign tax credit
    carried back 1 year and forward 10 years
  101. what is the amount of the standard deduction
    6,100 Single, 8,950 HH, 12,200 MFJ
  102. what is the standard deduction for children
    children greater of 1,000 or 350 + earned income (not including dividends or capital gains)
  103. what is the Standard deductions phaseout
    apply to AGI exceeding 300K MFJ, 275 HH, 250 Single and must reduce aggregate amount of itemized deductions by lesser of 80% of otherwise allowable deductions or 3% of the amount with AGI exceeds the threshold
  104. what expenses does the Standard deductions limitations not apply to
    • does not apply to medical expenses
    • investment expenses
    • casualty or theft loss
    • gambling losses
  105. what are the requirements for the earned income credit
    • have valid SS
    • have earwigged income from employment, self employment, or another course
    • US citizen or resident alien
    • cannot be qualifying child on another return
    • have investment income less than 3,300
  106. what ist the phase out for the American opportunities credit
    phase outs is (AGI - (80K or 160 MFJ)) / 10K or 20K MFJ
  107. what is the amount of the adoption credit
    max is 12,970 with phase-out for modified adjusted gross income
  108. What is the AMT formula for individuals
    • taxable income
    • + tax preference
    • + personal exemption
    • + standard deduction if not itemized
    • +- certain other adjustments
    • = Alternative minimum taxable income
    • - exemption amount
    • =alternative minimum base
    • X rate
    • = tentative minimum tax
    • - regular income tax
    • =AMT
  109. what is the fomrula to determine the rate for AMT for individuals
    rate = AMT Base (first 179,500 X 36%) and excess 28%
  110. what is the exemption for personal AMT
    • MFJ -80,800 (phaseoue .25 per 1 over 153,900
    • singler - 51,900 (phaseout .25 per 1 over 115,400
  111. what is the calculation of net operating loss
    • taxable income (when negative)
    • + NOL carried forward
    • + personal exemption
    • + nonbusiness deductions over nonbusiness income

    • nonbusiness deduction are: alimony, contributions to self-employed retirement plan, loss from sale of investment, either the standard deductions or all itemized deductions
    • nonbusiness income includes: interest, dividends, gain on sale of investment property, treasure trove
  112. a person materially participates if satify one test. What are the tests
    • more than 500 hours
    • partipicaiotns constitutes substantially all of partipicaiton in activiity
    • more than 100 hours and exceeds participaition of any othe rindividual
    • materailly participates in 5 of preceding 10 years
  113. what closing costs are capitalizable
    • brokerage commission
    • pre-purchase taxes
    • sales tax on purchase
    • excise tax
    • title transfer tax
    • title insurance
    • recording fees
    • attorney fees
    • document review, preparation
  114. what is formula for lump sum assets (purchased more than one asset for a lump sum
    allocable cost = FMV of asset / FMV of all assets X lump sum purchase price
  115. when is the residual method used
    any asset transfers of a group of assets that constitutes a trade or business and for which the buyers basis is determined only by the amount paid for the assets
  116. what is the donees basis in property received as a gift
    donors basis in property
  117. if gifted stock is given with a FMV basis lower than actual basis is subsequently sold for a loss what is the formula
    sale price - FMV at the date of the gift
  118. if gifted stock is given with a FMV basis lower than actual basis is subsequently sold for a gain what is the formula
    sale price - original basis of stock
  119. what happens if gifted stock is sold at a price between the original basis and FMV
    no gain or loss is recognized
  120. what is the basis for inherited property
    basis is the FMV on the date of death or 6 months after
  121. when would the uniform capitalization rules not apply
    if property is acquired for resale and the company's annual gross receipts (for the past 3 years) do not exceed 10M
  122. what is adjusted basis
    initial basis is adjusted consistent with tax-relevant events (ex. Legal fees to defend title, major improvements)
  123. what is the definition of accelerated cost recovery
    tax accounting method of depreciation that allow a deduction in excess of a current years decline in economic value
  124. what property is subject to accelerated cost recovery
    tangible property used in trade, in business, or for production of income and has determinable, limited useful life
  125. what is the formula for the income forecast method
    (Basis - salvage value) X income generated by the property / estimated total of income for useful life
  126. what property is subject to income forecast method
    film, videotape, sound recordings, copyrights, books, and patents
  127. what deprecation methods are used for MACRS
    • 200% DDB for 3, 5, 7, 10 years
    • 150% DDB for 15 & 20 years & farm personal property
    • S/L for real property
  128. what property uses mid month and mid year convention
    • mid year (personal property)
    • mid month (real property)
  129. when does a person use mid quarter depreciation
    mid quarter us used when 40% of assets are purchased in final quarter and all assets are done according to the quarter they were purchased.
  130. what is depreciation rate for real property
    • residential real property - 27.5
    • non residential real estate - 29
  131. what real property qualifies for 15 year recovery
    • leasehold improvements
    • restaurant property
    • retail improvement property
  132. what type of property is depreciable under section 179
    depreciable personal property used in an active conduct of a trade or business and acquired by purchase from an unrelated party
  133. what is the useful life of a patent
    20 years
  134. what is the useful life of a copyright
    time the work is fixed in a tangible medium of expression for the life of the author plus 70 years
  135. what is the amortization life of an intangible
    15 years beginning in the month it was purchased
  136. when does a sale occur for real property
    earlier of the date of conveyance or date that the burden of ownership passes to the buyer
  137. what is not included in net capital gains for individuals
    short term capital gain
  138. how is short term capital gains taxed for individuals
    as ordinary income
  139. when are long term capital gains taxed at
    15/20% basket
    25% basket
    28% basket
    • 15/20 basket - 0% for 10 or 15%, 15% for 38% or under, 20% for 39.6%
    • 25% - un-recaptured sec. 1250 gain
    • 28% - sale of collectibles and gains from sec 1202 stock
  140. what is carry forward for capital losses
    • individual - indefinitely
    • corporation - 3 back 5 forward
  141. what is a wash sale and how is it treated
    sale is not recognized is stock sold and repurchased within 30 days. The disallowed loss is added to the basis of the stock purchased in the wash sale
  142. how much can a person deduct for worthless section 1244 (small business) stock
    50K or 100K for MFJ as ordinary income and the remaining is capital loss
  143. what qualifies a small business for section 1244 stock
    • aggregate capital cannot exceed $1M, corp. must not derive more than 50% from passive investment
    • stock must be paid by stockholders and not given as compensation
  144. what are installment sales
    disposition of property in which at least one payment is to be received after the close of the year for the disposition
  145. what is the calculation for realized gain for installment sales
    gross profit X payments received in current year / total contract prices
  146. what is the calculation for recognized gain for installment sales
    gross profit / contract price X payments received
  147. what items do not qualify for non-recognition when like kind exchange occurs
    • money
    • liabilities
    • inventory
    • partnership interest in different partnership
    • securities and debt instruments
  148. what is the calculation for gain realized for property
    • money received
    • + FMV of other property
    • + liability relief
    • -money or other property received
    • -selling expenses
    • -liabilities assumed
  149. what is the gain recognized for like kind exchange
    • lesser of gain realized of boot received
    • (if each party assumes liability of the other the net liability given or received is treated as boot
  150. what is the basis of new property for like kind exchange
    • actual basis of property given
    • + gain recognized
    • + boot given
    • -boot received
  151. when an involuntary converted asset occurs what does similar or related service mean
    • owner-user - have similar characteristics & be used for the same purpose
    • owner-investor - risks, management activities, services performed continue without substantial change
  152. what is the replacement period for involuntary conversion
    earlier of the date of disposition or the threat of condemnation and ends 2 years after the close of the first tax year
  153. how often can you get the 250K or 500K exclusion for selling a home
    once every 2 years
  154. how are gains reported for a section 1231 asset sale
    long term capital asset in the amount of the sale price - cost and remainder is ordinary income
  155. how are losses reported for a section 1231 asset sale
    ordinary income
  156. what happens if section 1245 property sold is recognized (like kind exchange, involuntary conversion
    • add the gain recognized
    • + FMV of property acquired that is not Sec. 1245 property and is not included in computing the recognized gain
  157. what assets classifies as section 1250 property
    depreciable real property such as a building or its structure
  158. how is an asset sold under section 1250 calculated
    excess of accelerated depreciation taken over S/L is ordinary income then move to section 1245 (for corporations)
  159. what happens is section 1245 gain is larger than section 1250 gain
    20% of the difference is characterized as ordinary income
  160. what happens if section 1250 property sold is recognized (like kind exchange, involuntary conversion
    • greater of recognized gain or
    • excess of the potential 1250 ordinary income over the FMV of 1250 property received
  161. what is gross profit under the installment sales
    actual profit received
  162. if gifted stock is given with a FMV basis higher than actual basis is subsequently sold for a gain what is the formula
    sales price - basis
  163. what is the amount realized for exchanged property
    sum of money received and the FMV of other property otherwise it is the amount received for property
  164. Dawn's mother gave her a diamond necklace appraised at $90,000 on April 30, 2014. Gift tax of $21,000 was paid on the transfer. Her mother purchased the necklace for $60,000 in 2004. Dawn sold it for $90,000 cash on October 9, 2014.
    The donee’s basis is equal to the donor’s basis increased by gift tax paid attributable to appreciation. The donor’s basis is increased by gift tax paid × [(FMV - donor’s basis) ÷ taxable gift]. The increase is $8,289 {$21,000 × [($90,000 - $60,000) ÷ ($90,000 - $14,000)]}. Dawn’s basis in the necklace was $68,289 ($60,000 + $8,289), and the gain recognized is $21,711 ($90,000 - $68,289).
  165. what businesses must be treated as a C-corp.
    • state or federal law
    • association
    • joint stock companies
    • insurance companies
    • certain banks
    • state owned organizations
    • certain foreign organizations
    • publicly traded corporations
  166. what is a publicly traded partnership
    ineligible entity that are taxes as corporations
  167. when is a professional associations treated as a corp.
    organized under the states Professional Association Act and operated as a corporation
  168. how are personal service corporations taxed
    at a flat rate of 35%
  169. when would the ITS allocate income, deductions, credits and exclusions from a professional service corporation
    if substantially all the PSC service are performed for one other corporations, partnership, or entity and the principal purpose is tax avoidance
  170. what are check the box regulations
    apply to business entities other than trusts that are separate for federal tax purposes. Allows the company to be taxed as a corporation or a partnership
  171. what is included in gross income for a bond repurchase
    issues price of its bond minus the repurchase price and any premium it recognized
  172. what is included in gross income for a sinking fund income
    interest or other income from property to satisfy an obligation
  173. how long are organizational costs (start-up) costs amortized for
    180 months beginning the month the business started
  174. what are examples of organizational costs
    legal fees for drafting the charter, incorporation fees, expenses for temporary directors, and organizational meeting costs
  175. what are examples of non-organizational costs
    costs related to transfer of asset to the corporation or the issuance and sale of stock
  176. what basis is given to property or inventory donated from a corp.
    adjusted basis
  177. what is value given to food and book inventory if donated by a corp.
    basis plus on-half of the gain that would have been recognized if the asset were sold at FMV and may not exceed 2 times the assets basis
  178. how much of charitable contributions are allowed for corp.
    • 10% of taxable income before any:
    • charitable contributions
    • DRD
    • dividends paid deductions
    • NOL carryback
    • capital loss carryback
  179. what order are charitable contributions given for carry forward
    FIFO
  180. what is eligibility for DRD
    must hold stock at least 46 days during the 90 day period
  181. what amount is used for the DRD
    lesser of DRD or same percent as % applied to taxable income before DRD. However if either amount created a NOL then use the DRD
  182. when are foreign DRD allowed to be used
    • 10% ownership
    • foreign corp. is subject to US federal income tax
    • foreign corp. has income effectively connected with a trade or business
    • not a foreign personal holding corp.
  183. when would a DRD not be allowed to be taken
    • when received from:
    • mutual savings bank
    • real estate investment trust
    • domestic international sales corp.
    • public utilities on PS
    • corporation exempt from tax during the distribution year
  184. what would not qualify as a gift for a corp.
    • signs or promotional materials used on the recipients business
    • item costing less than $4
  185. what are the items that are not included in determination if a corp. officer makes over $1M
    • income form pension plan, annuity, and specified employee trusts
    • benefits that are tax free under the IRC
    • compensation based on performance goals
    • commission based on performance
  186. how is worthless stock treated for a corp.
    treated as a capital loss unless the security is affiliated and then it is ordinary income
  187. how is the repurchase of a bond with a premium treated
    deduct as interest expense the excess of repurchase price over the issue price
  188. what value is given to casualty losses for a corp.
    • lesser of decline in FMV or the actual basis
    • unless completely destroyed and then the adjusted basis prior to loss
  189. how does deprecation affect a NOL
    it cannot create or increase a NOL
  190. what gets applied first a charitable carry forward of NOL
    charity
  191. how are capital short term capital gains treated
    as ordinary income unless offset by long term capital loss
  192. when is schedule M3 used
    large entities that need to provide more transparent
  193. who do passive activity losses apply to and who do they not apply to
    • apply: individuals, estates, trusts, closely held c-corp, personal service corp
    • not apply: grantor trusts, partnerships, S-Corps
  194. what is deductable for repruchased stock
    interest expense incurred on borrowings to repurrchase but other expenses are not
  195. Wonder, Inc., had 2013 taxable income of $200,000 exclusive of the following:
    Gain on sale of land used in business $25,000
    Loss on sale of machinery used in business (13,000)
    Loss on sale of securities held 3 years (4,000)
    Loss on sale of securities held 3 months (3,000)
    On what amount of taxable income should Wonder compute tax?`
    The sale of the land and the sale of machinery used in the business are Sec. 1231 transactions, if held more than 1 year. Since the gain and loss net to a gain of $12,000, they are a long-term capital gain and loss. The capital losses on the securities are fully deductible because they do not exceed the $12,000 net Sec. 1231 gain.
  196. what is the tax rate percent for corp that make between 335,000 & 15M
    taxpayers with taxable income between $335,000 and $10,000,000 to pay a flat 34%. Taxpayers with taxable income between $10,000,000 and $15,000,000 pay a 35% marginal tax rate.
  197. when must an amended 1120x return be filed
    Form 1120X, an Amended Corporate Income Tax Return, must be filed within the time set by law for a refund to be allowed. A claim for refund generally must be filed within 3 years of the time the return was filed or 2 years from the time the tax was paid, whichever expires later.
  198. how are carryover losses treated
    The NCL is treated as an STCL in a carryover tax year. It offsets only a net capital gain, before the carryover, but it may not produce or increase an NOL
  199. what are the tax brackets for corporations
    • 335K-10M is 113,900 + 34%
    • 10M-15M is 3.4M + 35%
    • 15M-18.33M is 5.15M +38%
    • 18.33M is 6.416M + 35%
  200. where are foreign tax credits applied on a corp tax form
    eithere as a creid or a deduction
  201. what other taxes can the foreign tax credit be applied to for a corp
    gross tax lialbity after but is not creditable against the accumulated earnings tax or te personal holdings company tax
  202. what do qualified foreign taxes include
    foreign tax on income, war profits, and excess profits
  203. what is the formula to calculate foreign tax credit for a corp
    US income tax X foreign source taxable income / worldwide income
  204. what limitations is imposed on the numerator and denominator for the foreign tax credit
    regular taxable income with adjustmnets and must be applied seperatly to nonbusiness interest income
  205. what is the carryover for foreign tax credit
    back 1 year and forward 10 years
  206. what are stipulations for the foreign tax carryover
    • carryover is treated as foreign tax paid subject to the foreign tax limit
    • carryover may not be applied in any year when a deduction for foreign taxes is taken
  207. what types of corporations are not considered includable
    • tax-exempt corp
    • s-corp
    • foreign sales corp
    • insurance corp
    • real estate investment trust
    • regulated investment companies
    • domestic international sales corp
    • corps that claim Sec. 9.36 possessions tax credit
  208. when is IRS approval in regards to filing a consolidated return
    when election is made to terminate filing consolidated returns but is not needed to start filing
  209. what items are removed from taxable imcome and consolidated seperatly on a return
    • charitable contributions
    • dividends received and paid deductions
    • percentage depletion on mineral properties
    • NOL deductions
    • Sec 1231 gain and losses
    • capital gains and losses
  210. what is a brother-sister controlled group
    any two or more corporations if the stock of each is owned byt the same five or fewer people
  211. what tax benefits are shared amoung a controlled group
    • tax brackets
    • Sec 179 expensing minimum of $500K
    • AMT exemption base of 40K
    • general business credit of 25K
    • Accumulated earnings tax of $250
  212. what is the formula for corporate AMT
    • taxable income
    • + tax preference
    • +- adjustments
    • =gross tentative AMTI
    • +- ACE adjustment
    • -AMT NOL deduction
    • = Alternative minimum taxable income
    • - exemption amount
    • =alternative minimum base
    • X rate
    • -foreign tax credit
    • = tentative minimum tax
    • - regular income tax
  213. what are tax preference items for Corp. AMT
    • private activity bond interest - expenses to earning it (add back)
    • percentage depletion - any excee of dedcution calimed over adjusted basis
    • intangible drilling costs - add ane excess amortized over 10 years over 65% of net income from oil, gas, geothermal properties
  214. what are the tax adjustments for Corp. AMT
    • accelerated depreciation - MACRS to 150% declingin for personal property and real property is S/L @ 40 years and mid-month
    • installmenet sales - add any balance of current year gain (on disposition of stock) minus gain recognized under the installment method
    • long-term contracts - convert to percentage of completion method
    • subtract all amounts added to taxable income as a tax preference to the extent they increased the regular tax net operating loss
    • distributions from a trust or estate
  215. how do you compute the adjusted current earnings (ACE) for corp. AMT
    • ACE
    • -tentative AMTI (figure out in another question)
    • = Difference
    • X .75
  216. What adjustmetns are added or subtracted back to calculate tentative AMTI
    • organizational expendures amortized and deducted
    • 70% DRD attributable to <20% owned corps
    • life insurance proceeds on a corporate officer are added
    • installment method on nondealer is disregarded unless interest is paid
    • LIFO recapturefor excess of FIFO valuation over LIFO
    • deprecaiton is combied using the alternative depreciation system
  217. how are ACE adjsutments applied to corp. AMT
    • add ace adjustment if ACE>AMTI
    • subtract ace adjustment if ACE
  218. how is the AMT exemption calculated for a corp. AMT
    40,000 - ((AMTI - 150,000) X .25)
  219. how is the foreign tax credit cacluated for AMT
    • lower if foreign tax credit or
    • 90% of gross tentative AMT computed before ant AMT NOL deduction and foreign tax credit
  220. what is the rate for Corp AMT
    20%
  221. who is exempt from Corp AMT
    • has average gross receipts fo 5M or less for first 3 years
    • has average gross receipts of 7.5M or less for prior 3 years
  222. what are the different methods to calculating the estimated tax payments for a corp
    • 25% of tax liablity
    • annualization method
  223. how is the 25% of tax lialbity calucalted
    • 25% of the lesser of
    • 100% of the prior years tax or 100$ of the current years tax

    if estimated tax increased the amount should be reconciled and paid on the next estimated payment
  224. when is the annulaization estimation method used
    when income is is uneven in regards to inflow
  225. when is paying 100% of the prior years etsimated taxes not an option
    a corporation with 1M taxalbe income or more during any 3 prceding years
  226. how much is the estimated tax penalty
    the payment needed that is not paid is taxed at 5% (3% for individuals) and accrues from due date until the underpayment is paid
  227. when would an estimated tax penalty payment not have to be paid
    • tax lialbity on the return is less than 500 differencet
    • IRS waives the penalty
    • erroneous IRS notice to a large corp is withdrawn
  228. how are estimated payment refunds obtained
    if the overpayment is greater than 500 and greated than 10% of the corporations estimate of its tax liabiltiy
  229. what is the penalty for accumulated earnings tax
    15%
  230. how determines the accumulated earnings liablity
    IRS on an audit
  231. who is exempt from accumulated earnings tax
    • S-Corps
    • tax-exempt corps
    • personal holding corp
    • foreign personal holding corp
    • passive foreign investment companies
  232. what is the carryforward for AMT credit liablity
    forward indefinenttly
  233. The following information pertains to Wald Corp.’s operations for the year ended December 31, 2013:
    Worldwide taxable income

    $300,000
    U.S. source taxable income

    180,000
    U.S. income tax before Foreign Tax Credit

    96,000

    Foreign nonbusiness-related interest earned

    30,000

    Foreign income taxes paid on nonbusiness-related interest earned

    12,000
    Other foreign source taxable income

    90,000

    Foreign income taxes paid on other foreign source taxable income

    27,000
    What amount of Foreign Tax Credit may Wald claim for 2013?
    The Foreign Tax Credit limit is the proportion of the taxpayer’s tentative U.S. income tax (before the Foreign Tax Credit) that the taxpayer’s foreign taxable income bears to his/her worldwide taxable income for the year. The limit must be applied separately to nonbusiness interest income.

    Nonbusiness interest income computation:

    ($30,000 ÷ $300,000) × $96,000 = $9,600

    Other foreign source taxable income computation:

    ($90,000 ÷ $300,000) × $96,000 = $28,800

    Foreign taxes paid on the other income is less than the limit and fully creditable. The total credit is $36,600 ($9,600 + $27,000).
  234. how are first quarter estimated payments caluclated for a large corp
    1. For the first quarter, estimated payments of large companies (taxable income greater than $1 million) should be 25% of the lesser of 100% of the current year’s tax or 100% of the prior year’s tax.
  235. what is section 351
    no gain or loss be recognized if property is transferred to a corp by one or more persons solely in exchange for stock and immediately after such person has control over the corp.
  236. how is nonquaalified PS treated under section 351
    as boot received not coutned towered 80% owernship test
  237. when would boot be realiezed for section 351
    extent of money and FMV of other property (except stock) receveid in exchange
  238. when would a shareholder recognize gain for a liabilty assumed from property given to corp
    if it exceeds actual basis of the property contributed
  239. what is the shareholders basis in stock when property given in exchange for stock
    • actual basis in contributed property
    • - boot receivd (money, liability assumed, property recived @ FMV)
    • + gain recognized by shareholder
  240. what is the holding period of stock when property is transferred in exchnage for stock
    holding period of propertyy is added to the holding period of stock
  241. what is the basis of property for a corp. when transferred by shareholder for stock
    • actual basis in property to shareholder
    • + gain recognized by shareholder
  242. what is the calcuation to determine the value given to distributions from a corp.
    • money
    • +obligations FMV (Bond)
    • +property FMV
    • -related liabilities
    • =amount of distribution
  243. when is form 1099-Div required to be filed
    • paid gross dividends of $10
    • ade payments of $600 as part of liquidation
  244. when is a loss or gain recognized for a distribution from a corp.
    • no loss is realized
    • gain is realized as if the property were sold to the distributee at its FMV
  245. what basis does a shareholder take from a property distribution where AB>FMV
    FMV basis
  246. what is the gain recognized in the hands of a more than 50% shareholder distributee
    ordinary income
  247. what is the basis of distributed property to shareholder when liablity assuemd
    • if FMV is greate then FMV
    • if liability is greater then liability
  248. what is an extraordinary dividend
    dividend on stock held 2 years or less that exceeds 10% of either basis or the FMV of the stock
  249. what is the basis in extraordinary dividend
    basis in stock is reduced by the nontaxed portion of the extraordinary dividend (amount of DRD)
  250. when is a gain recognized for extraordinary dividend
    nontaxed portion of dividned exceeds the stocks basis
  251. when would a shareholder include a distribution of stock in gross income
    • distribution in lieu of money
    • disproporionante distribution
    • distribuion of PS
    • distribution of convertible PS
  252. what is a proportionate distribution
    shareholder allocates the aggregate basis in the old stock to the old stock and new stock in proportion to the FMV of the old and new stock
  253. what is the amount of taxable stock distribution when option is given for stock or property
    • greater of FMV of stock or
    • cash of FMV of other property
  254. when would stock redemption be trested as a sale (capital gains/losses) instead of dividends
    • redemption is not essentailly equivelant to a dividend
    • redemption is substantially disproportionate
    • distribution is in complete redemption of all of a shareholders stock
    • distribution is to a noncorporate shareholder in partial liquidation
    • distribution is received by estate
  255. what amout of gain would a corp. have to recognize on distributions for stock redemption
    gain is as if the property distributed were sold at FMV to the distributee immediately prior to the distribution
  256. what is substantial disproportionate and how is it calculated
    • amount received by shareholders is not the same proportion as their stock holdings
    • less than 50% of voting power of outstanding stock &
    • less than 80% of the voting & common stock before the redemption
  257. how are redemptions treated by an estate
    treated as a sale but the redeemed stock must be valued at more than 35% of the gross estate
  258. is a gain or loss recognized for partial and complete liquidation when distributing property
    • partial - recognize gain only
    • complete - recognize gain & loss
  259. for tax pruposes what is the definitno of reorganization
    meter change in form of investment rather than disposition of assets
  260. what are the different corp. reorganzation types
    • type A - merrger or consolidation
    • type B - stock for stock
    • type c - stock for assets
    • type d - division
    • type e - recapitalization
  261. when would a liquidating loss by a corp not be recognized
    Certain realized losses are not recognized when the distributee shareholder is related to the corporation. Applicable distributions include those of assets acquired within 5 years by a contribution to capital or a Sec. 351 exchange. Permanent disallowance of the loss results.
  262. what does Not essentially equivalent to a dividend mean
    Not essentially equivalent to a dividend means that there is a meaningful reduction in the shareholder’s proportionate interest in the corporation. Reduction in voting power is generally required.
  263. Vernon receives a truck from Berry Trucking Company as a distribution in complete liquidation. Vernon’s basis in the stock of Berry Trucking Company is $2,000. The fair market value of the truck on the date of the distribution is $30,000. There is a $15,000 loan on the truck, which Vernon assumed. What is the basis of the truck to Vernon?
    If a shareholder assumes a liability of the liquidating corporation or receives property that is subject to a liability, then the liability reduces the amount realized by the shareholder, thus reducing the shareholder’s gain or increasing the shareholder’s loss. Nevertheless, the shareholder’s basis for the property is the property’s fair market value, in this case $30,000.
  264. when giving property in a liquidating dividend what is the basis of the property
    Sec. 336(a) provides that a corporation should treat a complete liquidation as a sale using the fair market value. However, Sec. 336(b) requires that the fair market value used should not be less than any liability accepted by the distributee. Since Bluebird is transferring property with a liability of $76,000, which is higher than the $70,000 FMV, the $76,000 is used as the new FMV. Therefore, Bluebird Corporation recognizes a $24,000 gain ($76,000 new FMV – $52,000 adjusted basis).
  265. how many different types of stock can an S-corp have
    one class by variation in voting rights of that one class is permitted
  266. who ay not own stock in an s-corp
    partnerships & Corps
  267. how is a S-corp terminated for passive income
    3 consecutive tax years the corp has both subchapter C E&P and passive income is greater than 25% of gross receipts
  268. what does passive income include for a S-corp
    dividends, interest, royalties, rents, annuities and reduced by interst on AR for inventory sold and rents from lease under which significant serives are rendered to the lessee
  269. what corp tax credits is an S-corp exempt from
    • corporate income tax
    • AMT
    • AET (accumulated earnings tax)
    • PHC (persaonal holding corp)
  270. what items are stated seperatly for an S-corp
    • sec 1231 gain/loss
    • net short term capital gain/loss
    • net long term cap gain/loss
    • dividedns
    • charity
    • taxes paif to foreign country
    • tax exempt interest and related expense
    • invesment income and related expense
    • amounts previously deducted (bad debt)
    • real estate activity
    • sec. 139 deduction
    • credits
  271. what is included as passive activity for an s-corp
    rental eactivity or an activity of the corp in which the shareholder does not materially particiapte
  272. what order is retained earnings affected when a distribution from an s-corp occurs
    • aacumulated adjustment account (AAA)
    • previosuly taxed income (PTI)
    • accumulated earnings and profits (AE&P)
    • other adjsutment account (OAA)
    • stock basis
  273. how does tax exempt income from an s-corp affect retained earnings
    affects the other adjustment income and does not accumulated adjustmnet account
  274. how does a shareholders basis get affected when a distribution exceeds his basis and there is subchapter C E&P
    capital return to the extent of AAA then dividend income to subchapter C E&P
  275. what is the atax rate for passive income investment for an s-corp
    35% of excess net passive income
  276. what is the tax on the excess net passive income (ENPI) of an S corporation
    The tax on the excess net passive income (ENPI) of an S corporation is the ENPI times the highest corporate tax rate (35%). Thus, the tax is $35,000 ($100,000 × 35%)
  277. Magic Corp., a regular C corporation, elected S corporation status at the beginning of the current calendar year. It had an asset with a basis of $40,000 and a fair market value (FMV) of $85,000 on January 1. The asset was sold during the year for $95,000. Magic’s corporate tax rate was 35%. What was Magic’s tax liability as a result of the sale?
    An S corporation that, upon conversion from C to S status, had net appreciation inherent in its assets is subject to a built-in gains tax of 35% on net gain recognized (up to the amount of built-in gain on conversion) during the recognition period. Magic had $45,000 ($85,000 FMV in January 1 – $40,000 basis) of built-in gains at the time that Magic elected to be an S corporation. The tax on the $45,000 is $15,750 ($45,000 × 35%).
  278. The books and records of F, a calendar-year S corporation since 1987, reflect the following information for 2013:
    Accumulated adjustments account - 1/1/13

    $ 30,000
    Accumulated earnings and profits - 1/1/13

    75,000
    Ordinary income for 2013

    102,000
    F has only one shareholder, T, whose basis in F’s stock was $50,000 on January 1, 2013. During 2013, F distributed $150,000 to T. What is the amount of this distribution that should be treated as a capital gain by T?
    Distributions by S corporations with accumulated earnings and profits are governed by Sec. 1368(c). The portion of the distribution that does not exceed the accumulated adjustments account balance reduces the shareholder’s basis. The remaining distribution is treated as a dividend to the extent of accumulated earnings and profits. Any remaining distribution is treated as a recovery of the shareholder’s remaining basis in the S corporation stock, and a capital gain to the extent it exceeds such basis. At the end of 2013, F’s accumulated adjustments account will be $132,000 ($30,000 + $102,000) because of F’s 2013 income. T’s basis in the stock will be $152,000 ($50,000 beginning basis and $102,000 ordinary income from 2013). The first $132,000 of the distribution is from the accumulated adjustments account and will reduce T’s stock basis to $20,000. The remaining $18,000 of the distribution will be treated as a dividend. Because T still has a $20,000 basis for his stock, no capital gain results.
  279. Pages, Inc. (an S corporation) is owned by Martin and Steve. They share in the income and loss of the corporation on a 50/50 basis. In 2013, the corporation reported $90,000 in ordinary income and $12,000 of tax-exempt income. Each owner’s basis in his stock is $25,000. The corporation was previously a C corporation, and $30,000 in E&P remained on the books at the beginning of the year. Martin and Steve each received an $80,000 distribution from the corporation on December 15, 2013. What is the character of the distribution to Martin [assume the accumulated adjustment account (AAA) and other adjustments account (OAA) are zero on January 1, 2013]?
    The ordinary income will increase Martin’s share of the AAA to $45,000 and also increase his stock basis to $70,000. The tax-exempt income will increase Martin’s share of OAA to $6,000 and increase his stock basis to $76,000. The first $45,000 distributed to Martin comes from AAA, reducing AAA to $0 and his basis to $31,000. The next $15,000 distributed to Martin comes from E&P and is dividend income; Martin’s stock basis is not reduced. The next $6,000 distributed to Martin comes from OAA, is tax free, and reduces his basis to $25,000. The remaining $14,000 comes from stock basis, is tax free, and reduces his basis to $11,000.
  280. Jenny Corporation (an S corporation) is owned entirely by Craig. At the beginning of 2013, Craig’s adjusted basis in his Jenny Corporation stock was $20,000. Jenny reported ordinary income of $5,000 and a capital loss of $10,000. Craig received a cash distribution of $35,000 in November 2013. What is Craig’s gain from the distribution?
    The basis is increased by the ordinary income to $25,000. The $35,000 distribution is taken next and, since it exceeds the basis, there is a $10,000 gain. The capital loss is nondeductible because there is no basis left after the deduction from the distribution for Craig and it is carried over.
  281. what is the holding period of a partnership interest when ordinary income property or services is given for the interest
    day following the exchnage
  282. how does a partnership get the title of natural business year or seasonal
    if 25% of gross receipts are received during the last 2 months of each preceding 3 years
  283. what are seperatly state items for a partnership
    • ordinary income
    • rental activities and related expenses
    • guaranteed payments
    • ineterest and dividend
    • royalties
    • capital gains/loss
    • sec 1231 gain and loss
    • sec 179 deductions
    • foreign income tax
    • tax exempt income
    • distributions
  284. how are parnership allocations made if there is not an agreement in place
    according to their interests in the partnership
  285. how is a relief from liablity in a partnership treated
    distribution of money
  286. what ist he basis in a partnership when it is gifted
    donees basis after adjsutment for the donors distributive share of partenrship items up to the date of the gift
  287. what ist he basis in a partnership when it is inherited
    FMV
  288. when is a partnership return due
    on or before the 15th of the 4th month
  289. what is a service partnership
    A services partnership is one in which capital is not a material income-producing factor. In a family partnership, a family member is treated as a services partner only to the extent (s)he provides services that are substantial or vital to the partnership.
  290. what is a recourse and non-recourse liability
    A liability is a recourse liability if the creditor has a claim against the partnership or any partner for payment if the partnership defaults. A liability is a nonrecourse liability if the creditor has no claim against the partnership or any partners.
  291. An organization may qualify for exemption from federal income tax if it is organized and operated exclusively for one or more of the following purposes:
    charitable, religious, educational, scientific, literary, or testing for public safety.
  292. which organizations do not have to apply in writing to the IRS for exemption status
    other than an employee’s qualified pension or profit-sharing trust
  293. When the AQR partnership was formed, partner Acre contributed land with a fair market value of $100,000 and a tax basis of $60,000 in exchange for a one-third interest in the partnership. The AQR partnership agreement specifies that each partner will share equally in the partnership’s profits and losses. During its first year of operation, AQR sold the land to an unrelated third party for $160,000. What is the proper tax treatment of the sale?
    When determining the gain or loss allocable to each partner, you must first allocate any precontribution gain or loss (gain or loss that existed in the asset at the time it was contributed to the partnership but went unrecognized) to the contributing partner, followed by their proportionate share of the gain or loss. In this case, Acre contributed land with a built-in $40,000 gain ($100,000 FMV – $60,000 adjusted basis). Upon disposition, the partnership realizes a gain of $100,000 ($160,000 amount realized – $60,000 carryover basis). Of this gain, $40,000 is allocated to Acre as precontribution gain. The remaining gain of $60,000 is shared equally among the partners per the partnership agreement. Thus, Acre reports a total gain of $60,000 [$40,000 precontribution gain + ($60,000 remaining gain ÷ 3)] and the other two partners each report a gain of $20,000 ($60,000 remaining gain ÷ 3).
  294. On September 1, 2013, Julie’s basis in her partnership interest was $75,000. In a distribution in liquidation of her entire interest on that date, she received properties A and B, neither of which were inventory or unrealized receivables. On September 1, 2013, property A had an adjusted basis to the partnership of $35,000 and a fair market value of $75,000. Property B had an adjusted basis to the partnership of $15,000 and a fair market value of $25,000. Based on this information, what was Julie’s basis in property A immediately after the distribution?
    If a partner’s interest is liquidated solely through a distribution of partnership property other than money, no gain is recognized. If the partnership distributes property other than money, the partner’s basis in the partnership must be transferred to the distributed assets. When a liquidation occurs and the partner’s basis in the partnership exceeds the partnership’s basis in the distributed assets, the excess of the partner’s basis in the partnership must also be allocated among the distributed assets. Any basis increase required is allocated first to properties with unrealized appreciation in proportion to the respective amounts of unrealized appreciation inherent in each property (but only to the extent of each properties unrealized appreciation). Any remaining increase is then allocated in proportion to the properties’ fair market values. Property A is first assigned its basis of $35,000 and property B is assigned $15,000. Another $25,000 ($75,000 partnership basis minus $50,000 AB assigned to properties) must be allocated to the two properties. Property A is allocated $20,000 [$40,000 increase in FMV over $50,000 ($40,000 appreciation of A + $10,000 appreciation of B) total increase in FMV times $25,000]. Thus, property A is assigned a basis of $55,000 ($35,000 initial basis + $20,000 based on increase in FMVs).
  295. Betty contributed land with a $6,000 basis and a $10,000 FMV to the ABC Partnership in Year 1. In Year 2, the land was distributed to Sally, another partner in the partnership. At the time of the distribution, the land had a $12,000 fair market value, and Sally had a $30,000 basis for her partnership interest. What gain is recognized by Betty on the distribution? What is Sally’s basis for the distributed land?
    For property contributed to a partnership after June 8, 1998 that had a deferred precontribution gain or loss, the contributing partner must recognize the precontribution gain or loss when the property is distributed to any other partner within 7 years of its contribution [Sec. 704(c)(1)(B)]. The precontribution gain or loss that is recognized equals the remaining precontribution gain or loss which would have been allocated to the contributing partner if the property had instead been sold for its fair market value on the distribution date. Betty recognizes a $4,000 gain ($10,000 FMV at contribution date – $6,000 adjusted basis). The partnership’s $6,000 basis in the land is increased by the $4,000 gain. Sally takes a $10,000 basis for the land and reduces the basis of her partnership interest by a corresponding amount.
  296. Tracy has a one-fourth interest in the TANY Partnership. The adjusted basis of his interest at the end of the current year is $30,000. He sells his interest in the TANY Partnership to Roy for $50,000 cash. There was no agreement between Tracy and Roy for any allocation of the sales price. The basis and fair market value of the partnership’s assets (there are no liabilities) are as follows:
    The gain or loss on the sale of the partnership interest is a capital gain or loss, subject to long- or short-term treatment, depending upon the length of time the selling partner owned the interest in the partnership. An exception to this rule applies when the partnership owns unrealized receivables or inventory. In this case, the selling partner must allocate a portion of the sale proceeds to the unrealized receivables and to the inventory and, to that extent, will realize ordinary income. The unrealized receivables and the inventory are Section 751 assets, meaning $22,000 [($52,000 gain from inventory + $36,000 gain from unrealized receivables) × 1/4] is ordinary income. But the gain is only $20,000; thus, there is a $2,000 capital loss.
  297. What is the threshold of public support that generally forces a private foundation to terminate that status and become a public charity?
    Each domestic or foreign exempt organization is a private foundation unless it generally receives more than a third of its support (annually) from its members and the general public. In this case, the private foundation status terminates, and the organization becomes a public charity.
  298. what is considered a partners ordinary income
    1. A partner’s ordinary income is the portion of taxable income not required to be stated separately.
  299. what is considered a prinicpal receipt and disbursement of trusts and estates
    • gain on sale of property
    • replacement property
    • nontaxable stock dividends
    • stock splits
    • stock rights
    • liquidating dividends
    • 27.5% of royalties
    • principal payments on debt
    • capital expenditures (repairs & modifications)
    • fiduciary fees
    • tax on principal items
  300. what are key items of a simple trust
    • requires current distribution
    • requires no distrubiotn of the res (principal)
    • provides no charitbale contributions by the trust
  301. what are key items of a complex trust
    • accumulate income
    • provide for a charitable contributions
    • distribute amounts other than income
  302. how is principal income treated for a grantor trust
    taxed to the grantor
  303. when does a trust have to file a tax return
    if there is taxable income and gross income is $600 or more
  304. when is the tax return for a trust due
    15th day of the 4th monht
  305. how are lice insurance proceeds treated for a trust
    includible in value of gross esate by are not taxable
  306. how is income in respect to the decendent taxed for a trust/estate
    taxed as income if it received by the estate
  307. what fees are deductable in full for a trust or estate
    trustee fees/admin fees and tax return prep fees
  308. what happens to depreciation if id exceeds trust income
    allocated between the parties according to the instrument or proprotion as income
  309. how are expenses for tax exempt items treated for a trust
    not deductable
  310. what personal exemptions are allowed for trust
    • 600 for an estate
    • 300 for simple trust
    • 100 for complex trust
  311. what dedcutions are allowed for distribution of taxable inome from a trust
    simple trust - lesser of amount of distrubiton or distributable net income
  312. what is the formula to dertermin distributale net income
    • taxable income of fiduciary
    • + exemption
    • + tax exempt interest munes related expenses
    • - capital looses allocated to prinicpal
    • - capital gains allocated to principal
    • - taxalve stock dividends allocated to principal
    • - extraordinary dividends allocated to principal
  313. what is incomee in respect to the decendent
    all amounts to which a decedned was entitles as gross income but that were not includible in computing taxalbe income on the final return`
  314. what is considered income in respect to the decendent
    • salary earned prior to by not received before death
    • collection of AR by cash taxpayer
    • gain on sale of property not received before death
    • rent accrued but not received
    • interest on installment debt accrued by cash taxpayer
    • installment income recognized after death on a contract entered before death
  315. who reports income in respect to a decendent
    by the person receiving it and is fiduciary income if received by trust/estate
  316. what tax year can an estate and trust adpot
    • estate - any year
    • trust - calendar year (except wholly charitable or tax-exempt trusts)
  317. how is a beneficiary taxed for a simple trust
    • lower of trust income required to be distributed
    • beneficiarys proportionate share of the trust
  318. how is a beneficiary taxed for a complex trust
    taxed on amounts of fiduciary income required to be distributed plus additional amounts distributed to the beneficiary
  319. when is an estate tax return due
    An estate tax return is due 9 months after the date of death of the decedent. Accordingly, the return would be due on February 15, Year 3
  320. what capital loss can be deducted for a dead person final tax return
    A deduction for NOLs and capital losses must be taken on the final return or carried back to prior years. There are no carryforwards of unused losses and deductions, and the limitations on losses and deductions still apply in this situation. The capital loss deduction is limited to $3,000 in any year.
  321. what is deductible on a decendents final income tax
    A deductible amount is allowed against gross income on the decedent’s final income tax return only if the right to deduct it from the GE is waived. Medical expenses paid within 1 year of death may be deducted on either the estate tax return or, if properly waived, on the final income tax return (not both).
  322. what are Deductions that are allowable in computing the taxable estate of a decedent
    Deductions that are allowable in computing the taxable estate of a decedent include the marital deduction, charitable deduction, state inheritance taxes (after 2004), and deduction for payment of the decedent’s funeral expenses.
  323. where are admin expenses for deceased deductible
    Administration expenses (and debts of a decedent) are deductible on the estate tax return, and some may also qualify as deductions for income tax purposes on the estate’s income tax return. Double deductions are disallowed. A waiver of the right to deduct them on Form 706 is required in order to claim them on Form 1041.
  324. when would income go on a final return or estate return
    Income that a decedent had a right to receive prior to death but that was not includible on his/her final income tax return is income in respect of a decedent. The $10,000 is properly includible in the estate’s (fiduciary) income tax return because Ross was a cash-basis taxpayer and would not properly include income not yet received at the time of death in his final return. Since the money was owed to Ross (he had a right to receive it), it is an asset of the estate and must be included on the estate tax return also.
  325. what are the different committees that a bill must go through to process
    ways and means committee (house) > finance committee (senate) > if revisions then joint committee which goes back to house and senate > president
  326. what is the tax authority hierarchy
    private letter ruling, TAM>Revenue ruling, Revenue procedure >US tax district and federal claims court > treasury regulation, appellate court opinion > IRC, US supreme court > US constitution
  327. what are forms of legislative law
    comes from Congress and authorized by constitution and consist of IRC and committee reports (determines congressional intent)
  328. how are tax regulations created
    written by the office of chief council, IRS, and approved by the Secretary of the Treasury
  329. where are forms of the administrative law
    treasury department and includes regulations, rules, and procedures
  330. what is a revenue ruling
    official interpretation of internal revenue law as applied to a given set of faces and is intended to promote uniform application of tax laws by IRS employees
  331. where are revenue rulings published
    internal revenue bulletins
  332. what are revenue procedures
    interpretation of internal revenue law as applied to a given set of facts (admin and procedural matters)
  333. what is the internal revenue bulletin
    authoritative instrument of the commissioner of internal revenue for announcing official IRS rulings and procedures
  334. what are IRS publications
    explain the law in plain language and their advisors
  335. what is a technical advice memoranda
    requested by IRS area officers after a return has been filed in conjunction with an ongoing examination
  336. for an individual the estimated taxes should be:
    • 100% of prior year return (110% if AGI exceeds 150K)
    • 90% of current year tax
    • 90% of the annualized current year tax
  337. what is the minimum tax liability for failure to file estimated tax payments
    lesser of $100 or 100% of penalty
  338. when would an individual not have to pay estimated taxes
    • liability for the year is less than 1,000
    • no tax liability was incurred in the prior year tax
    • IRS waives it
  339. how is a dependent person taxed at on net unearned income
    taxed at parents marginal tax rate minus first 1,000 and greater of 1,000 of standard deduction or 1,000 itemized deduction or the amount of allowable deductions that are directly connected with the production of the unearned income
  340. when would cause an immediate assessment of tax deficiency without a 90 day notice
    • tax shown on a return filed by a taxpayer
    • mathematical and clerical errors in a return
    • overstatement of credits
    • tax for which assessment is waived
  341. what is the order when an assessment of deficiency (not paying enough taxes) occurs
    computerized exam or audit > 30 day letter >notice of deficiency (90 day letter) > A. tax court within 90 days >B. pay and file taxes >courts > supreme court
  342. what is the statue of limitations for an assessment of a deficiency
    3 years from the later of return date or filed date and Iris has 10 years following assessment to begin collection of tax by levy or court proceeding
  343. what happens if a petition is not filed with the US court after 90 day letter
    taxes may be assessed however filing suspends the 90 day period
  344. what happens if a person partially or fully pays a deficiency prior to mailing of the notice of deficiency letter
    deprives tax court of jurisdiction
  345. what is the statue of limitations for a claim for refund for worthless stock
    7 years from the date prescribed for filing
  346. what is the difference in the different tax planning techniques: timing, shifting, conversion
    • timing - accelerates or defers recognition of income and/or deductions
    • shifting - moving income from one family member to another or jurisdiction to another
    • conversion - converting income form a less favorable category to a more favorable one
  347. what is the difference between tax avoidance and evasion
    • avoidance - minimization of tax liability through legal arrangements
    • evasion - takes place once a liability has already been incurred
  348. what accounting methods is IRS approval not required
    • adopting LIFO inventory
    • switch from declining depreciation to straight line
    • making an adjustment in useful life of certain assets
    • correcting an error in computing tax
    • change from accrual method to installment method
  349. when does an inventory corp. not have to use accrual method
    if current year and preceding 2 years have average annual receipts of 1< or less
  350. when does a taxpayer have to allocate purchasing costs between COGS and inventory
    average annual gross receipts over 10M for 3 preceding tax years
  351. what accounting method is used for produced merchandise
    full absorption costing method
  352. what is the formula for the percentage of completion method
    • contract price
    • - total estimated cost of contract
    • = estimated total gross profits
    • X % completed
    • = gross profit recognized to date
    • - gross profit recognized in prior period
  353. what is the formula for the installment method
    • contract price
    • -COGS
    • =Gross profit
    • / Contract price
    • X current year receipts
  354. what is considered a substantial understatement of income tax of a tax return position
    Under the rules for disclosure of tax positions, a substantial understatement of income tax occurs when the understatement is more the larger of 10% of the correct tax or $5,000.
  355. what are the financial penalties for fraud for tax evasion
    Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.
  356. what is nexus
    Before a state can tax a nonresident, a minimum presence in the taxing state by the nonresident must be established. Substantial presence to tax the nonresident is known as nexus.
  357. what are the rules in regard to seizing a property for payments of taxes
    A levy is one method the IRS uses to collect tax that has not been paid voluntarily. A levy is the seizure of property in order to satisfy a tax debt. Sale of property must not be less than 10 days or more than 40 days from the time of giving public notice. The property may be sold by public auction or sealed bids. If the proceeds from the sale of the property seized are less than the total tax bill, the taxpayer is required to pay the balance.
  358. what time frame does a person have to pay penalties and interest when they sign an agreement
    If the taxpayer does not pay the additional tax when (s)he signs the agreement, (s)he will receive a bill that includes interest. If the taxpayer pays the amount due within 10 business days of the billing date, (s)he will not have to pay more interest or penalties. This period is extended to 21 calendar days if the amount due is less than $100,000. Jody paid the bill within 21 days of the date of notice and demand and thus will owe no additional interest
  359. When determine the formula for UDITPA formula what value is given to rented property
    Property rented by the taxpayer is valued at eight times the net annual rental rate
  360. In accordance with the UDITPA, which of the following is correct for allocating interest and dividends?
    Nonbusiness income means all income other than business income. It is allocated, not apportioned. Specific rules apply to nonbusiness income from rents, royalties, capital gains, interest, dividends, patents, and copyrights. Interest and dividends are allocated based on the taxpayer’s commercial domicile; i.e., they are taxed by the company’s “home state.”
  361. According to UDITPA (uniform division of income for tax purposes) what items are allocated based on location of property
    real property rent & royalty, real capital gains and losses, tangible capital gains and losses (at time of sale)
  362. According to UDITPA (uniform division of income for tax purposes) what items are allocated based on proportional use of commercial domicile
    tangible personal rents & royalties, patent and copyright royalties
  363. when are partnership tax returns due
    partnership tax returns are due April 15 with a 5 month extension
  364. how long are extensions given for exempt corps for filing tax forms
    exempt organizations get a 3 month extension for filing
  365. what is the major weakness of a sole proprietorship
    it cannot rais equity capital
  366. when does a partnership have to be in writing
    if the partnership lasts longer than 1 year
  367. what is a partnership by estoppel
    recognized when an actual partner does not exist
  368. what is a purported partner
    represented himself as a parnter or has conseted to such a representation
  369. how are losses and profits shared among a partnership
    if no agreement is made then it is shared equally
  370. what is a judgement creditor
    may attach the partners transferable interest only by securing a charging order from a court
  371. what is the designation of a person who inherited a partnership
    assigneed and not a partner
  372. the duty of loayalty for a partnership is limited to what
    • not competing with the partnership
    • not dealing with the partnership in the conduct or winding up of the partnerhsip business as a party with adverse interest
    • not exploiting a apartnership opportunity or secretly using a partnership assets for personal gain
  373. the duty of care in the conduct or winding of a patenrship is
    • not engage in
    • knowing violations of the law
    • inentiaonl wrongdoing
    • gross negligence
    • reckless behabior
  374. what is a joint venture
    created like a partnership generally for the purpose of a single transaction
  375. how is a limited partnership formed
    file with secretary of state
  376. how are losses shared in a limited partenrship
    shared on basis of tehir fair values of contribution
  377. when is a partner liable and not liable
    • liable for own malpractice and employees
    • not liable for negligent act committed by another partner
  378. what is the purpose of a corporation
    purpose permiteed by state statue and the articles of incorporation
  379. what is required of a corp to do business in another state
    certificate of authority
  380. how does a promoter secure potential investors
    stock subscription agreement
  381. how long is a preincorporated subscription agrrement irrevocable for
    6 months
  382. what date does a corp existence commence
    when artilces are filed with secretary of state
  383. what is a de jure corp.
    corp incorporated in strict compliance with the applicable state statue
  384. what is a de facto corp
    • statue under which the business could have incorporated
    • good faith but unsuccessful attempt to comply with it and
    • objective evidence that indicates an actual or attempted exercise of corporate power
  385. what is the doctrine of respndeat superior
    a principal may be liable for the agents torts but the wrongs must be committed within the scope of the agency
  386. when would a corporate viel be pierced
    • assets of corp and shareholders are commingled
    • corporate formatilites were ignored
    • crop was established for a sham purpose
    • two or more entities are relatedd corps and in practice do not maintain sufficient independent existence
    • corp. is inadequatly capitalized to carry on its intended business
  387. define:
    state capital
    capital surplus
    earned surplus
    • state capital - par value of par value stock
    • capital surplus - excess of contributed capital over par or state value
    • earned surplus - retianed earnings
  388. what is a voting trust
    trust where shareholders may transfer their shares to vote collectively
  389. what is the term of a voting trust
    limited to 10 years initially
  390. when is a proxy irrevocable
    when it is coupled with an interest
  391. how many days notice does a shareholder have to give to inspect the corp. books
    5 days
  392. what are ultra vires acts
    outside the purpose of forming the corp
  393. once a demand to sue for wrondoing has been made bya shareholder how long do they have to wait before they can file a shareholder derivative lawsuit
    90 days
  394. what do most states require that a shareholder prove before a derivative lawsuit can be filed
    • owned share at time of wrongdoing
    • written demand was made to directors
    • directors refused to sue
    • refusal was in bad faith
  395. what is the difference between an inside and outside director
    • inside = officers and full-time employees
    • outside - unaffiliated with the corp. except for stock ownership
  396. what is a quarom
    board meeting consisting of a majority of shareholders
  397. what are shareholder rights during a merger
    • provided a copy of the plan of merger
    • appraisal rights
    • 10 days notice if a short merger (90% controll by a corp)
  398. how has dissenters rights during a stock exchange
    • shareholdres of the acquiree
    • dissenters rights is being able to get cash or property for value of your stock
  399. what are reasons that a secretary of state would dissolver involuntarily a corp.
    • fail to file annual report
    • pay its franchise fees
    • appoiny or maintain a resident interest
  400. what is a judicial dissolution
    deadlock of board is harmful to the corp. or the directors actions are contrary to the best interest of the corp.
  401. what is the definition of quasi-public
    A quasi-public corporation is privately formed and for-profit. However, it is often heavily regulated because of its substantial effect on the public interest and its special privileges.
  402. what is an agency by estoppel
    person hols himself out as an agent and the alleged principal knows (or should have known) of the represetnation and fails to make an effective denial
  403. what is the difference between general, special, and durable power of attorney
    • general - authorizes agent to do anyhting that may be necessary to transact the principles legal affairs
    • special - authority for only specific transactions
    • durable - effective during a specific period of incapacity of the principal
  404. when do power of attorneys for general, special, and durable power of attorneys end
    • general & special - upon completion of item or incapacity of principal
    • durable - needs to be in writing and does not end
  405. what are the different types of agents
    • general - perfom all acts relevant to the purpose for which they are engaged
    • universal - conduct principals business for which they can legally delgate
    • special - particular transaction
    • del credere - guarantees obligations of a third party to the principal
  406. when can apparent authoirty not exist
    when principal is undiscolsed
  407. who does a subagent owe a fiduciary responsibility to
    both agent and principal
  408. define an agents duty of obedience, care and diligence, notification, and account
    • obedience - floow lawful explicit instructions of the principal
    • care and negligence - use care and skill of a resaonable person and avoid injury to the interests of the principal
    • notification - notify principal of info agent possesses
    • account - accoutn for money or property and not comming funds
  409. what are ways an agent may assume liablity of a contract
    • making the contract in his name
    • being a pary to the contrac with his principal
    • guaranteed the principals performance
  410. what is the definition of indemnify
    compensate for loss or hamr
  411. when would a princpal have a duty to indemnify an agent
    • agent acted as instructed in a legal transactions or
    • in a transaction the agent did not know to be wrongful
  412. what are the financial and occupational duties a principal owes an agent
    • financial - compenstation, reimbursement, indemnification
    • occupational - nonimpariment of agents performance,
    • general dury of care, disclosure of known risks, provision of reasonalbe safe working condition
  413. when is an undiscolsed princpal not able to ratify a contract set up by an agent
    • credit extended to third party
    • involves personal services of party
    • involves nondelegable duties
    • is a negotiable instrument signed by agent with no indicaiton of his status
  414. when a contract is ratified when is the contract considered started
    considered authorized at the time it was performed (agent set it up)
  415. what is vicarious liability
    actions of the agent for which the principal may be found liable
  416. an agency coupled with an interest is generally not terminated by what actions
    • revocation by the principal
    • death of the principal
    • loss of legal capacity of the principal
  417. what items would be considered illegal per se (arrangements deemed unreasonable without inquiry)
    • price fixing
    • division of markets
    • group boycotts
    • tying arrangement
  418. who are not eligible for workers comp
    • independet contractors
    • agricultural
    • domestic employees
  419. how many employees does a company have to have to fall under the civil rights act of 1964
    15 or more
  420. when does an employer have to follow FLSA
    $500K in sales or engaged in interstate commerce
  421. when do employter contributison become vested under the employee retirement income securiites act
    start 5 years and fully vest thereafter or gradually vest over a max of 7 years
  422. how many employees does a company have to have to comply with COBRA
    20 ore more workers unless it is a Federal government agencie or religious
  423. how long is a patent good for
    • utility (most common) has 20 year life
    • design (as opposed to invention) has 14 years
  424. how long are copyrights good for
    • authors copyright is 70 years
    • publishers copyright is earler of 95 yuears from publication or 120 from creation
  425. what are remedies available to a principal when an agent fails to perform a duty
    When an agent fails to perform a duty, the principal may (1) terminate the agency, (2) withhold the agent’s compensation, (3) recover secret profits, (4) impose a constructive trust on resources in the agent’s possession, (5) seek an injunction against breach, (6) obtain damages for breach of the agency contract, (7) seek reimbursement for liability to third persons caused by the agent’s misconduct, and (8) rescind certain contracts. A constructive trust arises by operation of law even though no actual trust agreement exists. For example, the principal might be able to obtain a court order requiring the agent to hold resources for the benefit of the principal even though the agent holds legal title.
  426. what is one o fthe main reasons for the clayton act
    The Clayton Act prohibits acquisition of stock or assets of another corporation if the effect may be to substantially lessen competition or produce a monopoly. The Department of Justice may attack mergers and acquisitions in their incipiency rather than waiting for the merger or acquisition to occur and then having to prove that it has had the harmful effect.
  427. what is the only requirement for workers comp
    The only requirement is that the employee be injured and that the injury arise out of, and in the course of, his/her employment. Therefore, workers’ compensation benefits are available only to those employees injured while working within the scope of employment.
  428. when is a person not able to be considered an interlocking directorare
    Section 8 of the Clayton Act prohibits interlocking directorates. Consequently, a person may not be a member of the board of directors of two or more competing corporations. Section 8 is applicable under the following conditions: (1) The firms are engaged in interstate commerce; (2) one has capital, surplus, and undivided profits totaling more than $27,784,000; and (3) the elimination of competition by agreement between the firms would amount to a violation of any of the antitrust laws. However, simultaneous service is not illegal if competitive sales are less than certain thresholds. Competitive sales are revenues from sales of one firm in competition with the other. Competitive sales of (1) either firm must be less than $2,778,400, (2) either firm must be less than 2% of its total sales, or (3) each firm must be less than 4% of its total sales.
  429. what are treble damages
    triple the damages
  430. what is an executory contract
    a contrat that is not yet fully performed
  431. what are the terms that must be in a contract
    • names of parties
    • subject matter involved
    • price and quantity (quantity can be missing)
    • time and place of performance (time can be missing)
  432. what is a primissory estoppel
    promise is given that the promisor should resasonable expect to induce action byt the promisee
  433. what is a quasi-contract
    contract implied by law that makes no promises and reach no agreemetn however one of the parties is substantially benefited at the expense of the ther party
  434. what is a contract of adhesion
    a weaker party only choice is to accept the terms impoaed by the stronger party or forgo the transaction entirely (rental agreement)
  435. what is unconscionability
    relates to inscupulous or unreasonable activity and the contract lacks fundamental fairness
  436. what is exupatory clause
    contractual terms that excuse one pary from liability for injury or damae caused by his acts
  437. what are the elements of fraud in a contract
    • false representation of a material fact
    • inente to mirepresent (scienter)
    • intent to induce reliance
    • justifiable reliacen by the innocent party of the misrepresentation
    • damage suffered by the innocent party
  438. what is construtive fraud
    arises from gross negligence and a misrepresentation may bt made with a willful and reckless disregard for its truth or falsity rather than actual intent to deceive
  439. what is fraud in the incudement
    occurs when defrauded party is aware of entering into a contract and intends to do so however they are deceived about a material fact
  440. what is fraud in the execution
    occurs when the signature of a party is obtained by a fraudulent misrepresentaiton that directly relates to the signing of a contract
  441. when would a party have to disclose facts in a contract
    • party has a fiduciary relationship
    • material fact is known by one party and the other could not reasonably discover it
    • person misstates an important fact and must now correct it as soon as he learns about it
  442. what is undue influence
    dominent party worongly exploits a confidential relationship to persuade a party to enter into an unfavorable contract
  443. what are voidabl reasons for a contract
    • fraud in inducement
    • negligent misrepresentation
    • innocenent misrepresentiation
    • mutaul mistake of fact
    • duress - threat
    • undue influence
  444. what are voiid reasons for a cotnract
    • fraud in execution
    • duress - physical force
  445. what contracts are contracts fall under the statue of frauds
    • marriage
    • perfromance over 1 year
    • sale of land
    • agreement of executor or an adminstrator
    • sale of goods for $500 or more
    • agreement to answer debt of another
  446. what items have to be in the written contract for statue of frauds
    • reasonable certain description fo the parties and the subject matter
    • essentail terms and conditions
    • description of the consideration
    • signatures fo the parties to be charged
  447. what prevails if words conflict with numbers in a contract
    words
  448. what is accord and satisfaction
    creation of a new contract and prior contract discharged
  449. what is novation
    a substituted contract that replaces a party to the prior contract
  450. what is the difference between subject to and assume a mortgage
    • subject to - not liable
    • assumes - liable for mortgage
  451. what common events would be a considered a commercial impractability
    shortgages caused by war, crop failures, or labor strikes
  452. what is frustration of purpose
    contract becomes valueless due to destruction by an intervening event that was not reasonably foreseen
  453. what are the difference between expectation, reliance, and restitution interest
    • expectation - expected benefit of the contract
    • reliacne - arises from action in reliace on the other parties duty to perform
    • restitution - party has an interest in revocering the value of the benefit that his performance conferred on the other party
  454. define the following damages
    nominal
    compensatory
    consequential
    punitive
    liquidating
    • nominal - breach proven but the nonbreaching party cannot prove actual damages
    • compensatory - place the unjured party in as good a condiotn as ifg the breaching party had not breached
    • consequential - reasonable damages that are foreseeable and in addition to compensatory damages
    • punitive - punishment
    • liquidating - penalties for not performing by a certain time
  455. For a contract to be legally binding, it must have what type of consideration.
    A basic requirement of a contract is legally sufficient consideration.
  456. Consideration does not exist if
    Consideration does not exist if

    • An existing duty was imposed by law, or
    • A person is already under contract to render a specified performance.
  457. With regard to an agreement for the sale of real estate, the statute of frauds
    An agreement for the sale of real property is within the statute of frauds. To be enforceable it must satisfy requirements of the statute: a written memorandum must name the parties, describe the subject matter, state the essential terms, recite the consideration, and be signed by the party to be charged. Other parties need not sign it
  458. what is an unconscionability saale
    a ones sided sale that is hockingly unfair
  459. when would a shipment of nonconforming goods not be a breach
    seller notifes buyer that goods offered only as an accomodation
  460. what is a tender offer
    unconditional ofer to perform with a current liablity to do so and if unjustly refused can sue for remedies for breach of contract
  461. what does risk pass to a buyers absent an agreement
    • from a merchant - take physical possession
    • from nonmerchant - place goods at the buyers disposal
  462. when does risk pass whne a warhouse or bailee is used
    • buyers receipt of a negotiable instrument document of title covering the goods
    • tender to the buyer of a nonnegotiable docuemtn covering the goods
    • if not document of tilte is involced tehn risk passes when bailee acknowledges buyers rights or sellers tender to the buyer written directions
  463. what is the difference betweem sale on approval and sale or return contract
    • sale on approval - buyer takes goods to use and may return even if the conform to contrct
    • sale of return - buyer takes the goods to resell and can return unsold items
  464. what is the difference betwee implied warranty of merchantability and warranty of fitness
    • merchantability - goods are fit for the ordinary purpose
    • fitness - buyer relies on seller to select suitable goods
  465. what warranty do all sellers make
    warranty of title - title is good, transfer is rightful, goods are free of liens
  466. how are warranties disclaimed
    • cannot disclaim an express warranty
    • implied can use certain language, buyers examination, course of dealing preformance or usage of trade
  467. what conditions must occur fro a buyer to recover goods from an insolvent sellet
    • goods identified in contract
    • seller is insoolvent within 10 days of receipt of first payment
    • tender of any upaid portion of the price is made and kept
  468. what is the difference between perfection of possession and control
    • possession - goods, negotialbe documents, tangible chattel paper, instruments money
    • control - investmnet property, electronic chattel paper, deposit accounts, registered security
  469. Under Article 2 of the UCC, a firm offer will be created only if the
    A firm offer is an assurance, in writing and signed by a merchant, that the offer will remain open. A firm offer remains open during the time stated, even if it is not supported by consideration. If no time is stated, the time is a reasonable time. But in no event may the period of irrevocability exceed 3 months.
  470. Winslow Co., which is in the business of selling furniture, borrowed $60,000 from Pine Bank. Winslow executed a promissory note for that amount and used all of its accounts receivable as collateral for the loan. Winslow executed a security agreement that described the collateral. Pine Bank did not file a financing statement. When was a security interest attached
    Attachment occurs when the security interest is enforceable against the debtor with regard to the collateral, barring an express agreement postponing attachment. The security interest is enforceable against the debtor and third parties when (1) value has been given by the secured party; (2) the debtor has rights in the collateral or can transfer them to the secured party; and (3) the debtor has authenticated a security agreement describing the collateral. An alternative to the debtor-authentication requirement is that one of the following has occurred in accordance with the security agreement: (1) The collateral (if not a certificated security) is in the secured party’s possession, (2) the secured party controls certain collateral (investment property, deposit accounts, chattel paper, or letter-of-credit rights), or (3) the collateral is a registered certificated security delivered to the secured party. Because Pine gave value of $60,000 and Winslow had rights in the accounts receivable, attachment occurred upon Winslow’s execution of the security agreement.
  471. what is a fee simple, restrive convenant, license, easement
    • fee simple - totality of ownership rights recognized by law because it includes the rights of possession, exploitation, and full ownership for life or in perpetuity
    • restrive convenant - promise included in an agreement that limits the use of real property or the building that may be erected on it. The promise is usually included in a deed.
    • license - revocable personal privilege that permits one party to enter and make some use of land in possession of another without being considered a trespasser. A license is informal. It is personal to the licensee and therefore not assignable.
    • easement - right of one person to legal entry onto, and limited use of, the land of another.
  472. what is a promissory note
    contains a promise that the maker promises unconditionally to pay a fixed amount of money, to the order of the payee or bearer on demand at a definite time
  473. what is a draft
    draft contains an order to an unconditional writtedn order by oner person (the drawer) to another person (drawee) to pay a fixed amount of money to a third person either identified or bearer
  474. what is the difference between a time and sight draft
    • time - payable at definite time in the future
    • sight draft - payable on demand (upon presentiaton to the drawee
  475. what is a trade acceptance
    time draft used by sellers as a means to extend credit to buyers of their goods
  476. what type of draft is a check
    • time draft - when postdated
    • sight draft - checks written other than postated
  477. what conditions must be presetn for an instrument to be negotiable
    • written and signed by maker or drawer
    • contan an unconidtional promise or order to pay
    • payable to order or bearer
    • payable on demand or at a definite time
    • not state any other undertaking or instruction
  478. what is a blank, special, restrictive, conditional, qualified endorsement
    • blank - identifies no particular payee
    • special - specifies person instrument is payable to (pay to, pay to order)
    • restrictive - restricts instrument even furhter (deposit only)
    • conditional - subjects endorsee to happning or nonhappening of a specified event
    • qualified - disclaims or limits contractual liability on instrument (without recourse)
  479. what defeneses is a holder subject to if transfers and instrument without endorsing
    real and personal
  480. when a holder consered a holder in due course
    takes the instrument in good faith, for value, without notice of dishonor of instrument, lateraion or unauthoirzed signature, and defense or claim
  481. how does aholder give value to an instrument
    • 1. promise has been performed or secruity interest in or lein on the instrument is acquired
    • 2. taking an instrument in payment of pre-existing claim
    • 3, issuing or transferring a negotaible instrument
    • 4. incurring an irrevocable obligation to a third party
  482. how is subject to a real defense and personal defense
    • real - assignor, holder, holder in due course
    • personal - assignor, holder
  483. who is primary liable for an instrument
    maker of a promissor note and drawee that accepts a draft
  484. who is secondarily liable for an instrumnet
    • drawer - when drawee refuses
    • endorser - drawee, maker do not pay
  485. what qualifies as a real defense
    • real defense (FABLE) -
    • forgery
    • alteration
    • bankruptcy
    • , lack of capacity,
    • execution fraud/extreme duress
  486. what qualifies as a personal defense
    • personal defense - (BUILD) -
    • breach of contract,
    • unauthorized completion,
    • inducement in fraud
    • lack of consideration,
    • duress
  487. what information does a wharehouse repceipt need to include
    • location of the warehouse
    • date of issue
    • dscription of the goods
    • person to whom the goods are to be delivered
  488. what is a bill of lading
    evidence of the receipt of goods for shipment
  489. describe artisan, mechanic, bailee, and tax lien
    • artisan - repariere or improver of personal property
    • mechanic - against real property
    • bailee - common carrier or warehouser
    • tax - payment of taxes to govt entity
  490. what is a writ of executiuon
    authroizes the sheriff to seize and sell specific nonexempt property to satisy judgement
  491. what are the requirements for involuntary bankruptcy
    • debtor as 12 or more cerditrs - 3 must filr with unsecured claims of 15,325
    • debtor has 12 or fewere creditors 0 1 may file with unsecured claims of 15,325`
  492. what types of bankruptcy are trustees required
    chapter 7 & 13
  493. what are the priorities for bankruptcy
    • domestic obligations,
    • admin expenses,
    • claims from ordinary course of business,
    • up to 12,425 for wages within 180 days,
    • employee benefit plans,
    • depositors of money for purchase of undelivered goods,
    • tax claims by govt,
    • intoxicated auto claims
  494. what entities canny be discharged from debt with chapter 7 bankruptcy
    partnership and corporations
  495. what are nondischargeable debts when chapter 7 bankruptcy
    • most taxes
    • debts incurred from basis of materailly false FS
    • debts from fruad
    • alimony, maintenance or child support awards
    • education loans to govt entity
    • govt penalties and fines
    • intaxicated accident
    • luxury goods on CC within 90 days of filinh
  496. what are ways a surety can get back their money
    • reimbursement - sue debtor for amounts
    • subrogation - entitles same rights a debtor has
    • exoneration - court comple a capable byt reluctant debtor to pay debt before the creditor collects from surety
  497. Under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code, certain property acquired by the debtor after the filing of the petition becomes part of the bankruptcy estate.
    A surety is primarily liable for the debtor’s obligation. A creditor may proceed directly against the surety upon default. In some states, a guarantor has secondary liability; the creditor must first proceed against the principal debtor. Only when a judgment is unpaid may (s)he proceed against the guarantor.
  498. On September 1, 2013, Julie’s basis in her partnership interest was $75,000. In a distribution in liquidation of her entire interest on that date, she received properties A and B, neither of which were inventory or unrealized receivables. On September 1, 2013, property A had an adjusted basis to the partnership of $35,000 and a fair market value of $75,000. Property B had an adjusted basis to the partnership of $15,000 and a fair market value of $25,000. Based on this information, what was Julie’s basis in property A immediately after the distribution?
    If a partner’s interest is liquidated solely through a distribution of partnership property other than money, no gain is recognized. If the partnership distributes property other than money, the partner’s basis in the partnership must be transferred to the distributed assets. When a liquidation occurs and the partner’s basis in the partnership exceeds the partnership’s basis in the distributed assets, the excess of the partner’s basis in the partnership must also be allocated among the distributed assets. Any basis increase required is allocated first to properties with unrealized appreciation in proportion to the respective amounts of unrealized appreciation inherent in each property (but only to the extent of each properties unrealized appreciation). Any remaining increase is then allocated in proportion to the properties’ fair market values. Property A is first assigned its basis of $35,000 and property B is assigned $15,000. Another $25,000 ($75,000 partnership basis minus $50,000 AB assigned to properties) must be allocated to the two properties. Property A is allocated $20,000 [$40,000 increase in FMV over $50,000 ($40,000 appreciation of A + $10,000 appreciation of B) total increase in FMV times $25,000]. Thus, property A is assigned a basis of $55,000 ($35,000 initial basis + $20,000 based on increase in FMVs).
  499. how long does a customer haver to make an objection under the fair credit billing act
    A customer has 60 days after receiving a bill to make an inquiry or objection. (under fair credit bililng act
  500. Debtors may pursue civil actions against agencies that engage in what type of practices
    Debtors may pursue civil actions, e.g., class action suits, against collection agencies that engage in abusive, deceptive, and unfair debt collection practices.
  501. when do mechanic liens attach
    The majority of states have statutes providing that mechanic’s liens attach when work first begins
  502. what is added to and deducted to determine the estimated tax liabiltiy
    A corporation is required to make payments of estimated tax liability in quarterly installments. The estimated tax liability is the sum of the regular income tax, AMT, and certain other taxes, reduced by corporate tax credits.
  503. where are admin expenses for a decendent
    Administration expenses (and debts of a decedent) are deductible on the estate tax return, and some may also qualify as deductions for income tax purposes on the estate’s income tax return. Sec 642(g), however, disallows a double deduction and requires a waiver of the right to deduct them on Form 706 in order to claim them on Form 1041.
  504. who are the primary government enforceres of the antitrust laws
    The Justice Department and the Federal Trade Commission are the primary government enforcers of the antitrust laws. But any private person (including individuals, corporations, etc.) whose business or property is injured as a direct result of a violation of antitrust laws may sue the violator. The private person also can recover treble damages under most statutes.
  505. what does the national labor relations act do
    The NLRA establishes the right of labor to organize and to bargain collectively with management. The act requires employers to recognize unions and bargain with them in good faith. It also prohibits unfair labor practices, such as discrimination against union members, refusal to bargain with unions, and interference with the rights of employees to organize. The act also established the National Labor Relations Board to settle labor disputes and take action against unfair labor practices.
  506. what information does a tax return preparer have to furnish with each tax return
    Treasury Regulations require preparers to sign all the returns they prepare and to include their identification numbers.
  507. what itemized deductrions are not subject to phaseouts
    Itemized deductions are subject to the phaseout for high income taxpayers. The phaseout applies to all deductions with certain exceptions including medical expenses, casualty losses, and investment interest expenses.
  508. what happesn if an exempt organzaation spends more on lobbying than their elected expenditures limit
    exempt Organizations exceeding an elected expenditure limit for lobbying activities are subject to an excise tax, not loss of exempt status.
  509. what is the phaseout for itemized deductions
    An individual whose adjusted gross income exceeds $300,000 ($150,000 if married filing separately) must reduce the aggregate of itemized deductions by the lesser of 80% of otherwise allowable itemized deductions or 3% of the excess. The overall limitation, however, does not apply to deductions for medical expenses, investment interest expenses, casualty or theft losses, or gambling losses (to the extent of gains).
  510. what are the requirements for different types of fraud
    • Intent to deceive is a necessary element of actual fraud.
    • Gross, not ordinary, negligence meets the scienter requirement.
    • Whether an accountant is liable for fraud depends on whether (s)he acted with scienter. Scienter means that the person making a representation knew that it was false at the time of making it or acted with a reckless disregard for the truth. The difference between actual and constructive fraud is that the scienter requirement for the latter is met by gross negligence (reckless disregard)

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