-
what does the Internal revenue code represent
codification of the federal tax laws of the US
2-1
-
what is the calculation to calculate the amount of personal taxes due
- gross income
- +- Adjustments
- =AGI
- - Deductions
- - Net Exemptions
- = Taxable income
- X Tax Rate
- = Tax Liability
- - Credits
- + Self Employment Tax
- +AMT
- - Withholdings
- -Prepayments
- = Tax Due
- 2-1
-
What is considered an adjustment
- I EMBRACED Education Health and Farmers
- Interest on student loan
- employment tax
- moving expenses
- business expense
- rent/royalty/flow through entity
- Alimony
- Contributions to retirement
- Early withdraw penalty
- jury duty pay
- Education
- Health Savings Accounts
- Farm income (Schedule F)
- 2-1
-
What goes on a Schedule A
- COMMITT
- Charitable Contributions
- Other Miscellaneous
- Misc. Expense
- Medical Expense
- Interest
- Taxes
- Theft Casualty
2-1
-
When must an individual file a tax return
- if income is greater than the sum of their personal exemptions plus their standard deduction or
- net self-employment earnings of $400 or more
- Individuals claimed as dependents on another taxpayers return and have any unearned income and gross income of 950
- anyone receiving advanced payments on the Earned Income Credit
- Kiddie Tax
- 2-1
-
What is the kiddies tax
- children who are under 18 years old or full time students under 24, must pay tax at their parents tax rate on unearned income of more than 1,900
- 2-1
-
When is an individual tax return due
April 15
2-2
-
How long of an extension is allowed for an individual tax return
-
What is allowed to be extended for individual filing an extension
filing only and does not include tax payment
2-2
-
When does interest start and end for late tax payments for individuals
Starts April 15 and ends when actual payment is made
2-2
-
what are the amounts of interest penalties for late tax payments for individuals
.5% for late payments and 5% for late filings or not filing
2-2
-
what is the max amount of penalties for late filings/payments
25% of net tax owed
2-2
-
what form is used to file an individual tax return extension
4868
2-2
-
what form is used to file an amendment
1040x
2-2
-
what is time frame an individual is allowed to file an amendment to their tax return
- later of
- 3 years of original tax return due date (including extensions)
- 2 years after actual payment of tax
2-2
-
what are the statue of limitations for the IRS to come after you on an individual tax return
- 3 years after later of due date of filing date (simple negligence)
- 6 years if total income is understated by 25% or more (gross negligence)
- unlimited for tax fraud or non-filing of return (fraud)
2-2
-
who uses the cash basis of accounting
- service type business not exceeding $10M including
- most individuals
- S-Corps
- individually owned partnerships
2-2
-
what entities are prohibited from using cash basis
- C-Corps with receipts exceeding $5M
- tax shelters
- certain trusts
- 2-2
-
when do individuals on a cash basis recognize income and deductions
- income - actually or constructively received
- deductions - disbursed or charged on credit card
2-3
-
what is included as gross income
- INSIST SIP DECAF
- interest
- net operating losses
- Scholarships
- injury awards
- stock options
- tax refunds
- social security benefits
- inheritance, gifts, and life insurance
- prizes and awards
- dividends
- earned income
- capital assets
- annuities and pensions
- foreign earned income benefits and annuities
- 2-3
-
When is income considered earned
when it is constructively received
2-3
-
what are different types of earned income
- LASTING JUG
- life insurance
- awards and prizes
- salaries/wages
- tips
- illegal drug money
- non-money form
- gambling
- jury duty
- unemployment
- group term life
2-3
-
when are tips considered earned
in the month the schedule is submitted.
- IE. Earned Dec but schedule submitted Jan.
- 2-3
-
when are premiums for group term life insurance considered earned income
- when premiums for group term life are over $50K
- 2-3
-
when are prizes and awards not considered earned income
under 400 and received for years of service
2-3
-
is health insurance considered earned income
-
when are scholarships taxable as income
- compensation of services and
- money spend of something other than tuition, books, or class supplies for degree seeking students
2-3
-
what interest is not taxable as income
- state and local municipal bond interest
- Series EE and Series I if redeemed for higher education and
- bought by taxpayer or spouse
- buyer at least 24
- redeem directly (not transferred to school)
- room and board do not qualify
- 2-3
-
what dividends are not taxable as income
- life insurance dividend - return of premium
- S-Corp
- stock dividends from common or splits
- liquidating dividend
- 2-4
-
what is tax rate for dividends
15% or 0% and after 2012 taxes at normal tax bracket
2-4
-
what injury awards are not considered income
- pain & suffering
- workers comp
- 2-4
-
what value is given to awards and prizes
-
what conditions must be satisfied for a prize/award to not be taxed as gross income
- no services required by recipient and
- selected without any action on recipients part and
- payment assigned by recipient to a governmental unit or charitable organization
2-4
-
when is social security excluded from gross income
- if provisional income is less than $25K.
- It provisional income exceeds $60K tax is subject to 85%
2-5
-
how much can you exclude as part of foreign earned income credit
95,00 of income earned in foreign country
2-5
-
how does a person qualify for a foreign earned income exclusion
- Bona fide residence test
- physical presence test
- 2-5
-
what is the bona fide residence test
- US citizen who is a foreign resident for an uninterrupted period that includes an entire year OR
- 2-5
-
what is the physical presence test
- US citizen present in a foreign country for at 330 full days in a 12 month period
- 2-5
-
what is taxable when getting a tax refund
- Federal - interest is
- state - interest is and refund is itemized on schedule A in PY
- 2-5
-
what is tax rate for long-term capital assets
- 15% if held for more than one year
- 0% if tax bracket is 10 or 15%
- 2-5
-
how much of a net capital loss is allowed against ordinary deduction for individuals
-
what is carry forward for net capital loss for individual
-
how much of a net capital loss is allowed against ordinary deduction for corporations
-
what is carry forward for net capital loss for corporations
- back 3 years and forward 5 years
- 2-5
-
what is carry forward for net operating loss
- back 2 years and forward 20 years
- 2-5
-
What is the name of schedule A and what goes into it
- itemized deductions
- personal and employee deductions
- 2-5
-
What is the name of schedule B
interest and dividend income
-
What is the name of schedule C and what goes into it
- profit and loss from a business
- employer expenses / 1099 income
- 2-5
-
What is the name of form 8949 and what goes into it
- capital gains and losses
- S/T & L/T investments
2-5
-
What is the name of schedule E and what goes into it
- supplementary income or loss
- Rental income
- Royalties
- Copyrights
- Oil/gas
- Patents
- Flow through entity
- 2-6
-
What is the name of schedule F
- profit and loss from farming
- 2-6
-
what is form 1116
Foreign tax credit
-
what is form 4562
depreciation and amortization
-
what is form 4797
- sale of L/T business property (not inventory or receivables)
- 2-6
-
what is allowable adjustment for student loan interest
-
what is allowable adjustment for self employment tax
- 50% of payroll taxes (FICA & Medicare)
- 1--% of medical insurance premiums
- 2-6
-
what is deduction from payroll taxes for FICA and Medicare
- FICA - 6.2%
- Medicare - 1.45%
- 2-6
-
when would medical premiums not be allowed as an adjustment
- when another member of the family has coverage through their employer
- 2-6
-
what qualifications must be met for moving expenses to be allowed as adjustment
- work must be at least 50 miles further from old home (each way)
- only direct costs are allowed
- meals, house hunting costs or temp living expenses are not allowed
- must work at least 39 weeks
- 2-6
-
what costs are allowed for business expense
- FAST HOG
- fifty percent of meals and entertainment
- all costs to run business
- similar to small corp.
- taxes paid by business
- hobby losses are not
- one hundred percent of travel
- gifts up to $25 per customer
- 2-6
-
how much is allowed as a deduction for promotional item for business expense
-
what is definition of passive activity
- any business venture in which the taxpayer doesn’t materially participate
- 2-6
-
what are the most common types of passive activates that a person can participate in
- limited partnerships interest
- all rental activity (if not a real state professional)
2-6
-
how are losses recorded for passive activity
- losses only to the extent of passive gains with unused carried forward until activity disposal
- 2-7
-
what entities are allowed to claim a passive activity
- individuals
- partnerships
- estates
- trusts
- closely held C-Corp
- personal service Corp
- 2-7
-
when can tax credits from passive activities offset taxes
- when it arises from passive activities
- 2-7
-
how are losses recorded for someone who materially participates in rental activity
- real estate person - losses treated as ordinary loss
- active participation - $25 K of losses as ordinary loss
-
what is phase out for active participation for real estate
- 50% reduction of excess of taxpayers modified AGI over 100K
- 2-7
-
when is rental income allowed to be excluded from gross income
- dwelling is rented for less than 15 days
- 2-7
-
how is rental income treated for a property that is also used for personal use
- rented more than 14 days or 10% of number of days rented - deductions are limited to gross rental income
- rented is not more than 14 days or 10% - all expenses allocate to the rental portion
- 2-7
-
what qualifications must be met to be considered alimony
- CANNOT
- cash only (not property)
- apart when payments are made
- not child support
- not designated as property settlement
- own return for payer and payee
- terminates on death of recipient
- 2-8
-
would payments for college qualify as alimony
-
what qualifies as earned income for retirement plan
- salaries and wages
- net self-employment
- alimony
- 2-8
-
how much is a person able to contribute to an IRA
-
what is the income cap for Roth IRA
- 122K or 183K if married
- 2-8
-
what conditions cause a traditional IRA to not be deductible
- individual participates in another pension or profit sharing plan AND
- AGI excess 68K or 112 married
- 2-8
-
what happens to IRA contributions if a spouse is a participant in another plan
contributions for no-participating spouse cannot be deducted if joint AGI excess 183K
2-9
-
when would early deduction from a IRA not cause a 10% penalty
- reached age 59.5
- medical expenses exceeding 7.5% AGI
- death or disability of participant
- first time purchase of home (10&
- 2-9
-
what is a Coverdell education savings account
- allows 2000 contribution made to beneficiary who is under the age of 18
- 2-9
-
how are Coverdell education savings monies withdrawn tax free
- pay elementary, middle, high school and college expenses
- 2-9
-
when does unspent money for Coverdell savings get taxed
- at age 30 of beneficiary unless transfer money to another family member of same generation
- 2-9
-
when would jury duty be entered into AGI
- when submitted to employer if employer reimbursed for it
- 2-10
-
what counts as qualified higher education and what is allowable deduction
- courses required by employer, by law, govt. regulation, or improve/maintain skills required in performing job
- $4,000
- 2-10
-
what form is used for health savings account deduction
-
what is the crop method of accounting
- cost of producing crop is deducted in year the crop income is realized
- 2-11
-
what income items go on schedule f
- raised livestock, produce & grains
- livestock and other items bought for resale
- 2-11
-
what expenses are allowed for farmers
- car/truck
- chemicals & pesticides
- depression and 179 depreciation
- feed purchased
- fertilizers
- seeds & plants
- reasonable wages paid to children, meals to feed workers
- 2-11
-
when do depreciation review farm income
11-Feb
-
what is the standard deduction if being claimed on another persons tax return
- greater of 950 or earned income +300 never to exceed regular standard deduction
- 2-11
-
when would a standard deduction be increased from normal
- if over 65 or blind
- $1,450
- 2-11
-
when is a charitable deduction allowed to be deducted on taxes
- if given cash or property and when charity receives the funds
- 2-12
-
what valuation is given to property for charitable contributions
- lower of tax basis or fair market value on date of contribution
- 2-12
-
what valuation is given to property for charitable contributions that is held for at least one year
- fair market value of long-term capital gains recovery
- 2-12
-
how much of a deduction is allowed for charitable contributions
- 50% of AGI or 30% for long-term assets
- 2-12
-
what is carry forward for charitable contribution
-
how much of a deduction is allowed for charitable contributions for corporations
-
what qualifies as an other miscellaneous expense
- gambling losses to extent to winnings
- estate taxes on income in respect to descendent
- 2-12
-
what qualifies as a miscellaneous expense
- BIT
- business expense as employee
- investment costs
- tax preparation/legal advice related to taxable income
- 2-12
-
what form is used for business expenses of an employee
- form 2106 in schedule A
- 2-12
-
what qualifies as a business expense
- A JAB CLUB
- AICPA and union dues
- job travel
- appraisal fees for charitable donations or casualty loss
- business mileage
- CPE/job education
- laptop
- uniforms
- business use of home
- 2-12
-
what is included as investment expense
- safety deposit box
- investment advisory fees
- newsletters
- and IRA custodial fees
- 2-13
-
what qualifies as medical expense for deductible expense
review HW problems for items
-
who can qualify for medical expense deduction
- taxpayer
- spouse
- dependents
- anyone who provides taxpayer over 50% of support
- 2-13
-
what interest is deductible
- investment interest
- mortgage loan interest
- 2-13
-
how much of mortgage loan interest is allowed be deducted
- acquisition indebtedness to 1,000,000
- home equity loans 100,000
- 2-13
-
how much is allowed for deduction of interest
- extent of reported net investment income on tax return
- carried forward indefinitely
- 2-14
-
what is definition of acquisition indebtedness
- loans used to acquire or construct the home as well as loans that replace previous acquisition indebtedness
- 2-14
-
What taxes are allowed be itemized
- personal property and real estate taxes
- state and local sales tax
- state, local, or foreign taxes
- 2-14
-
what does not qualify for taxes for deduction
- fees
- fines
- federal
- FICA
- gas
- excise
- 2-15
-
what is phase-out for itemized deductions
- misc. - 2%
- theft & casualty - 10%
- medical - 7.5%
- 2-15
-
how is loss measured for theft & casualty
- drop in fair market caused by event but is limited to the tax basis of asset
- 2-15
-
what is calculation for theft and casualty losses
- loss
- -insurance reimbursement
- -$100 per event
- -10% AGI
- 2-15
-
when can a child claim an exemption
- when dependent child is not claimed as personal exemption
- 2-15
-
what is requirement for dependent
- C-IRS Jack you
- Citizen
- income
- relationship or unrelated household member
- support
- no Joint return
- 2-16
-
What are citizen requirements for dependence
- US citizen
- resident of Mexico or Canada
- 2-15
-
what is not considered relative for dependence
-
what are different credits allowed for individual tax return
- FACE FED
- foreign tax credit
- adoption credits
- child tax credit
- education credits
- first-time homebuyer tax credit
- earned income credit
- dependent and child care credit
- 2-19
-
what is the amount of child tax credit
- 1,000 for children under 17
- 2-17
-
what is the dependent care credit based on
- smallest of
- actual dependent care expenses
- earned income
- 3,000 for one dependent or 6,000 for multiple dependents
- 2-17
-
what income is used for calculation of dependent care credit
- earned income is based on lower-paid spouse
- unless spouse in school and income based on the spouse who is gainfully employed
- 2-17
-
what is the amount allowed for the adoption credit
- first 13,360 of costs and carry forward for 5 years
- 2-18
-
what are two different types of education credits
- American opportunity tax credit
- lifetime learning credit
- 2-18
-
what is the amount of the tax credit for the American opportunities tax credit
- applies to first four years of post secondary school
- 100% of first 2,000
- 25% of next 2,000
- per student
- 2-18
-
what is the amount of the tax credit for lifetime learning credit
- applies to all other years of education
- 20% of first 10,000
- per family
- 2-19
-
what are limitations for lifetime learning and American opportunities credit
- applies to only tuition and fees
- credit is not available to taxpayers over a certain AGI
- credit cannot be claimed on the tax return of the dependent
- cannot claim both credits at the same time
- 2-18
-
what is the maximum investment income a person can have to still qualify for earned income credit
-
what amount is allowed for the first-time homebuyer tax credit
- lesser of 8,000 or 10% purchase price
- 2-19
-
what form are estimated tax payments made
-
when are estimated tax payments due for individual taxpayers
- months 4,6,9
- and Jan 15
- 2-19
-
when would an individual be subject to underpayment tax penalty
- balance due on the tax return is greater than 1,000 by April 15
- 2-19
-
how can an individual avoid the underpayment penalty for employment tax
- withholding & estimated taxes excess 100% of prior year or 100% if taxable income is over 150,000 in PY
- 90% of current year tax liability is paid
- 2-19
-
what is the penalty for underpayment for estimated tax payments
- filing - 5% per month limited to 25%
- payment - .5% per month
- 2-19
-
what is an accuracy related penalty
- penalty of 20% if underpayment of employment taxes is attributable to negligence or disregard of rules
- 2-20
-
what is the calculation for alternative minimum tax for individuals
- AMT
- regular taxable income
- +- adjustments and preferences
- =AMTI before exemption
- - exemption
- =AMTI
- X tax rate
- =tentative minimum tax
- - regular tax
- =amt
- 2-21
-
what are different adjustments for AMT
- SIMPLE PIE
- standard deduction
- interest on home equity loans
- medical expenses under 10%AGI
- personal and dependent exemptions
- local and state income taxes, all property taxes and sales tax
- employee business expense, tax prep and investment expense subject to 2%
- 2-22
-
what are preferences for AMT
- PIE
- private activity bond interest
- incentive stock options
- excess depreciation on personal property
- 2-22
-
what is the 1933 Federal Securities Act concerned with
- original issuance of securities intended for sale to the public
- 3-1
-
what is the 1934 Securities exchange Act of 1934
- provides ongoing reporting requirements and focuses on secondary offerings of securities and regulates purchases and sales after initial issuance
- 3-1
-
what is the SEC responsible for
- administering federal securities laws
- regulating brokers
- issuing rules on work papers and other records
- ability to de-list any issuer
- 3-1
-
what parts make up a registration statement for being able to issue securities
- prospectus
- detailed information about securities being issued
- 3-1
-
what is a prospectus
- summarizes:
- historical company information
- discusses risks involved
- 3-1
-
what is the detailed information about the securities being issued that is part of registration statement
- basin information:
- names & addresses & amounts of securities held by directors, officers, underwriters and shareholders with at least 10% of stock
- intended used of the proceeds
- companies debt
- companies operating history and pending litigation
- financial information:
- audited balance sheet (not more than 90 days old)
- audited pal (for previous 5 years)
- 3-2
-
how long does it take for the SEC to deem a registration statement complete
-
what is a red herring
- issuance of preliminary prospectus
- 3-2
-
what does a red herring contain
- prospectus that has been filed but missing certain unavailable information
- 3-2
-
what are tombstone ads
- announces potential investment and how to acquire prospectus
- 3-2
-
is a tombstone ad an offer to sell
-
what is shelf registration
- requires a company to periodically update the prospectus, but allows sales and resale to be continuous for an indefinite period of time.
- 3-2
-
who is a shelf registration not available to
-
what are blue sky laws
- state adopted security laws
- 3-2
-
what applicable offerings require a registration statement and a prospectus made available
- SPIN
- securities offered
- public issue
- interstate commerce
- no other exemption is available
- 3-2
-
what are the different exemptions were a securities registration statement is not required
- ACID BRAINS
- regulation A
- commercial paper/casual sale
- intrastate
- regulation D
- brokerage transactions
- regulated industries
- agencies of the Gov..
- insurance contracts/policies
- not for profit
- stock dividends and splits
- 3-3
-
what is commercial paper
- notes and bonds that mature within 9 months and used for commercial purposes
- 3-3
-
what is regulation A
- exemption for offerings that raise up to $5M over a period not exceeding 12 months
- 3-3
-
what are requirements for regulation A
- SEC notified within 15 days of first sale
- offering circular provided to all prospective investors
- 3-3
-
what is an offering circular
- less extensive than prospectus and information does not need to be audited
- 3-3
-
what is a casual sale
- sale by persons not connected with the issuing company
- 3-5
-
what is required for intrastate offerings to be exempt
- company does at least 80% of business operations in a single state
- securities are offered exclusively to residents of that state
- the investors agree not to resell their securities to non-residents for at least 9 month
- 3-5
-
what are the different types of regulation D exemptions
-
is advertising allowed for regulation D rules 504, 505, 506
- only for 504 and is to non-accredited investors
- 3-4
-
what is time frame that SEC must be notified of a sale for regulation D rules 504, 505, 506
- 15 days after first sale
- 3-4
-
when and who is reselling allowed for regulation D rules 504, 505, 506
- 504 - resale to non-accredited investors is allowed
- 505, 506 - no resale for 2 years
- 3-4
-
what max amount of offerings for regulation D rules 504, 505, 506 and what is the time frame
- 504 - 1M w/I 12 months
- 505- 5M w/I 12 months
- 506 - unlimited w/I unlimited amount of time
- 3-4
-
how many investors are allowed for regulation D rules 504, 505, 506
- 504 - unlimited
- 505 - unlimited accredited and less than 35 non-accredited
- 506 - unlimited accredited and less than 35 non-accredited where non-accredited needs to be represented by accredited investor
3-4
-
what financial information needs to be given to investors for regulation D rules 504, 505, 506
- 504 - none
- 505 - audited balance sheet to non-accredited
- 506 - audited balance sheet to non-accredited
- 3-4
-
for regulation D rules 504, 505, 506 which are allowed if required to report under 1934 act
- 504 - not
- 505, 506 - are allowed
- 3-4
-
who are causal sales not available to
- issuers
- underwriters
- dealers
- directors
- officers
- owners with at least 10% of any class of shares
- 3-5
-
if you are exempt from 1933 act are you exempt from 1934
-
when is a SEC S-1 (registration statement) needed
- listed or traded on national exchange OR
- at least 10M in assets and 500 shareholders
- 3-6
-
what is required disclosure for S-1
- names of officers and directors
- nature of business
- financial structure of firm
- any bonus and profit sharing provisions
- 3-6
-
what are forms:
10k
10q
8k
proxy statement
- 10k - annual comparative audited financial statements
- 10q - quarterly unaudited (reviewed) financial information
- 8k - due after key events
- proxy statement - indication and objective discussion of matters to be voted on
- 3-6
-
when are the following forms due:
10k
10q
8k
- 10k - 60 days for large accelerated filers, 75 days for accelerated filers, 90 days for all others
- 10q - 45 days after quarter end
- 8k - 4 days after event
- 3-6
-
what is the difference between a large accelerated filer and an accelerated filer
- large - 700M of outstanding stock
- accelerated - 75-700M of outstanding shares
- SEC website
-
what is a tender offer
- attempt to but 5% or more of a class of stock at a specified price
- 3-7
-
who must file a tender offer with the SEC and what must be shown
- person wishing to acquire the stock
- must be shown:
- source of funds
- amount of stock owned
- price offered for shares
- future plans for the company
- 3-6
-
what happens if a director, officer or 10% shareholder sales stock purchased within 6 months
- return the profit to the corporation
- 3-6
-
what is a proxy solicitation
- right to vote someone's shares at a shareholder meeting
- 3-7
-
what is the fine for an officer of a company who makes certification while knowing it does not comply with SEC requirements
- 1M of fines or imprisonment for 10 years
- 3-7
-
what does the Sarbanes-Oxley do with regards to loans
- illegal for issuer to give various types of personal loans to or for any executive officer or director
- 3-7
-
when would an executive have to forfeit bonus
- under Sarbanes Oxley must forfeit if an earnings restatement when misconduct was present
- 3-7
-
what is the most common lawsuit against auditors
-
who can sue for breach of contract
- anyone in privity
- intended 3rd party beneficiary (named in contract by client)
- 4-1
-
what is the definition of privity
- person whom you have a contract with
- 4-1
-
who is the plaintiff of a case
person suing
-
who is the defendant in the case
person who is being sued
-
what must the plaintiff prove in lawsuit for breach of contract
- MILE
- material misstatement or omission
- info was the proximate cause of harm
- loss/damages financially
- error - caused by breach or non-performance)
- 4-1
-
what is the most common general standard of an auditor that a person will sue for breach of contract
due professional care
4-1
-
what are the defenses by the accountant for breach of contract
- didn’t breach or it was fully performed under the contract terms
- 4-1
-
what is negligence in regards to auditing
- accountant has a duty in the performance of an engagement to exercise due professional care expected of an ordinarily prudent CPA
- 4-1
-
who can sue an auditor for negligence
- anyone in privity
- anyone known or foreseen by CPA (ex. Shareholders)
- 4-2
-
who cannot sue an auditor for negligence
- states that follow the ultramares decision
- 4-2
-
what must plaintiff prove for negligence
- MILE
- material misstatement or omission
- info was the proximate cause of harm
- loss/damages financially
- error
- 4-1
-
what errors must be proven for negligence
- absence of due care (carelessness)
- lack of due diligence
- negligence (NEG)
- ___Nondisclosure of info to client
- ___Errors previously discovered not corrected
- ___GAAS/GAAP not followed
- 4-2
-
what is the ultramares decision
- if a person is not in privity with an auditor they cannot sue
- 4-2
-
what is the defense of an auditor for negligence
- followed GAAS
- lack of privity (useless against client or intended 3rd party)
- 4-3
-
what standards guides a CPA's duty of due care
- state and federal statutes
- court decision
- contracts with the client
- GAAS & GAAP
- customs of the profession
- 4-3
-
what is the definition of fraud
-
what are types of fraud
- actual fraud
- constructive fraud (gross negligence)
- 4-3
-
what is the definition of actual fraud
- making false statements with knowledge of their falsity
- 4-3
-
what is the definition of constructive fraud
- making false statements with a reckless disregard for truth
- 4-3
-
what must a plaintiff prove for fraud
- MILE
- material misstatement or omission
- info was relied upon
- loss/damages financially
- error - reckless or intentional misconduct (actual/constructive fraud)
- 4-4
-
what is the defense of an auditor for fraud
- audit performed under GAAS
- 4-4
-
who is liable for damages under section 11 of the 1933 act
- anyone who signed a registration statement
- 4-5
-
what must the plaintiff prove in lawsuit under 1933 act
- M.L.
- material misstatement
- loss was suffered
- 4-5
-
what damages are awarded for 1933 act
- difference of amount paid for stock and market value or sales of proceeds if sold
- 4-5
-
what is the defense of an auditor under 1933 act
- due diligence
- plaintiff had knowledge of misstatement
- 4-6
-
what is statue of limitations for a lawsuit to be brought against an auditor for 1933 act
- must be brought within 1 year after discover and within 3 years from the offering date
- 4-6
-
what is the common source of liability for 1934 act
- section 10(b) and rule 10(b)-5 commonly known as the anti-fraud provision of the act
- 4-6
-
what must plaintiff prove under 1934 act
- MILE
- material misstatement
- info was relied upon
- loss was suffered
- error - scienter
- 4-6
-
what is scienter
- fraud but it is held in federal court
- 4-6
-
what court is common law heard in
-
what is defense of an auditor for 1934 act
- conformity to GAAS
- lack of intent to deceive
- 4-7
-
what is the violation for 10b-5
- civil damages and/or criminal damages
- 4-7
-
what is common law
- legal system that relies on precedent
- WIKIPEDIA
-
how test are required under the 1955 private securities act
- RIG
- related-party transactions
- illegal acts
- going concern
- 4-7
-
what would cause a penalty assessed to a paid tax preparer
- fails to sign the return and provide the appropriate federal ID number
- fails to provide a copy of the return to the client and retain a copy for the time specified by law
- negotiates or endorses a clients tax refund check
- 4-8
-
what would cause a paid tax preparer to be held liable by the client
- fails to provide the client the completed return to allow a timely filing
- fails to advise the client of tax elections that would have provided the client with substantial tax savings
- 4-8
-
what are exceptions to keeping work papers confidential
- valid subpoena
- IRS administrative subpoena
- court order
- quality control peer review
- where disclosure is in compliance with GAAS or GAAP
- permit electronic preparations or submission of the taxpayers return
- 4-9
-
what are criminal violation of the internal revenue code
- willfully preparing a false tax return (perjury)
- assisting others to evade taxes (tax evasion)
- 4-9
-
under the racketeer influenced and corrupt organizations what is considered criminal liability
- accountant is affiliated with a business or accounting firm involved in racketeering
- an enterprise that has committed any two crimes within 10 years
4-10
-
what does racketeering consist of
- ELF MOB
- embezzlement
- laundering money
- federal securities fraud
- mail fraud
- organized crime
- bribery
- 4-10
-
what type of damages can be awarded under the racketeer influenced and corrupt organizations act
- treble damages - triple amount of damages
- 04-10
-
how often do paid tax preparers need to renew their preparer tax identification number
-
what is a realistic possibility standard
- 1/3 likelihood being sustained on merits (used for taxes)
- 5-1
-
what is a reasonable basis standard
- 20% probability of being sustained on its merits
- 5-1
-
what is a more likely than not standard
-
how can a penalty for a tax preparer be avoided
- adequate disclosure of the questionable position on the return basis for the position
- showing that there was a reasonable basis for the position
- 5-1
-
what is the minimum position a CPA should recommend to take on a tax return
-
when would a CPA make inquiries regarding a tax return
- if information appears incorrect, incomplete, or inconsistent
- 5-3
-
what tax documents should a CPA refer to when feasible
-
when would the use of estimates be allowed on a tax return
- if it is impractical to obtain exact data
- estimated amounts appear reasonable
- 5-3
-
when would a CPA notify the IRS of an error in a past return
- only with clients permission or
- required by law
- 5-3
-
how should a CPA act if a prior return has an error regarding the client
- wait to see how the client responds to the error to see if a professional relationship will continue
- 5-3
-
who may practice before the IRS
- any CPA who is not currently under suspension or disbarment from practice
- 5-4
-
what is a contingent fee
- fee based on results or a percentage of fees saved on a tax return
- 5-4
-
when is a contingent fee allowed
- judicial proceedings arising from IRC
- examination or challenge of:
- original tax return
- amended return if taxpayer received written notice from IRS within 120 days
- 5-5
-
when would a CPA be allowed to negotiate or endorse a tax return check
-
-
when would a CPA be subject to censure, suspension, or disbar when preparing a tax return
- practitioner is shown to be incompetent or disreputable
- intent to defraud
- willfully and knowingly misleads or threatens a client
- 5-6
-
who maintains the requirements for receiving a CPA and maintaining CPE
- state board of accountancy
- 5-6
-
who does the IRS work for
- US department of treasury
- 5-6
-
what does the internal revenue code govern
- income taxes
- payroll taxes
- gift and estate taxes
- excise tax
- 5-6
-
what disciplinary actions is available to the IRS
- civil penalties (prohibit practice or impose fines)
- criminal penalties (preparing fraudulent returns or making false statements)
- 5-7
-
who approves PCAOB pronouncements
-
who are the board members of PCAOB
- 5 members of which 2 are CPAS and all are appointed by SEC
- 5-7
-
who do public accounting firms need to register with to perform audit functions
-
how often does the PCAOB perform peer reviews
- every year if more than 100 audit reports annually
- every 3 years if under 100 audits performed annually
- 5-7
-
what does the PCAOB board do
- establish audit standards
- quality control and standard and ethic standards in preparation and issuing audit reports
- inspects, investigates, and disciplines public accounting firms
- 5-7
-
who is required to review all audit reports
-
what authority does the PCAOB board have
- suspend auditors
- revoke registration of accounting firm
- monetary penalties
- 5-8
-
what are monetary penalties the PCAOB may charge
- 100K for individual or 750K if intentional breach
- 2m for an entity or 15M if intentional breach
- 5-8
-
how is the PCAOB board funded
- fees imposed upon public companies
- 5-8
-
what functions is a public accounting firm not allowed to do for audit clients
- I LAMB BASH
- internal audit outsourcing reviews
- legal services and expert services unrelated to the audit
- appraisal or valuation services, fairness opinions
- management functions
- bookkeeping or other services related to accounting records
- actuarial services
- system design or implementation
- human resource functions
- 5-8
-
how often do audit partners have to change
-
what is the audit committee responsible for
- hiring, retaining, and firing the audit firms
- compensation and oversight of any audit work
5-8
-
when would an audit firm not be allowed to perform an audit
- if CEO, controller, CFO, CAO or any person serving in the equivalent capacity was employed by audit firm during one year period prior to audit
- 5-8
-
who is responsible for a companies internal controls
-
what is management required to report to officers with regard to internal controls
- all significant internal control deficiencies
- 5-8
-
what is the claw back policy
- executives are required to forfeit a bonus or incentive based pay or profits from the sale of stock received in prior 12 months prior to an earnings restatement
- 5-9
-
what are characteristics of a partnership
- TUUNEL
- transfer of ownership required agreement
- under RUPA partnerships are separate legal entity
- unlimited liability of partners for partnership debt
- not a taxable entity
- ease of formation, can be very informal
- limited duration
- 6-1
-
what is meant by a partnership is a legal entity
- may sue and be sued
- may own property in partnership name
- 6-1
-
what are basic rights of partners in a partnership
- profits
- property
- participation (management right - vote/make contracts/debt)
- 6-1
-
what is a partnership interest
a partner has an equal share of the profits and surplus generated by the business
-
of the basic rights for partnership what rights are transferable
-
what happens to a partnership if a property is purchased with partnership funds
- property belongs to the partnership.
- 6-1
-
what does management right mean to a partner
- has a right to participate in the management of the business
- has a right to inspect books
- make contracts and vote on partnership action
- 6-2
-
what are the different ways a partnership can be formed
-
when would a partnership be required to be in writing
- GROSS
- goods sold over $500
- real estate sales
- over one year required to perform contract
- surety ship
- statements in consideration of marriage
- 6-2
-
what would cause a implied partnership to be formed
- when two or more persons share profits from a venture
- 6-2
-
how would a person show that a partnership was not formed
- partner does not use partnership property and they do not participate at the management of the business
- 6-2
-
what names can be used for partnership and what forms need to be formed
- can use names of current and former partners without approval
- a fictitious name would need a fictitious name statement given to the appropriate government agency
- 6-2
-
what are the different types of authority
- actual
- apparent
- unauthorized action
- 6-2
-
what are the different types of actual authority
-
what are the differences between express and implied
- express - explicitly states person has authority
- implied - assigned tasks which required authority to carry out duties
- 6-2
-
what is implied authority
- good faith 3rd party reasonable assumes you have authority
- 6-2
-
when would an unauthorized transaction cause a partnership to be liable
-
what must occur for an unauthorized action to be ratified
- principal (partnership) must be fully disclosed
- must know details of contract
- must ratify before 3rd party withdraws
- 6-2
-
what contracts would actual authority be required
- ASAP
- admitting a new partner
- selling or pledging property
- admitting or submitting a legal claim
- promising to pay debts of another
- 6-3
-
what percent of consent is required for a new partner to be admitted into a new partnership
-
what is the reasoning for unanimous decision for admitting a new partner
- each partner has agency power and is entitled to share of the profits
- 6-2
-
can a partner sell property or inventory without another all other owners consent
- property - no
- inventory - yes
- 6-3
-
what are the fiduciary duties of partners
- duty of loyalty
- duty of care
- partner refrains from competing with the partnership
- partners have a duty of good faith and fair dealing in the discharge of their duties
- 6-3
-
what does duty of care refer to for a partners fiduciary duty
- refrain from engaging in gross negligent or reckless conduct, intentional misconduct or knowingly violate the law
- 6-3
-
what are/aren't partners liable for in a partnership
- joint & several liable for contracts and debts
- jointly and severally liable for torts
- not liable for crimes by other partners
- 6-4
-
how are damages collected from a partnership when breach of a contract occurs
- go after the partnership then individual partners
- 6-4
-
how are damages collected from a partnership when a tort occurs
- go after partners and partnership in any order they choose
- 6-4
-
what is a silent partner
- a partner that does not participate in management of partnership
- 6-4
-
what is a silent partner liable for
- unlimited liability same as other partners
- 6-4
-
if a new partner starts what are they liable for
- new debts created after joining - unlimited
- old debts not liable for, however, capital contributed is accessible by creditors
- 6-4
-
what is a retired partner liable for
- new debts - liable if proper notice of retirement isn't given unless constructive notice is given
- 6-5
-
what is novation in a partnership
- releases retired partners from prior debt created by partnership
- 6-4
-
how are profit and losses shared in a partnership if there is not an agreement
- equally among partners
- 6-5
-
what happens if a loss reduces a partners liability to zero
- partners is personally liable for debt.
- 6-5
-
what is the definition of a dissolution
- change in a relationship of the partners when a partner ceases to be associated with the carrying on of the business.
- 6-5
-
what is the entity theory
- conceptual basis for continuing the firm itself despite a partner withdrawal from the firm
- 6-5
-
what does RUPA stand for
- revised uniform partnership act
- 6-5
-
how does RUPA affect partnership dissolution
- partnership does not dissolve if a partner leaves unless remaining partners agree to disoolve or there is only one partner left
- 6-5
-
what is a partnerhsip at will
- partnership without a specified duration
- 6-5
-
what annual information form does a partnership file
-
how long do remaining partners have decide to keep partnership running if a partner dies, declaries bankruptcy, or withdraws
-
what is requried to form a partnership
- consent among members of partnership
- 6-5
-
what is required to form a limited partnership
- government approval on a valid statue and a filing of articles of limited partnership
- 6-6
-
what rights is a limited partner given
- right to interest (profits) but not property or management
- 6-6
-
how many partners are requried for a limited partnership
- one general partner and one limited partner
- 6-6
-
what can a limited partner cote on
- dissolution of patnership
- loans of paternship
- removeal of general partner
- 6-7
-
how is a new partner added to limited partnership
- written agreement of all parnters unless agreement provides otherwise
- 6-7
-
can a person be a limited partner and general partner in a partnership
-
who owes fiduciary responsibility for a limited partnership
- general partner owes duty to limited and other general partners
- limited parter does not owe fiduciary duties
- 6-7
-
can a limited partner be a creditor
- yes and an be secured or unsecured
- 6-7
-
can genereal partnerships combine/conver, merge with limited partnership
-
how are profits shared in a limited partnership if there is not a certificate agreement
- shared based on eprcetnages of capital contributinos
- 6-7
-
how are LLCs formed
- filing with secretary of state
- 6-7
-
how are multiple member and single member LLC treated
- multiple treated as partnership
- single treated as sole proprietership
- 6-7
-
what duty of care do owners and managers owe in a LLC
- not be grossly negligent and a duty of loyalty
- 6-7
-
how is a LLC taxed
- can be taxed as a partnership (form 1065) or
- as corporation (form 1120)
- 6-7
-
how is a LLC terminated
- withdraw of any member
- passage of 30 years
- state law may limit life
- 6-7
-
how must approve a LLP
- state government (articles)
- 6-8
-
what are similarities between LLP and LLC
- gratned limited liablity states under state statues
- easy to orgnanize (compated to corp.)
- treated as partnership for federal tax purposes (if elected to noe be treated as corp)
- similar state franchise taxes
- 6-8
-
how are liability defferent between LLP and LLC
- LLP is limited liable for malpractive or negligence and unlimitedly liable for contracts/debt
- LLC has limited lialbity for contracts and debts and unlimited liability for malpractice or negligence
- 6-9
-
how mayn partners must a LLC have
-
what are the differneces between a LLC and LLP regarding ease of formation
- LLP can covnert partnership to LLP by filing with Secretary of State
- LLC must create a new entity
- 6-8
-
what is a joint venture
- simlary to partnership and death does not dissolver
- 6-7
-
what is the difference between a LLC and LLP regarding partnership interest, property use, management
- LLC - has partnership interest, has used of property, has maangement rights
- LLC has interest, no property rights, no management rights
- 6-9
-
what management rights does a LLC partner have
- can look at books and vote
- 6-9
-
what is the designation of owners of a LLP, LLC, & Corp
- LLP - partners
- LLC -mebers
- Corp - shareholders
- 6-10
-
who has aurhoity to bind (agent) for genearl partnership, limited PS, LLP, LLC, Corp
- General - partners
- limited PS -general partners
- LLP - parnters
- LLC - managers
- corp - officers/directors
- 6-10
-
what act governs a C-corp
- model business corpation act
- 6-11
-
what are characteristics that distinguish a C-corp
- EL TIC
- ease of transfer
- limited liability
- taxation
- independent life
- centralized management
- 6-11
-
define the following for C-corp:
ease of transfer
limited liability
taxation
independent life
centralized management
- ease of transfer - ownership changed by transfer shares
- limited liability - sharesholders not responsible for debt
- taxation - corp files and pays its own taxes
- independent life - death of shareholder doesn’t casue dissolution
- centralized management - controlled by board of directors
- 6-11
-
what is the definition of perpetuity
- thing that lasts forever
- 6-11
-
what are the qualifications to be considered an S-Corp
- LORDS OF
- limited liability
- one hundred shareholders
- resident or citizen of US (shareholders)
- domestic corp (cannot be forein)
- shareholders must be individuals
- only one class of stock
- formal creation
- 6-11
-
how long does it take a S-corp to reelect S-corp status if it has been revoked
-
how is a closely held corporation
- stock is not offered to public and has less than 50 shareholders
- 6-11
-
what is a domestic corpation
- the state where a corp receives its charter in which it incorporated
- 6-11
-
what is a foreign corp
- a corp operating in a state other than the state that provided the charter
- 6-11
-
what are the oeprating requirements for a foreign corp
- file a certiifcate of authority if it wishes court protection (can sue)
- 6-11
-
-
is a contract a promoter sets up binding
- no inless board of direcots elects to adopt it
- 6-12
-
what liabiltiy does a promoter have
- personnally liable for any contract prioer to adoptino (from board) and remains laible unless released
- 6-12
-
what is a novation
- substituion of a promoter for the new corp (releases the promoter of liablity)
- 6-12
-
what is filed for a corp to be formally created
- articles of incorporation
- 6-12
-
what items are included on an articles of incorporation
- name
- nature & purpose
- term
- name and address
- capitazaiont
- initial board
- registered agent
- 6-12
-
what is does the capitalization portion of the articles of incorpation refer to for a Corp
- amoutn and types of shares the corp wants to be authorized to issue
- 6-12
-
what is a registered agent
- place where state may serve court papers
- 6-12
-
what are by-laws
- rules and regulations that govern and help to guider internal managemenr perform its duties
- 6-12
-
who adopts the by-laws
- incorporators or board
- 6-12
-
what are the board of directors in charge of
- general operstion of the corp
- 6-13
-
how can vote by proxy
- shareholders can but board of directors cannot
- 6-13
-
what is the board of directors able to do
- adopts by laws
- select officers
- reacquire treasury stock
- declare dividends
- issue stock
- 6-13
-
what is the difference between treasury stock and cancelled stock
- treasury stock is authorized, issued, but no longer outstanding
- canceled stock is no longer issued or outstanding
- 6-13
-
what securities can a board issue
-
when is a board not allowed to issue dividends
- if the company is insolvent or declaring will lead to insolvency
- 6-14
-
what is the maximum amount of dividends that a board can dclare
- higher of ompanys retained earnings or current period earnings
- 6-14
-
what is the difference between par value and state value of stock
- par value - set under certificate of incorporation
- state value - set up by board
- 6-14
-
what are the advantages of preferred stock
- paid dividends before common
- get paid before common during a liquidation
- dividends paid in arrears
- particpating
- 6-14
-
what is the definition of participation in regards to preferred stock
- if common stock get dividedn that is a higher rate on its par value than the stated rate on preferred then preferred gets the higher rate
- 6-14
-
what are the different tyupes of dividends that can be offered to shareholders
- cash
- property (FMV @ declaration date)
- Scrip
- Liquidating
- stock - Small (FMV) / Large (Par)
- Stock split
- 6-15
-
what is the difference between a small and large stock dividend
- small - less than 20-25%
- large - more than 20-25%
- 6-15
-
what dividends do not reduce stockholders equity
- stock dividends
- stock splits
- 6-15
-
what fiduciary duty are board of direcots bound to
- act loyally in the best interest of corp and shareholders
- 6-15
-
what is the doctrine of respondeat superior
- an employer is responsible for the torts committed by employers in the normal scope of duties
- 6-15
-
what are directors and officers not allowed to do in a corp
- CHEATS
- compete with the corporation
- have an interest that is in conflict of corp interests
- engage in insider trading
- authorize transactions that are detrimetnal to minority shareholders
- take advantage of corp for personal gain
- sell control over the corp
- 6-16
-
what is the business judgment rule
- principle that protects directors from peraonl liability for acts performed in good faith
- 6-16
-
what voting rights are given to shareholders
- BALD Looks Cool
- board of directors
- amedn the articles of incorp and charter
- liquidating dividends
- dissolve corporation
- loans to directors
- consildations/mergers
- 6-16
-
what is appraisal right
- right of shareholders to get stock appriased if disagree with merger
- 6-16
-
what is preemptive right
- must offer new issued stock to current stock holders first so their stock is not dilluted
- 6-16
-
when would SEC peirce a corparations viel
- fraudulent corporation
- commingling funds
- undercapitalized
- 6-16
-
when is a shareholder allowed to inspect books
- when there is a reasonable purpose (normally 5% ownership or owned stock for 6 monhts)
- 6-17
-
what is a derivative lawsuit
- shareholder can sue on behalf of the corptaion if harmful actions against the company are not countered by the board
- 6-18
-
what is watered stock
- stock issued for less than its par value
- 6-18
-
what liability does a shareholder have when purchasing watered stock
- liable for difference between purchase price and par value
- 6-18
-
what federal taxes are assessed by an employer
-
when would unemployment benefits not be paid to employees
- left voluntarily
- refuses to accept equivelant work that has been offered
- dismissed for illegal activities
- 7-1
-
what is vesting
- when company pays retirement an employee can keep 100% after a period of time
- 7-1
-
what is the family medical leave act
- companies with 50 or more employees get up to 12 weeks in 12 monhts of unpaid leave for family or medical resaons
- 7-2
-
what laws die the fair labor standar act create
- minimum wage
- prohibts child labor for certain occupations
- 40 hour workweek
- 7-2
-
what is the labor-management relationsa act or taft hartley act
- prohibits an employer from requiring union membership of all employees
- 7-2
-
when must a company start keepint recored of injury and illness for each employee
- have 11 or more employees
- 7-2
-
what is the definition of
conitributory negligence
assumption of risk
negligence of fellow employees
and what do they have in common
- eligeible for workers comp
- contributory neglignece - employees own carelessness/ or violates workplace rules
- assumption of risk - employee was aware of dangers of oocpation and signer a waiver of liabillty
- negligence of fellow employees - reulst from calress or recless violation of another employee
- 7-3
-
when would a worker not be able to collect workers compensations
- BIND
- brawling
- intoxiation
- not job related
- deliberate self infliction
- 7-3
-
what might workers compensation benefits include
- burial expense
- cost of prosthetic devices
- monthly payments to surviving dependednt
- 7-3
-
what are the different anti-trust laws
- sherman clayton antitrust
- clayton act
- ferdeal trad commission
- robinson patman act
- 7-4
-
what did the following acts do:
sherman clayton antitrust
clayton act
ferdeal trad commission
- sherman clayton antitrust - prohibits contracts, combinations, and consipracites that restain intersat or foreign trade and prohibits monopolizations
- clayton act - outlaws discriminaiton in prices, exclusive adn tying contracts, intercorporate stockholdings
- ferdeal trad commission - blanket prohibiiton against unfair methods of competition
- 7-4
-
when is the c-corp tax return due
- 2.5 monhts after year end
- 8-1
-
what is the value of stock if cash and property given to a corp to gain 80% of control
- tax free
- carryover basis if property is subject to det
- carryover holding period
- 8-1
-
how are services taxed if given for stock for a corp
- taxable income at FMV of stock
- wage expense for corp
- 8-1
-
what are the two ways property can be valued when given for stock to a corp
- tax basis - (no gain or loss but only if 80%)
- FMV - (at date of contribution) gain reported
- 8-2
-
what is the calculation to determine sharehlders basis in stock received if 80% of control
- adjusted basis of propert transferred
- +recognized gain
- +cash paid
- +liabilities assumed
- +transaction costs and fees
- -cash received
- -FMV of property received
- -liablites transferred
- 8-3
-
what is the calculation to determine corporations basis in stock received if 80% of control
- adjusted basis of the property in the hands of the transferor
- + gain recognized by the transferor
- 8-3
-
what is the the formula for the corporate income tax return
- gross income (worldwide)
- -oridnary deductions
- =income before "sepcial deductions"
- -charitable contribution
- -dividend received deduction
- =taxable income
- X tax rate
- =gross tax liability
- -foreign tax credit
- =net regular tax liabilty
- +personal holding company tax
- +accumulated earnings tax
- + alteranative minimum tax
- =total tax liablity
- 8-4
-
when is revenue recognzed for a corporation
- recognized at the earlier of when earned or collectd
- 8-5
-
when are life insurance proceeds deductable and not dedcuttable
- deducatble - if proceeds go to benefit family
- not - proceeds go to corp
- 8-5
-
what are the two tests to see if an item is deducatlbe for a corp
- meets both all events test and
- economic performance test
- 8-5
-
what is the differnece between all events test and economic performance test
- all events - liability exists and and the amount can be determined reasonably accuracy
- economic perfomance test - property or services are provided when property or services are performed
- 8-5
-
how much of organizational expenses are deducatlbe for a start-up corp
- 5,000 (for each organization and start-up costs)
- 8-5
-
how long are start up costs amortized
-
what stock costs are not deductablw
- A SLIP
- accounting fees
- selling costs
- legal fees
- issuing costs
- printing costs
- 8-5
-
what is the maximum amount of salaries that are deducatble
- $1M for each of the 5 highest paid executives
- 8-6
-
what estimated losses are not deductible intil occurred
- bad debt
- warranty costs
- lawsuits
- marketable securities
- inventory
- 8-9
-
when is interest expense not deducatlbe for a corp
- loan proceeds used for tax-exempt investmnets
- 8-6
-
what employee expenses are deductable for a corp
- 50% of meals and travel
- all travel costs
- 8-6
-
what is the amoun of casualty loss for a corp
- property adjusted basis immedialty before the casualty
- 8-6
-
how often is impairment tested for goodwill, franchise, and trademarks for a corp
-
how long can research and development costs be amortized
- can be expensed immedialty or over a minimum of 60 monhts
- 8-6
-
what amount of dividend is allowed to be deducted for a corp (dividend received deduction)
- <20% - 70% deductable
- >20 to 80% - 80% deductable
- >80% - 100% deducatble
- 8-6
-
when would an investor not qualify for a dividend reimbursement deduction
- froma foreign company
- borrowed money to buy the investment
- recevied from a tax exempt organization
- owned less than 46 days
- 8-7
-
what is income is multiplied when getting the dividend reimbursement deduction
-
how much is allowed for a charitablt contribution for a corpoation
- 10% for adjsuted tax income
- 8-8
-
what is adjusted tax income
- net income adjusted for:
- charity
- dividend reimbursement deduction
- net opearitng loss carryback
- capital loss carryback
- 8-8
-
how long can you carryforward a chartibalt contrubitno for a corp
-
when can a pledge be accrued for a charitable contrubioton for a corp
- paid within 2.5 monhts
- 8-8
-
what is the carryback/forward for a capital loss for a corp
- back 3 years
- forward 5 years
- 8-8
-
what is the carryback/forward for a net operationg loss for a corp
-
what costs are not dedcutable toa corp for income tax purposes
- federal income tax
- government fines and penalties
- costs of issuing stock
- lobbying costs
- compensation
- club dues
- 8-8
-
what is the calculation for the foreign tax credit for a corp
- US tax liability X foreign income / worldwide income
- cannot exceed actual forign taxes paid
- 8-9
-
what is the accumulated earnigns tax
- used to penalize corps. That accumulate earnings beyond the resaonable needs to expansion, retirement of debt and working capital
- 8-9
-
how can a corporation reduce or eliminate the accumulated earnings tax
- pay:
- actual dividends
- consnt dividedns
- paid personal holding tax
- 8-10
-
what is the tax % on undistributed income for accumulated earnings tax
-
what is the safe harbor (max amount) for accumulated earnings tax that a corp is able to have
- $250K for manufacturing
- 150K for persaonl service corp
- 8-10
-
what is a consent dividend
- hypothetical dividedns you pay taxes on, even though no moye was actually received
- 8-10
-
what is a persaonal holding copmany tax
- using a corporation to shelter certain types of passive income
- 8-10
-
when would a corp be subject to a personl holding company tax
- 5 or fewer individuals own more than 50% stock and
- 60% or more of revenue from passive source (taxalbe interest, dividedns, rent and royalty income)
- 8-10
-
what is the tax percent for undistributed persaonl holding company income
-
how can a corp avoid the personal hlding tax
- pay actual dividend or
- consent dividend
- 8-10
-
what are the names of the supplementary schedules
m-1
m-2
m-3
- m1 - reconcilaiotn of book income to tax income
- m2 - analysis of unappropriated retained earnings per books
- m3-reconciliation of finacial accounting income with taxable income
- 8-11
-
whata the M1, m2, m3 schedules used for
- m1 - idnetify differences between book and taxable income to IRS
- m2 - used to determine if a prior period adjustment might cause a prior return to be amended
- m3 - for coprrs with assets of $10M or more and is more detailed than M1
- 8-10
-
when would a corp not be subject to a underpayment estiamted tax penalty
- underpayment is under $500
- installments each quarter coer the tax on the income to date
- estimated tax payments equal at least 100% of the current year liability
- payments equal 100% of prior year tax liability
- 8-12
-
when would a corp not be able to use the prior year tax liablity as a reason to escape the underpayment estimated tax liablity
- if no liablity in previous year
- corp had taxalbe income of $1M in any of preceding 3 years
- 8-12
-
what is the time frame a corp can claim a refund or overpaying estaimed tax liablity
- 3 years after the original return was due (including extensions)
- 2 years after the payment of tax
- 8-12
-
what is the statue of limitations for a corp for taxes that the IRS can come after you
- 3 years unless:
- omitted gorss income is greater than 25% (6 years)
- fruad (unlimited
- 8-12
-
what is the penalty for a corp if a tax underpayment is the result of fraud
- 75% of the portion of underpaymnet
- 8-12
-
how does a corp determine if a corporation is distribution taxable or a return of capital
- difference betweeen current earnings & profits and accumulated earnings & profits
- 8-12
-
what is the difference between current earings and profits and
acumulated earnings and profits
- current - similar to net income
- accumulated - simlar to retained earnings
- 8-12
-
how is amount of accumulated earnings and profits determined
- higher of current earnings and profits
- sum of current and accumulated earnings and profits before distribution
- 8-12
-
what are the different formulas to determine taxable portion of dividend when using current earnings & profits and accumulated earnigns & pfotis if a shareholder received 100 cash distribution
8-12
- Current E&P + - + -
- Accumulated E&P- + + -
- dividend portion+ Net + 0
- 8-13
-
how are property dividedns taxed when they are non-liquidating to a corp and shareholder
- corp - taxe on gain (capital gain), no loss is deducted
- shareholder - taxable up to earnings and profit
- 8-14
-
how are property dividedns taxed when they are liquidating to a corp and shareholder
- corp - ordinary gain (capital if stock), ordinary loss (as if sold)
- shareholder - capital gain, capital loss
- 8-14
-
what is the value given to property that is distribtued as a dividend
- FMv of property received.
- 8-14
-
what value is given to stock when a merger/acquisiton occures
- new shares are at the carryover basis
- 8-15
-
what are the different types or reorganzaiona for a corp
- type A: mergers or consolidations
- type B: use of voting stock to acquire at least 80% of the nonvotingshares of target corp
- type C: use of voting stock to acquire all of targests net assets
- type D: transfer of assets by an acquiring asset to acquire contorlling interest in a target corp
- type E: recapitaliztion to change hte capital strucutr of a single corp
- type F: chnage of identity, form, or state of incorporation
- type G: transfer of assets of an insolvent corp to former creditors
- 8-15
-
what percent of stock must be owned to file a consolidated return
-
can C-corp and S-corp file a consolidated return
-
what needs to be elimiated if corp chooses to file a consolidated return
- intercompany profits
- interest
- dividends
- 8-15
-
what are advantages of of section 1244 stock
- if appreciate is considered capital gain
- if value declines loss is ordinary
- up to 50,000 ordinary loss and rest is capital
- only applies to first $1M
- must be sold by original purchaser
-
how does stock get qualified as 1244 stock
- issued by domestic corp
- issued to individual or partnership (not for services)
- 8-16
-
what is the calculation for corporate AMT
- regular taxable income
- +- adjustments and preferences
- =AMTI before ACE adjustment
- +- adjusted current earnings (ACE) adjustment
- =AMTI before exemption
- - expemption
- =AMTI
- X tax rate
- =tentative mnimum tax
- - regular tax
- =AMT
- 8-16
-
what are the adjustments and preferences for AMT for a corp
- PILE
- private activity bond interest
- installment sales of inventory - accrual accounting
- long term contract income calculated using the % completion method
- excess deprecaiton on personal property over 150% declingin balance
- 8-16
-
how are adjusted current earnings calculated for corporate AMT
- SLIM
- seventy percent of dividend received dedcution (80% and 100% are not added back)
- life insurance proceeds from key employee
- muni bond interest
- ADD ALL TOGETHER AND MULTIPLY BY 75% TO GET ACE
- 8-16,17
-
what is the calculation for the exemption for corpate AMT
- 40000-(25% X (AMTI before exemption - 150,000))
- NOT TO EXCEED $40k
- 8-16
-
what are the conditions to be classified as a S-corp
- IN ROD
- shareholders must be individual, grantor, ceratain estate/trusts
- no more than 100 shareholders
- shareholders must be resident or citizen of US
- only one class of stock
- domestic corp for the S-Corp
9-1
-
what is meant by one class of stock for an S=corp
- gives equal amount of income to each shareholder
- 9-1
-
what vote is required to turn a corp into a s-corp
-
what is the definition of net basis
- amount of stick a shareholder has in a corp
- 9-2
-
what is the calculation to determine net basis for a s-corp
- initial basis
- +- % income/loss
- + muni bond interest
- +- seperately state item
- -distributino received
- = net basis
- 9-2
-
what method is used to calculate income for an s-corp
-
what is the limitation of a loss for an s-corp when determining basis
- limited to amount invested + amount loaned to company
- cannot go below zero
- 9-2
-
what is a seperatly stated item when trying to calculate net basis of s-corp
- any amout that can hit a limit on individual tax return
- examples are:
- capital gain/loss
- seciont 1231 gain/loss
- section 179 deduction
- rent & royalty
- charitbale contribution
- interest income on investment
- 9-2
-
what is an accumulated adjustment account
- cumulative balance of undistributed net income and dedcutions for S corp
- 9-4
-
what vote is required to terminate an s-corp
-
what is a built in gains tax
- c-corp elects s-corp stats and FMV of assets exceeds its basis
- 9-5
-
when are built in gains taxable
- if assets are sold within 10 years
- 9-5
-
when does a partnership have to file taxes
-
how long is the extension gigven for a partnership
-
how is the tax year chosen for a partnership
- tax year of partners or majority of partners
- 10-1
-
what is the definition of outside basis
- partner basis in the partnership
- 10-1
-
what is the definition of inside basis
- partnership basis in their assets
- 10-1
-
what is the calucaltion to determine the ending outside basis for a partner in a partnership
- initial outside basis
- +- % income/loss
- + muni bond interest
- +- seperately state item
- -distributipn received
- +your % of partnership liablitles
- -liabiliteis contributed to partnership
- = ending outside basis
- 10-2
-
what form does a partnerhsip file for tax rturn
-
what value is given to property given to a partnership
-
what happens if a partner contributes property that would casue basis to be reduced to 0
- partner reports gain of the amount in which the basis would go below 0 and partners basis is 0
- 10-3
-
how much $ can a partnership deduct as organizational expenditures for the tax year in which it began
-
how long are startup organzational expenses for a parntership amortized foer
-
what items are stated seperatlye on a K-1 for a partner
- capital gains and losses
- section 1231 gains and losses
- dividends and interest
- charitagle contrubitons
- passive activites
- section 179 depreciation election
- tax credits
- 10-4
-
what happens if a partnership has a ending tax year different than majoarity of partners
- the 3 month (or 2, or 1) of partership income is deferred into the following year
- 10-5
-
how are cash and property distributions in a partnership handled when it reduces the partners basis to 0
- cash distribution - listed as gain on partners return
- propert - basis of distributed asset is reduced to equal the parnters basis in the partnership prior to distribution
- 10-6
-
what ist he amount realzied when a partner sells tehir interest to another party
- sum of cash and property received + relief from debt
- 10-8
-
what gains/losses are reported when a partner terminates from the partnerhsip
- ordinary gain/loss for inventory and receivable
- captial gain for everything else
- 10-8
-
-
what are the different ways a partnership can terminate
- operations of bhte business are discontinued
- business is reduced to one partners
- 50% or more of partnership interests change hands within a 12 monht period
- 10-9
-
how is a parntership that splits into two differnet partnerships treated
- the partnerhsip that gets the majoarity of interests is considered a continuation of that partnership and theo thoer partnerships are treated as brand new businesses
- 10-9
-
what happens if two partnerships merge and neither partners gets a majority of interests
- all previous partnerships dissolve and the merged partnership is a new partnership
- 10-10
-
what can cause a LLC to terminate
- withdrawl of any member
- passage of 30 years
- state law
- 10-10
-
what is the definition of a contract
- agreement between parties that may involve either a prmoise being exchanged for a promise or act
- 11-1
-
what are the differences between a bilateral and unilateral contract
- bilateral - two promises are made (promise for a promise)
- unilateral - promise for an act
- 11-1
-
when are contracts formed for a bilateral and unilateral contract
- bilatearl - promises are exchanged
- unilatearl - performance is completed
- 11-1
-
where was the uniform commerical code derived from
- statutory law (sale of gooods)
- 11-1
-
what is statutory law
- body of laws created by legistaltive statues
- 11-1
-
what is required for the formation of a valid common law contract
- ofer
- acceptance
- consideartion
- lack of defenses
- 11-1
-
what are the definite terms that must be implied for an offer
- price to be paid
- parties
- nature of the subject matter
- quantity involved
- time for performance
- 11-1
-
what is the definition for intent in a contract
- what a reasonable person believes
- 11-1
-
what terms of an offer must be defined for a cotnract
- quantity
- price
- time of contract
- 11-1
-
what is a quasi contract
- implied in contract when the court decides that a contract exists
- 11-1
-
what is an example of an unintentional contract and woulf be be considered an offer
- made in jest or anger
- advertisements
- 11-2
-
what items would terminate an offer
- RECORD
- rejection
- expiration
- counteroffer
- operation fo law
- revocation:
- direct or indirect
- 11-2
-
when would operation of law terminate a contract
- death or insanity of either parter
- destruction of subject matter
- illegality of subject matter
- 11-2
-
how are inquiries treated for a contract
- treated as asking a question and leaves the oringal offer on the table
- 11-2
-
what is the difference between executor and executed when related to a contract
- executor - certain duties still need to be perfromed
- exectued - all duties have been performed
- 11-2
-
what are the two important rules in regards to acceptance of an offer
- mirror image rule
- early acceptance rule
- 11-2
-
what are the differences between
mirror image rule
early acceptance rule
- mirror image rule - accep all termns of condition without alteration
- early acceptance rule - acceptance is effective when transmitted or received
- 11-2
-
what is a bilateral contract
- a contract that that can be accepted by a promise of an action (normally your cannot promise to do an action and instead must perform the action for the contract to be official)
- 11-3
-
what is a unilteral contrac
- contract that can only be accpeted by actual perfromance
- 11-3
-
what is consideration for a contract
- both parties must provide something of value
- 11-5
-
what are different ways that a contract can be "legally sufficient" where consideraiton is concerned
- paying or lednign money
- transferring or lending property
- rendering services
- relinquishing the rights to receive money, property, or services
- waiving the right to take certain action
- 11-5
-
what are past condition and pre-exisitng duty
- past consideration - actions taken before the contract was formed
- pre-existing duty - obligation which the party alread had before the contract was perfomed
- 11-6
-
when would pre-exisitng duty allow for modificaiton of a contract
- when both parties are providing new consideration
- 11-6
-
what is the differnece between a voidable and void contract
- voidable - one or more parties may escape the contract
- void - contract cannot be enforced by either party
- 11-9
-
what are difference ways a contract cane be voidable
- duress
- undue influence
- misrepresentation
- mistake
- capacity
- 11-9
-
what is the defintino of duress
- forced by threat to do something
- 11-8
-
what is the defintion of undue influence
- violate/abuse a relationship of trust or confidence
- 11-8
-
what is innocent misreprestiaon
- enterest into a party after receiveing inaccurate informatino about relevnat matters from the party
- 11-8
-
what is fraudulente misrepresentation
- similare to innocent misrepresneation except the person providing infomration had actial or construcitve knowledget that the information was incorrect
- 11-8
-
what must a person provie for innocent misrepresentation
- material misrepresentation
- info relied upon
- loss occurred
- error caused by misrepresentation
- 11-8
-
what must a person prove for fraudulent misrepresentation
- material misrepresentation
- info relied upon
- loss occurred
- error caused by fraud (Scienter)
- 11-8
-
what would and would not cause a mistake to cause a voidable contract
- material - voidable
- immartieal - not voidable
- 11-8
-
what are different ways a person would lack capacity for a contract
- minor
- intoxiation
- imcompetence
- 11-9
-
what are different ways a contract is considered void
- extreme duress
- fraud in execution
- illegal subject matter
- incompetent person
- 11-9
-
what is the definition of extreme duress
- physical threat of force
- 11-9
-
what is the definition of fraud in execution
- enters into a contract without realizeng they are
- 11-9
-
when would a incompenet person cause a contract to be void
- when a person is labled insane by the courts
- 11-10
-
what is the statue of frauds
- requires contract to be in writing
- 11-10
-
what contracts would fall under statue of frauds
- GROSS
- goolds sold for over $500
- real estate sales
- over on year required to perform contract
- suretyship
- statement in consideration of marriave
- 11-10
-
what is a suretyship
- guarantee debt of another
- 11-10
-
if a contract is considered indefinite duration would it fall under statue of frauds
-
when would sale fo goods be enforcable if not in writing
- SPAM
- specifically manufactured goods
- partially performed contract
- admit in court
- merchant does not object withing 10 days
- 11-11
-
what is parol evidence rule
- prohibits the use of oral or written evidence that contradicts the temrs of the written contract
- 11-11
-
when would parol eveidence rule not prevent the introduction of eveidence
- subsequent oral modifiation of the contract
- fraud in execution of contract
- oral discussion prior to the agreement that clarify ambigous or missing terms in the written contract
- 11-12
-
what is entirerty cause
- clasu caliming that there are not agreements other than those contained within the contract
- 11-12
-
when would a right and duty not be allowed to be delegated for a contract
- contract prohibits it
- duty is persoanl in nature
- materailly alters the rights and responsibility of the other party
- involves specialized personal services
- 11-12
-
what is novation
- assignor (original contract) is liable on a contract unless the other party to the contract accepts the assignee in place of the assignor
- 11-13
-
when would a third party have rights to enforce a contract
- assignment (assigned rights to them)
- intended third party beneficiary
- 11-13
-
what are two types of intended beneficiarues for a contract
- donee beneficiary
- creditor beneficiary
- 11-13
-
what are the differnece between
donee beneficiary
creditor beneficiayr
- donee - receiveing the beenfits as a gift
- creditor - receiveing benefits to settle a debt
- 11-13
-
what are the differnet ways a contract can be discharged
- performance
- agreement
- operatyion of law
- breach
- 11-14
-
what are the different ways that performance can discharge a contract
- full performance
- substantial performance - is used similar materials that are not substandard
- 11-13
-
what are the different agreements that can discharge a contract
- recission
- accord and satisfaction
- novation
- 11-13
-
what are the definition of :
recission
accord and satisfaction
novation
- recission - parties restored to their original position
- accord and satisfaction - perfomance of the substitued duty is the "satisfaction" that discharges the original duty
- novation - one party accepts third party in place of original
- 11-13
-
what opertions of law would cause a discharge
- impossibility
- death or incapacity
- bankruptcy
- illegality fo the servies to be performed
- 1-14
-
what is anticpatory breack of contract
- one part lets the other party know that performance will occur
- 11-14
-
what can a person due if an anticipatory breach occurs
- cancel the contract
- sue for compensatory damages
- 11-14
-
what is anticpatory repudiation
- party can sue at once or wait until after performance is due
- 11-14
-
what is liauqidation damanges clause
- clause that specifies amount that will be awarded in case of breach of a contract
- 11-14
-
what are the definitions of
compensatory damages
consequential damanges
nominal damages
punitive damages
specific perfromance
- compensatory damages - direct losses/profits
- consequential damanges - indirect costs and anticipated losses
- nominal damages - no real provable loss
- punitive damages - punish
- specific perfromance - availabe for unique proerty (patenets)(not for personal service)
- 11-14
-
what is thet statue of limitations for a contract
- generally 4-6 years
- begins at date of breach
- 11-15
-
whata re needed to make a sales contract binding
- offer
- acceptance
- consideration
- 12-1
-
what can the terms of a sales contracct be based on
- standard trade practive
- past experience
- 12-1
-
what must be explicitly stated in sales contract
- type and quantity of goods involve
- 12-1
-
how can quanitity be given in a sales contract
- specifically stated
- outpue contract
- requirement contract
- 12-1
-
what is the differfence between an output contract and requirement contract
- output - buyer agrees to purchase as much as the seller is able to produce for a specified period of time
- requirement contract - seller agrees to supply all needs of the buyer for a specified period of time
- 12-1
- 12-1
-
what items need to happen for a firm offer to be created
- signed
- up to 3 monhts
- merchant
- 12-1
-
how must sign a sales contract for a firm offer
-
what is the definition of a merchant
- dealer in goods involved in transaction
- 12-1
-
what changes can be made in a sales contract for it to still be considered the original offer
- minor changes (payments terms, change a warranty)
- 12-2
-
what changes would be considered a coutneroffer for a sales contract
- major changes (material price increase, quantity, delivery date)
- 12-2
-
what is the difference between with rserve and without reserve for a sales contract
- with - right to withdraw goods prior to acceptance
- without - goods cannot be withdrawn
- 12-2
-
how does consideration effect a sales contract for a modificaiton of an existing contract
- contract continues even if there is no consideration from on party
- 12-3
-
what parties of a sales contract is bound by silence for a sales contract
-
what does bound by silence refer to for a sales contract
- if a merchant does not object to changes the contract will continue
- 12-3
-
what happens in a sales contract if additional consideration (modificaiton of a contract) changes price of goods from 450 to 500
- contract must now be in writing
- 12-4
-
when do title and risk pass from merchant to consumer
- title - when contract forms
- risk - merchant (goods received by buyer)
- risk - non merchant (goods tendered to buyer)
- UNLESS STATES IN CONTRACT
- 12-5
-
what is the differnce between FOB Shipping and FOB destination
- Shipping - once shipped title passes
- desitaiton - once arrived title passes
- 12-5
-
what is a bailment
- owner of goods entrusts goods to antoher party
- 12-6
-
what following items would cause title and risk to not trasnfer to purchaser
- goods do not exist
- goods are not identifies to the contract
- 12-6
-
what is the difference between sale on approval and sale or return
- sale on approval - buyer obtains goods for use and can choose to purchase them later (normally 30 days)
- sale or return - buyer is given right to cancel sale if they are unable to resell goods
- 12-7
-
what happens to title and risk when a buyer rejects delivery and buyer revokes acceptance
- rejects - title is with seller risk goes to seller if defective otherwise stays with seller
- revokes - title and risk go to seller if a valid reason
- 12-7
-
what are the different types of warranties
- implied warranty of title
- express warranty
- implied warranty of merchantability
- implied warranty of fitness for particular purpose
- 12-8
-
what are the differences betwee
implied warranty of title
express warranty
implied warranty of merchantability
implied warranty of fitness for particular purpose
- implied warranty of title - automaticall exists in all sales (disclaimer must be explicit in contrac(
- express warranty - any statement or claim that become a "basis of the bargain" (cannot be discalimed)
- implied warranty of merchantability - seller warrants items are in fair condition for their ordinary purpose (discalimer may use lagnuage "as is" or "with all faults")
- implied warranty of fitness for particular purpose - buyer relies on sellers judgement in selecting the product (disclaimer must be in writing and use langauge such as "as is" or "will all faults")
- 12-8
-
when needs to be demonstrated to used breach of warranty defense
- express or implied warranty that was not effectively discalimed
- injury or illness resulted from the breach
- 12-10
-
what must a plaintiff prove for a product liability case
- absense of due care by defendant
- defect in the product caused by carelessness
- damages to the plaintiff result from the defect
- 12-10
-
what must a plaintiff prove for a strict liablity case
- defec or unreasonable danger in the product
- damages caused by danger
- defendant is in the business of selling the product
- 12-10
-
can contributory negligence be used in a strict liability case
-
what are sellers remedies for a breach of sales contract
- right to resell goods
- right to stop the carried from delivering goods
- cancel the contract
- recover damages (incidental or consequential)
- 12-12
-
what are buyers remendes for breach of contract
- acceo all, some or none of the goods
- cover
- specific performance - very unique goods
- recover damages
- recission of contract
- 12-12
-
what does cover refer to in breach of a sales contract
- purchase substitue goods and revcover the excee paid from the seller
- 12-12
-
what is the right of replevin
- claim ownership of goods if in your possession
- 12-12
-
if a strike occurs are parties in sales contract still liable
-
what is the statue of limitate on sales contracts
- 4 years from date of breach
- 12-12
-
when can an agent act on the princpials behalf
- when given authoirty from principal
- 13-1
-
what is required for an agetn to work for a principal
- agent must have sufficient metnal and physical ability to carry out instructions
- 13-1
-
what is required for an agency to rowk for a copmany
- meeting of the minds - no contract or consideration need be offered
- 13-1
-
when would an agency contract need to be in wirting
- real estate sales
- agency to run for a period exceeding over one year
- 13-1
-
what fiducuairy duty is required by an agent
- act loyally
- act in best interest
- 13-1
-
what are different types of authority an agent can be given
- actual
- apparent
- ratified
- 13-2
-
what are the difference between
actual authority
apparent authority
ratificaiton
- actual (implied) - assigned tasks that require authroity to carry out
- acrual (express) - explicitly stated
- apparent - good faith 3rd party assumes you have
- ratification - gives authroity after autority has been made
- 13-3
-
who is liable when an agent is acting for a pricinpal that is
fully disclosed
partially discoled
undiscolsed
- fully - principal
- partially - princial and agent are jointly and severally liable
- undiscoled - princiapl (if known) and agent
- 13-3
-
what are the different types of agents and what are their definitions
- general agent - broad authroity to act in a variety of transactions
- special agent - authoirty limited to a single or series of transactions
- sub-agent - agnet appointed by another agent
- 13-3
-
how is an agent who has authoirty terminated
- agreement - completed or time lapsed
- unilateral - dismiss the agent or agent resigns
- operation of law
- 13-4
-
what is an agency coupled with an interest
- arrangmenet where agent has legal right to subject matter
- 13-4
-
can an agent coupled with an interest be terminated unilateral by the principal
-
what are agents and princpal laible for
- agents - torts and criminal acts
- princiapl - torts (within scope of agency)
- 13-4
-
what is the difference between real and persaonl property
- real - fixed to one specific lovation
- personal - all other property
- 14-1
-
what are fixtures
- personal property that gets affixed to real property
- 14-1
-
what are the ways to take possession of personal property when not specifically purchased
- CAR PIT
- confusion (identical goods that are commingled)
- accession (imporving)
- receive as a gift
- production of property
- inheritnace or will
- take possession of property that is not owned
- 14-2
-
what is required to a deed to be effective
- names of grantor
- intent
- description
- delivered to purchaser
- gratnro signature
- 14-2
-
what are three types of deeds
- quitclaim
- grant
- warranty
- 14-2
-
what are the difference between the following deeds
quitclaim
grant
warraty
- quitclaim - no warranties whatsover and is "as is" (primarily used for gifts and inheritance)
- grant - transferor have done nothing to create any impairments of title during their period of ownership
- warranty - transferee guaranteed full rights of use of property
- 14-3
-
what is a notice-race jurisdiction
- person who first files calim to property has title to it
- 14-3
-
when would a later claim prevail in a notice-race jurisdiction
- later claimant recoreds first and did not know about the earlier claim
- 14-4
-
what are the differnet forms of concurrent owenrship
- tenancys in common
- joint tenancy
- tenancy by the entirety
- 14-4
-
what is the difference between
tenancys in common
joint tenancy
tenancy by the entirety
- tenancys in common - two persons with separate interest in same property
- joint tenancy - right of survivorship
- tenancy by the entirety - joint interest held by hisband and wife
- 14-5
-
how are rights transferable when a tenancy in common occurs
- transferred without consetn of others and has no impact on current or previous rights
- 14-4
-
how are rights transferable when a joint tenancy occurs
- if death - the interest transfers to other joint tenants
- if transferred - right of survivorship no longer applies betewwn transferee and other joint owners
- 14-5
-
what is needed for a mortgage to be effective
- written
- description
- signed by mortgagor and delivered to mortgagee
- 14-5
-
what acions are available to buyer if a property is sold and is not enough to cover the mortgage
- if buyer assumes mortgae then buyer is liable
- buyer takes subject to mortgage wihtout assuming then buyer acknoledges the priority of the mortgagee on the porperty
- agree to novation - byer is acceptin peronl liablity on it in exchange for mortgagee releasing the seller from liability
- 14-6
-
how long is a copyright valid for
- 70 years
- if created for fir - 95 years from publication or 120 after createion whichever is first
- 14-7
-
what is the fair use doctrine
- limited purpose without violation of copyright
- 14-7
-
when would fair use doctrine be allowed
- teaching and research activities
- news reporting
- review or critique puposes
- 14-8
-
what is covered under a computer software copyright
- computer program readale by humans
- binary language read by computer
- computer databaes
- finnancial and buseiness model
- 14-8
-
how long is a copyright by a corporation and business valid for
- 100 years from creation or 75 years form its publication
- 14-8
-
what is the term for a patent
- 20 years from the date of filing
- 14 years for design patent
- 14-8
-
what is the term for a trademark
- indefinently but must be renewed every 15 years
- 14-8
-
what is a trust
- established for purpose of benefiting specific individual or charities without given them current control of the principal of the trust
- 15-1
-
what are estates
- created at teim of persons death to temporarily hold the property of the decendetn until it can be distributed to heirs
- 15-1
-
who is responsible for filing income tax return for estate
-
what is the differnce between intestate and testae
- womeine dies without a written will
- testate - somone dies with a will
- 15-1
-
wahat is the difference between form 1041 and form 706
- 1041 - report income of the estate received after the decendents date of death
- 706 - for of property tax on value of the decedent estate at the time of death
- 15-2
-
-
what is the difference between an executor and administrato
- exector - names be decedents will
- administrator - namedd by courts
- 15-2
-
what responsibilites does a execturo have
- paying debts of decedent
- filin all necessary tax returns
- distriubtinog remaining assets to the appropriate beneficiaries
- 15-2
-
what are the fiduciary ditues fo a trustee
- act loyally
- due care
- distribute income and pirncipal according to terms
- keep accurate reocrds
- 15-2
-
what are the types of beneficiaries for a trust
-
what are the difference between a remainder and income beneficiary
- remainder receives principal of trust
- income receives earnings of trust
- 15-2
-
what would a reminater beneficiary get from a trust
- CAMP PICS
- cpaital gains
- all assets contributed to the trust
- mortgage premium paymnets
- property acquired in exhcnage for trust corpus
- process from sale of corpus
- insurance proceeds
- capital improvements
- stock dividends
- 15-3
-
what would a income beneficary get from a trust
- CRIMP ID
- cash dividends
- rental income/expense
- interest income
- muni bond interest
- property taxes
- income statemetn items
- depreciation
- 15-3
-
what is a inter vivos trust
- assets transferred to a trust while person is living
- 15-33
-
what conditions must be present for a valid trust
- BRATS
- beneficiary
- reasonable intent
- assets
- trustee
- specified life
- 15-4
-
what is considered reasonable intent for a trust
- valud purpose for creation of trust and is usually the seperation of control of assets from the benefits
- 15-3
-
what will cause a trust to fail reasonaable intent test
- when there is one beneficiayr
- purpose is impossible to fulfill
- 15-3
-
what is the speficied life on a trust
- must have a spedicifed termination point, expressed in years of in the length of life in bein at the time trust is creased
- 15-5
-
define:
intervivos trust
spendthrift trust
resulting trsut
cy pres trust
constructive trust
- intervivos trust - created between lvigin people
- testamanet trust - created through execution of will
- spendthrift trust - prohibits assets from being pledged to pay the debts of a beneficiary
- resulting trsut - created by courts due to the failue of express trust
- cy pres trust - failure of a charitable trust and is designed to acheive a similar goal
- totten ot tentative trust -
- constructive trust
- real estate investment trust
- 15-4
-
when would a trust be revocable
- reserve rights
- end of term
- occurrence of an event
- purpose accomplished
- consent of trustor, all beneficiaries, remainderman, and courts
- 15-5
-
what is the difference between per capita and per stirpes
- per capita - equal to each person
- per stirpes - each at the level of first generation
- 15-5
-
when are estimated quartelry tax payments due for an estate and trust
- estate - not for first 2 years but due after that
- trust - from beginning of creation
- 15-5
-
what amout of personal expemptions are allowed for a trusts and estates
- complex trsut - $100
- simple trust - $600
- estates - $600
- 15-6
-
what is the difference between a grantor trust, simple trust, and complex trust
- grantor - grantor can withdraw assets at any time
- simple - makes annual distributiosn exactly equal to distributable net income
- complex - something other tan simple
- 15-6
-
what si distributable net inome
- maximum amount that can be taxed to the beneficiary
- 1-7
-
how is distributable net income different from taxable income
- includes tax exempt income (muni bond interest)
- excludes capital gains
- actual distribuions of DNI rex taxalbe income
- 15-7
-
what are the main differences for a the calcuatoin of a fiduciary income tax return
- no limit on charitable deductions
- income paid before person died is included
- trustee fees are deductable
- deddcution fo distribution of distributable net income
- 15-8
-
what gifts constitute for a gift tax
- cash
- property
- loan $
- sell car
- irrevocable trust
- 15-8
-
what gifts are not considered part of the gift tax
- life insurance
- charity
- political contribution
- revocable trust
- 15-8
-
when would gifts be considered as an exclusion
- support minors
- marital deductions
- educqation and medical bills paid to school/hopsital
- 15-8
-
what form is used fto file for taxable gifts
-
what is the formula to calucalte the tax dur for gifts
- gross gifts
- -exclusions
- =taxable gifts
- +taxable gift over the years
- + taxable estate
- =total taxable transfer
- x tax rate
- -unified credit
- -other credits
- -prepayments
- =tax due
-
what is the tax form for the tax due for gift tax
-
what is the calucaiton to determine the taxable estate
- all assets
- +life insurance poroceeds
- +revocable trust
- + 1/2 of property with spouse
- =gross estate
- -charity
- -marital deduction
- -liabilites/expenses (medical, mortgages, admin exp, funeral)
- =taxable estate
- 15-8
-
what is a uncompleted gift (no interest)
- revoable transfer of the right to access wealth at a future time
- 15-9
-
what is the top tax bracket for the estate and gift tax
-
when is the estate tax return due
- 9 monhts after date of death
- 15-10
-
how much can a person give in one tax year for a gift tax
-
what ist he maximum amount of estate tax that is considered no taxable
- $5.25M for SFJ with a maximum tax rate at 40%
- 15-10
-
what is considred a receviable for a decendent
- amounts earned by decendednt but not paid until after their death
- 15-10
-
what value is given to assets for an estate
- fair market value at time of death
- 15-11
-
what is the alternative valuation date
assets are valued at time of distribution or dale from the estate and items not sold are valued at fair market value exactly 6 monhts after death.15-11
-
when woulr property from a decentednt reatin the original donors basis
- when propert is appreciated received within one year of death
- 15-11
-
when would an estate be liable for estate taxes
- if taxable estate exceeded the lifetime exlusion
- 15-11
-
what are allowable deductions for estate
- state death tax deduction
- marital deductions
- charitable deduction
- funeral expense
- casualty and tehft loss
- administrative expenses
- liabilities of the estate
- 15-12
-
when would charitable expense be allowed to be a deduction for an estate
- if authorized by the decendent in their will
- 15-11
-
what is the generation-skipping tax
- imposed when the decedents estate is transferring substational property to beneficieiares at least two geneatrtions below the decendent
- 15-12
-
what does MACRS stand for
- modified acceledated cost recovery
- 16-1
-
what are the significant differneces between GAAP and MACRS
- cost of the assetis dedcuted over a state recovery period that is shorter than the estimated useful life of the asset in most cases
- recoverd for new and used property is identical
- salvage value is ignored
- 16-1
-
what is the recovery period for real property (1250)
- 27.5 years for residentail rental property
- 39 years for most other buildints (business and investment realty)
- 16-1
-
what method of deprecaiton is used for real property (1250)
-
what is mid-monht convetion
- only depreciate the real property for half the monht when placed in service and hald in the monht of disposal
- 16-1
-
what is the recovery period for tangible property (1245)
- 3 years for small tools, software
- 5 years for autos, light trucks, copiers, computers & printers
- 7 years for moths other personal property, equipment, office furniture
- 16-1
-
what is mid quarter convetion for tangible property (1245)
- if acquire 40% of its assets in the final 3 monhts of the year
- 16-1
-
what is the primary method of MACRS depreicaiton for tankgible property (1245)
-
when does depreciaiton typucally start for tangible property (1245)
-
what si section 179 dedcution
- allows for immediate expense of certain depreciable property instead of capitalizeing it
- 16-2
-
how much can a corp expense for section 179 deduction
- 500,000 for each item and phased out $ for $ when all pruchases exceed $2M
- graph on updated material page 32
- 16-2
-
what is the useful life of an intangible (section 197)
- 15 years - most intangibles
- 16-3
-
how much can be expenses immediately for intangible (section 197)
-
what is the formula to calculate depletion expense per year using the cost method
- adjusted basis / estimated recoverable units X units sold
- 16-4
-
what is the formula to calculate depletion expense per year using the percentage method
- a statutory percentage X gross income
- 16-4
-
what are the differnet types of assets that a corporation will hold
- ordinary income assets
- section 1231 assets
- capital assets
- 17-1
-
what is an oridinary income asset for a corp
- assets acquired with the intention ofbeing sold
- i.e inventory, artistic works, receivables
- 17-1
-
what is a section 1231 asset
non-current business assets tht are used in the trade or business
-
what is the difference between section 1231, 1245 & 1250 property
- 1231 - depreciable and real property held for more than one year
- 1245 - decpreciable assets held by a business for integral use
- 1250 - real estate and real property
- tax department journal
-
how are a gain & loss recorded for section 1231 property
- gain - long term capital gain if held more than 1 year otherwise it is ordinary
- loss - ordinary income
- 17-1
-
what is a capital asset (non-business asset_
- item used for personal use that does not meat the guidelines of a ordinary income asset or 1231 asset
- 17-1
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