REGULATION PERSONAL Flashcards

Question 1

Q

What is JEEP?

Answer

A

Joint Ethics Enforcement Program

Question 2

Q

Who handles ethical complaints with national implications when it comes to CPAs?

Answer

A

The AICPA

Question 3

Q

What is scienter?

Answer

A

Whether or not a person or company has a “guilty mind”

Question 4

Q

Who is generally impacted in a fraud case?

Answer

A

“reasonably foreseeable” victims

Question 5

Q

What element must be proven in constructive fraud?

Answer

A

Gross negligence

Question 6

Q

What is the majority (restatement) view?

Answer

A

Limiting an accountant’s liability to a limited class of actually foreseen users

Question 7

Q

What is the “Ultramares” rule?

Answer

A

An accountant’s liability is only to those they are in privity of contract with

Question 8

Q

How can a CPA be convicted of common law fraud?

Answer

A

With knowledge of misstatements or recklessly making the misstatements

Question 9

Q

When does actual fraud occur?

Answer

A

An accountant makes a statement they know is false

Question 10

Q

When does constructive fraud occur?

Answer

A

An accountant makes a statement they have no reasonable grounds to believe is true

Question 11

Q

What are the two key provisions of the Foreign Corrupt Practices Act (FCPA)?

Answer

A

Anti-bribery

2. books and records and internal accounting controls

Question 12

Q

What does RICO stand for?

Answer

A

Racketeer Influenced Corrupt Organizations Act

Question 13

Q

How long must audit and review papers be retained for?

Question 14

Q

When is disclosing a client’s name not acceptable?

Answer

A

When they are experiencing financial difficulties (i.e. bankruptcy)

Question 15

Q

What does 26 USC Sec. 7525 provide?

Answer

A

Modest testimonial privilege to clients of all tax advisers

only for noncriminal matters
exempts written tax shelter advice

Question 16

Q

What does GAPP stand for?

Answer

A

Generally Accepted Privacy Principles

Question 17

Q

What is a bilateral contract?

Answer

A

A promise in exchange for a promise creating a contract

Question 18

Q

What is an executory contract?

Answer

A

One not fully performed

Question 19

Q

What does common law cover?

Answer

A

real estate

- services (employment)

Question 20

Q

What does the Uniform Commercial Code (UCC) cover?

Answer

A

Sales of goods

- Goods and services combined

Question 21

Q

What methods can express contracts be in?

Answer

A

Oral or written

Question 22

Q

What are implied-in-fact contracts?

Answer

A

Agreeing to a service before payment is determined

Question 23

Q

What is a unilateral contract?

Answer

A

A promise in exchange for performance

Question 24

Q

Executed contract

Answer

A

One that is fully performed

Question 25

Q

What is the “mirror image” rule?

Answer

A

If a response is not a mirror image acceptance of an offer, it is a rejection and a counteroffer (common law)

Question 26

Q

What are most general business advertisements?

Answer

A

Simply invitations to trade

Question 27

Q

What are the three main elements of a contract?

Answer

A

offer, acceptance, and consideration

Question 28

Q

What do you need for an offer to be valid under Common Law?

Answer

A

present intent - objective basis

2. language - all details

Question 29

Q

What do you need for an offer to be valid under UCC?

Answer

A

present intent - objective basis

2. language - subject matter

Question 30

Q

What brings termination?

Answer

A

rejection
counteroffer
revocation
All effective upon receipt

Question 31

Q

What other things bring termination?

Answer

A

death of offeror
bankruptcy
illegality

Question 32

Q

What is an option?

Answer

A

paid-for offer
consideration required
irrevocable

Question 33

Q

What are the requirements for a Merchant Firm Offer (UCC)?

Answer

A

writing
signed
by a merchant
states it will be kept open (max three months)
need an option over three months

Question 34

Q

What happens with a conditional acceptance?

Answer

A

Counter offer and rejection (usually prepositional phrases)

Question 35

Q

When no means are given and the same or faster method of communication is used, when is the acceptance of an offer effective under UCC?

Answer

A

When properly mailed - Mailbox Rule applies

Question 36

Q

When no means are given and the same method of communication is used, when is the acceptance of an offer effective under Common Law?

Answer

A

When properly mailed - Mailbox Rule Applies

Question 37

Q

When no means are given and a slower method of communication is used, when is the acceptance of an offer effective under UCC?

Answer

A

When received if the offer is still open

Question 38

Q

When no means are given and a different method of communication is used, when is the acceptance of an offer effective under Common Law?

Answer

A

When received if the offer is still open

Question 39

Q

When specified means (stipulated) are given and specified means are used, when is the acceptance of an offer effective under UCC and Common Law?

Answer

A

Mailbox Rule

Question 40

Q

When specified means (stipulated) are given and specified means are not used, when is the acceptance of an offer effective under UCC and Common Law?

Answer

A

counteroffer and rejection

Question 41

Q

When prompt shipment is the offer and the proper goods are shipped, when is the acceptance of an offer effective under UCC?

Answer

A

Upon shipment

Question 42

Q

When prompt shipment is the offer and improper goods are shipped, when is the acceptance of an offer effective under UCC?

Answer

A

breach and acceptance

Question 43

Q

What constitutes consideration?

Answer

A

A promise to do something new or something not already obligated to do

Question 44

Q

Why are charitable subscriptions a consideration issue?

Answer

A

Enforceable despite lack of detriment on one side

Question 45

Q

What’s wrong with preexisting obligations when it comes to consideration?

Answer

A

Not sufficient consideration

Question 46

Q

When is a modification enforceable?

Answer

A

UCC - in good faith

- Common Law - with additional consideration

Question 47

Q

What is a liquidated debt?

Answer

A

The terms are clear as far as payment, interest, etc. (i.e. a mortgage)

Question 48

Q

What is a un-liquidated debt?

Answer

A

You acknowledge you owe a debt, but disagree on the amount

Question 49

Q

What is the standard statute of limitations on contracts?

Answer

A

four years

Question 50

Q

What does the parol evidence rule prohibit?

Answer

A

Evidence that additional terms were agreed upon before the contract was signed

Question 51

Q

Over what dollar amount must sale of goods contracts (UCC) be in writing?

Answer

A

$500 or more

Question 52

Q

When must the sale of land be in writing?

Question 53

Q

For what time period must a services contract always be in writing?

Answer

A

1 year or greater

Question 54

Q

What satisfies the Statute of Frauds?

Answer

A

Record
Signature
Sufficient terms

Question 55

Q

What are the requirements for a merchant’s confirmation memo?

Answer

A

writing (record)
signed by one of the merchants
underlying oral agreement
two merchants required

Question 56

Q

What are the UCC exceptions under the Statute of Frauds?

Answer

A

Goods actually accepted by the buyer
Payments actually received by the seller
Specially manufactured
Admission - in any proceeding while under oath

Question 57

Q

When can a minor disaffirm a contract?

Answer

A

While still a minor and for a reasonable time after reaching the age of majority (voidable contract)

Question 58

Q

What happens if a buyer accepts an offer containing an immaterial unilateral mistake?

Answer

A

The contract is still valid

Question 59

Q

How can a minor upon turning 18 ratify a contract?

Answer

A

By specifically promising to be bound by the entire contract, either written or orally

Question 60

Q

How must an adult perform with a contract with a minor?

Answer

A

They are bound to it and must perform regardless

Question 61

Q

What is duress?

Answer

A

Threats that overcome one’s free will inducing a person to assent to a contract

Question 62

Q

What four proofs from the defendant are required in a common law fraud action?

Answer

A

a false statement of fact or misrepresentation
knowledge of the false statement
reliance by the plaintiff
a loss suffered by the plaintiff

Question 63

Q

How are future contracts treated if a person is declared insane?

Question 64

Q

What are the requirements for being (not declared) insane (voidable contracts)?

Answer

A

don’t understand the nature of contracts

- did not understand the effect of a specific contract

Answer 62

A

No defense

Answer 63

A

Defense is within range or offeree knows

Answer 64

A

Valid defense

Answer 65

A

a basis of the bargain

- fact or promise

Answer 66

A

material misstatement/basis of bargain
must prove knowledge
must prove intent to defraud
(can be rewarded punitive damages)

Answer 67

A

Parties agree to accept a different performance and the substituted performance is performed

Answer 68

A

Both parties agree to the discharge of their obligations

Answer 69

A

Discharge of a party’s duties

Answer 70

A

An undoing of a contract

Answer 71

A

conditions precedent
conditions concurrent
conditions subsequent

Answer 72

A

Performance is discharged

Answer 73

A

Is it for practical purposes just as good
Was it done in good faith
Can the party be compensated

Answer 74

A

Breach before performance is due

Answer 75

A

Under a technical breach

Answer 76

A

Return parties to original positions as if there was no breach

Answer 77

A

Agreed-upon in advance damages; alternative to compensatory damages

Answer 78

A

Requiring breaching party to perform; used against seller in land contract

Answer 79

A

They don’t. They may not sue to enforce contracts.

Answer 80

A

One party to a contract in question owed the creditor money
The contract in question was made specifically to satisfy the debt

Answer 81

A

liability

Answer 82

A

signature of person to be charged
quantity of goods ordered
written evidence of an agreement

Answer 83

A

Price, payment, and delivery

Answer 84

A

Breach and acceptance at the same time

Answer 85

A

Acceptance

Answer 86

A

A counter offer

Answer 87

A

Contract without additional terms

Answer 88

A

Have to check if material, there is an objection, or offer is limited. - If immaterial, it is usually included.

Answer 89

A

When the goods are placed in possession of the carrier

Answer 90

A

When the goods are delivered to the buyer’s destination

Answer 91

A

At the time of contracting

Answer 92

A

When the goods are shipped, marked, or otherwise designated for the buyer

Answer 93

A

Collect or cash on delivery

Answer 94

A

lump sum; cost and freight
risk and title pass to the buyer upon delivery to carrier
the seller includes cost of freight in contract price

Answer 95

A

Pass good title

Answer 96

A

Affirmations of fact or promises
Description of the goods
Sample or model

Answer 97

A

Fitness for a particular purpose
Merchantability
The usage of trade

Answer 98

A

Affirmation of fact or promise of performance

Answer 99

A

Must be part of the basis of the bargain

- Can’t make a disclaimer inconsistent with a express warranty

Answer 100

A

Given in every sale of goods by a merchant

Answer 101

A

Only given by merchants

Answer 102

A

If written, must be conspicuous

- Must use disclaimer of quality or use “merchantability” or general disclaimer “as is” or “with all faults”

Answer 103

A

The seller knows of the buyer’s reliance for particular use

Answer 104

A

Seller must have knowledge - buyer must rely

Answer 105

A

Must be in writing, conspicuous, and clear there are no warranties
Also disclaimed with “as is” or “with all faults”

Answer 106

A

Given in every sale

Answer 107

A

Doesn’t apply in circumstances where apparent warranty is not given

Answer 108

A

Must state there is no warranty of title

Answer 109

A

Defective condition unreasonably dangerous
Defendant in the business of using, selling, or manufacturing the product
Condition of product is the same
* knowledge of the defect is required for punitive damages

Answer 110

A

It violates public policy

Answer 111

A

Inspection of the goods, but can be later rejected if nonconforming

Answer 112

A

demand assurance of performance

- cancel the contract

Answer 113

A

after acceptance

- must materially impair value and either be a defect non-discoverable or a promise to cure

Answer 114

A

Upon notification by the buyer, prior to performance date, Seller has the right to get conforming goods to the buyer

Answer 115

A

insolvency

- advance breach by buyer

Answer 116

A

the buyer fails to take the goods: contract price minus resale price + incidental damages expenses saved)

Answer 117

A

the buyer fails to take the goods: contract price - market price + incidental damages expenses saved

Answer 118

A

specially manufactured goods: contract price + incidental damages - expenses saved

Answer 119

A

anticipatory repudiation: profits + incidental damages - salvage value

Answer 120

A

For rare, unique goods - buyer gets goods (incidentals)

Answer 121

A

the seller fails to deliver: cover price - contract price + incidentals + consequential damages - expenses saved

Answer 122

A

the seller fails to deliver: market price - contract price + incidentals + consequential damages - expenses saved

Answer 123

A

drafts, checks, notes, and certificates of deposit

Answer 124

A

When it is payable at a definite time or on demand

Answer 125

A

An order to pay - involves three parties

Answer 126

A

A promise to pay - involves two parties

Answer 127

A

A promise made between two parties

Answer 128

A

maker

- payee

Answer 129

A

drawer
drawee
payee

Answer 130

A

When presented

Answer 131

A

In 30 days

Answer 132

A

written
signed by maker or drawer
unconditional promise or order to pay
payable on demand or at a definite time
sum certain in money
words of negotiability

Answer 133

A

handwritten over preprinted and typewritten
typewritten over preprinted
words over numbers

Answer 134

A

Limits the warranties that the transferor of the instrument gives

Answer 135

A

Changes order paper to bearer paper

Answer 136

A

Keeps order paper as order paper or bearer to order

Answer 137

A

without recourse - limits liability

Answer 138

A

holder, given value, in good faith, and no notices of defenses, dishonor or overdue

Answer 139

A

Someone can become a holder in due course by gift of inheritance because they did nothing wrong

Answer 140

A

The maker

Answer 141

A

The drawee

Answer 142

A

payee and endorsers

Answer 143

A

drawer, payee, and endorsers

Answer 144

A

30 days to attach liability of endorsers
30 days to attach liability of drawer: only a problem if drawee bank fails
Six-months of good faith for banks cashing checks

Answer 145

A

drawer is off the hook for any amount above the FDIC insurance coverage

Answer 146

A

They step into the liability status of the party they are accommodating

Answer 147

A

Good title, no knowledge signatures are unauthorized, and no material alteration

Answer 148

A

good title
signatures are genuine and authorized
no material alteration
no defenses (without recourse waives indorsement waiver)
no knowledge of insolvency

Answer 149

A

HDC still gets paid

Answer 150

A

incapacity
illegality
fraud in factum
bankruptcy
lack of payment
forgery

Answer 151

A

HDC still collects according to original terms

Answer 152

A

fictitious payee
negligence
impostors

Answer 153

A

Domestic are revocable and international are irrevocable unless otherwise stated or agreed

Answer 154

A

Tool used by buyers to provide additional assurance of payment; buyer’s bank agrees to pay when specific requirements met (can’t vary terms)

Answer 155

A

It is nonnegotiable

Answer 156

A

issued by a carrier

- given to seller to evidence receipt of goods for storage

Answer 157

A

holder
takes in good faith
in ordinary course of business
pays value: no pre-existing - antecedent - debt
no notice of defense

Answer 158

A

title to document & goods
issuer obligated to hold or deliver goods according to document terms
not subject to personal defenses
subject to claims of stolen goods

Answer 159

A

document is genuine
no knowledge of any fact that would impair its validity or worth
negotiation is rightful
negotiation is effective to transfer title to document and goods

Answer 160

A

acts of god
acts of public enemy
defective packaging by shipper
inherent delicacy of goods - easily spoiled foods

Answer 161

A

underlying debt/obligation
security agreement or possession of the collateral by the creditor
debtor must have interest in the property

Answer 162

A

the creditor

Answer 163

A

security agreement:
- writing - exception is possession
- signed by debtor 
- description of collateral or possession or control
interest in the collateral
underlying debt

Answer 164

A

tangible property
intangible property
miscellaneous - proceeds, negotiable instruments, commercial tort claims, and judicial liens in tort claims

Answer 165

A

5 years for filing

can renew anytime within the last six months
for perfection by possession - as long as possession continues
must use care with collateral

Answer 166

A

4 month rule - collateral moved to another state

21-day rule - negotiable instruments

Answer 167

A

PMSI - purchase money security interest - consumer; not PMSI in inventory equipment
proceeds - identify
control

Answer 168

A

the buyer against a perfected secured creditor or a un-perfected secured creditor

Answer 169

A

With a perfected secured creditor, the creditor unless PMSI in consumer goods
With an unperfected secured creditor, the buyer assuming no knowledge

Answer 170

A

must be filed within 30 days after the final payment is made
or within 20 days of demand by the consumer

Answer 171

A

creditor - suit or repossession

- self-help - no court proceeding required before repossession - can’t breach the peace

Answer 172

A

creditor must sell collateral if debtor has paid 60% of cash price of collateral
consumer goods - can demand sale within 90 days

Answer 173

A

notice to debtor
notice to other secured parties
public or private
reasonable - price/practices
all security interests are terminated

Answer 174

A

expenses, first priority, second, debtor

* all security interests in the property are terminated

Answer 175

A

Only stands liable if creditor has exhausted every other avenue

Answer 176

A

in writing unless the surety financially or economically benefits from the contract

Answer 177

A

totally releases the surety

Answer 178

A

they can usually avoid liability

Answer 179

A

rights of surety after they pay - steps into shoes of debtor and creditor; has same rights

Answer 180

A

right of surety to force principal debtor to pay

Answer 181

A

rights from co-sureties - pro-rata share

Answer 182

A

right of surety to collect from principal debtor

Answer 183

A

the surety is released

Answer 184

A

the right to sell, will, mortgage, and lien the property. It is the highest form of land ownership.

Answer 185

A

gives the grantee/transferee the best protection on title

Answer 186

A

all tenants must acquire their interests at the same time

Answer 187

A

degree of attachment
degree of ownership
damage upon removal
relationship to property
agreement of parties

Answer 188

A

statutory right
strict filing and time requirements
used when creditor has furnished materials, labor, or services related to repair or improvement of real estate

Answer 189

A

statutory right

- improvement of property

Answer 190

A

5-20 years

Answer 191

A

warranty for time of ownership, same rights as general warranty

Answer 192

A

mortgagor - buyer/borrower

- mortgagee - creditor

Answer 193

A

original mortgagor, and transferee personally liable, property subject to foreclosure

Answer 194

A

original mortgagor personally liable, property subject to foreclosure

Answer 195

A

creation - any time, any interest
transferability - inter vivos or testamentary
death of tenant

Answer 196

A

creation - time, title, interest, and possession

Answer 197

A

an insurance company

Answer 198

A

legal process of having sums deducted directly from a debtor’s paycheck to satisfy a debt

Answer 199

A

debtor’s property is seized so that if a creditor wins a judgement, something will be available to pay the judgement

Answer 200

A

court costs and attorney’s fees, compensatory damages, and punitive damages

Answer 201

A

not a “substantial abuse”

Answer 202

A

they are exempt from garnishment

Answer 203

A

discharges debts if debtor performs as to all creditors who agreed

Answer 204

A

creditors may petition debtor in bankruptcy and set aside assignment

Answer 205

A

protection for equity in home, but still subject to mortgage and IRS

Answer 206

A

voluntary/involuntary
liquidation
trustee appointed
individual, partnerships, and corps. are eligible

Answer 207

A

reorganization
voluntary/involuntary
automatic stay
individuals, partnerships, and corps. are eligible
no need for trustee

Answer 208

A

family farmer chapter
only voluntary
50/50 requirement - 50% of income from farm and 50% of debts due to farm

Answer 209

A

consumer debt adjustment plan
voluntary
only for individuals
trustee appointed

Answer 210

A

if debt plan met, court grants discharge, with exceptions

Answer 211

A

schedule of all assets
list of all creditors
schedule of current income and expenses
approved credit counseling certificate
copy of most recent federal tax return

Answer 212

A

automatic stay when petition is granted
judgments and liens stop
enforcement actions stop

Answer 213

A

appointed by government
collect debtor’s assets
investigate debtor’s financial affairs
furnish reports to interested parties
review debtor’s materials
representative for the debtor’s estate

Answer 214

A

tangible & intangible property
all property acquired within 180 days of the bankruptcy
inheritances and gifts
property from divorce, separation, or property settlement
life insurance proceeds

Answer 215

A

federal or state

Answer 216

A

secured creditors (to the extent of repossession)
child support and alimony
administration costs during bankruptcy
employee wages (3 months preceding petition)
contribution to benefit plans
claims on raising or storage of grain
consumer deposits
taxes
unsecured creditors

Answer 217

A

alimony, child support payments, federal tax liens, and judgement liens based on intoxication torts

Answer 218

A

taxes within 2 years of filing petition
liability for obtaining money or property by false pretenses
willful and malicious injures
DWI debts
alimony, maintenance, or child support
unscheduled debts
debts from fraud as a fiduciary
government fines or penalties within 3 years prior
education loans due within past five years
prior bankruptcy debts in which debtor waived discharge
mortgage issues
Sarbanes-Oxley - bonuses; fraud
consumer debt incurred within 90 days of filing

Answer 219

A

writing
filed with court
not rescinded prior to discharge

Answer 220

A

writing, but only if agent’s contracts must be in writing

- capacity of the principal

Answer 221

A

capacity of agent

- consideration - can be a gratuitous agency

Answer 222

A

implied agency authority - whatever is customary

Answer 223

A

apparent authority - by circumstances
estoppel
ratification - full knowledge, retroactive, accepts or fails to reject

Answer 224

A

follow instructions

- fiduciary - act only on behalf of the principal

Answer 225

A

liability

Answer 226

A

compensation unless gratuitous
reimbursement for expenses
indemification

Answer 227

A

agreement - automatic termination date or accomplishment of task
unilateral act - you’re fired or I quit
operation of law - death, insanity, bankruptcy, or breach of fiduciary duty

Answer 228

A

principal liable to third party

- agent not liable to third party

Answer 229

A

principal liable to third party

- agent must indemnify principal

Answer 230

A

agent is liable to the third party

Answer 231

A

principal and agent liable to third party

- principal must indemnify agent

Answer 232

A

-agent is liable to the third party

Answer 233

A

the principal is held liable for tort liability

- must be within scope of employment vs. frolic and detour

Answer 234

A

the agent and the principal

Answer 235

A

the principal is not liable unless - negligent hiring or supervision, or implicit approval

Answer 236

A

an investment contract with four features:
1. investment of money
2. in a common enterprise
3. with an expectation of profit
4. to be earned primarily by the actions of others

Answer 237

A

pre-filing - no offers or sales
waiting - oral offers and a few written offers, but no sales
post-effective - offers and sales now okay

Answer 238

A

the “red herring” prospectus

Answer 239

A

Securities Offering Reform Package

- in 2005, enacted “company registration” for very large firms

Answer 240

A

Well-Known Seasoned Issuers
can essentially offer shares without regard to the rules mentioned before because the market is always well informed about them

Answer 241

A

“free writing prospectuses”

- supplemental written literature freely used by WKSIs

Answer 242

A

bank & government securities
federally-regulated common carriers
bankruptcy receivers/trustees
insurance & annuity policies

Answer 243

A

allows qualified issuer to raise up to $1 million in a 12-month period without registering

Answer 244

A

allows qualified issuer to raise up to $5 million in a 12-month period without registering
unlimited accredited investors, but no more than 35 unaccredited investors

Answer 245

A

allows qualified issuers to raise unlimited amounts without registering, if sell only to sophisticated investors or other represented by “purchaser representatives.”

Answer 246

A

states can enforce antifraud rules and require “notice” filing
states can’t engage in “merit regulation” or register “covered” securities

Answer 247

A

less than $1 billion in annual gross revenue
publicly traded less than five years
public float less than $700 million
Not issued more than $1 billion in nonconvertible debt in prior three years

Answer 248

A

only two years of audited financial statements for IPO
reduced disclosure of executive pay
confidential SEC review

Answer 249

A

SOX section 404a internal control audits

- numerous rules on executive pay

Answer 250

A

issuer cap - $1 million in a 12 month period

Answer 251

A

can’t invest in all crowdfunding endeavors per year more than:

the greater of $2,000 or 5% of investor’s annual income or net worth if both are less than $100 thousand
10% of annual net income or net worth not to exceed $100 thousand if either annual income or net worth greater than $100 thousand

Answer 252

A

eliminated the ban as long as all purchasers are accredited investors

Answer 253

A

went from $5 million to $50 million

Answer 254

A

went from $10 million in assets and 500 shareholders to $10 million and 2,000 shareholders

Answer 255

A

Section 11 remedies false statements or omissions in a registration statement as of the effective date

Answer 256

A

a false statement or omission in the registration statement on the effective date
materiality
tracing
damages

Answer 257

A

due diligence
alternative causation
statue of limitations - within three years of effective date or within one year of discovery

Answer 258

A

remedies violation of Section 5’s registration provisions:

sale of unregistered securities
failure to deliver prospectus
use of inadequate prospectus
offer before registration statement is filed

Answer 259

A

defendant violated section 5
defendant was a seller
plaintiff lost money

Answer 260

A

remedies false statements and omissions in oral statements and “free writing”

Answer 261

A

false statements or omissions
materiality
defendant is a seller
tracing
damages

Answer 262

A

due diligence
alternative loss causation
statute of limitations

Answer 263

A

punishes fraud in the secondary markets
regulates the securities industry
created the SEC
created the periodic disclosure system

Answer 264

A

created filing requirements for “reporting companies” that are exchange-listed and have 500 shareholders and $10 million in assets

Answer 265

A

Form 10 - when they become reporting companies
Form 10-K annually
Form 10-Q quarterly
Form 8-K between quarters if important developments occur

Answer 266

A

punishes fraudulent statements and omissions in the purchase or sale of securities in virtually every setting

Answer 267

A

false statement or omission
materiality
reliance
causation
purchase or sale
damages
scienter by the defendant

Answer 268

A

within two years of discovering the loss and within five years of the fraud itself

Answer 269

A

defendant made or caused to be made a false or misleading statement or omission
in a filed document
materiality
plaintiff’s purchase or sale of securities
plaintiff’s “eyeball” reliance
causation
damages

Answer 270

A

defendant acted in good faith and without knowledge that the statement was false or misleading
statute of limitations (1-year/3-year)

Answer 271

A

intentional violation of any provision of the 1933 or 1934 acts is a crime
criminal charges are brought by the department of justice
burden of proof = beyond a reasonable doubt

Answer 272

A

created the Financial Stability Oversight Council (FSOC) to reduce systemic risk in US financial system
“Volcker Rule” - places limits on proprietary trading by large banks
adds transparency
created the Consumer Financial Protection Bureau (CFPB)

Answer 273

A

race
color
religion
sex and sexual harassment
national orgin

Answer 274

A

bona fide occupational qualification (BFOQ)

- legitimate seniority or merit system

Answer 275

A

protects workers over 40 against age discrimination
no mandatory retirement
no discrimination in terms and conditions of employment

Answer 276

A

protects qualified individuals with a disability that substantially limits a major life activity
requires reasonable accommodations

Answer 277

A

contributed by at least 40 quarters (10 years)

- entitled to full range of benefits

Answer 278

A

entitled to some of the benefits

Answer 279

A

portion of medical costs of those 65 or older
some benefits for younger disabled workers
does not fund medicaid

Answer 280

A

Federal Insurance Contributions Act

Answer 281

A

may impose them on “responsible persons” who were required to collect, truthfully account for, and pay over the tax
the key question is whether the person had the discretion to decide which, when and in what order debts or taxes would be paid
willfully failed to do so

Answer 282

A

Federal Unemployment Tax Act

Answer 283

A

retirement benefits and disability benefits

Answer 284

A

executives

- professional employees, like CPAs

Answer 285

A

encourages employers to provide employee pension or welfare benefits plans through tax benefits
prohibits discrimination in such plans

Answer 286

A

employees are guaranteed a specified monthly income for life once retired

Answer 287

A

employers promise to contribute to a retirement account that hopefully will be wisely invested

Answer 288

A

defined benefit plans only

Answer 289

A

provides health insurance in some circumstances after a job loss
applies if employees lose their job due to termination (including quits) or reduced hours
coverage is extended for 18 months or 29 months if insured was disabled
employee pays for the coverage

Answer 290

A

entitled to 12 weeks of unpaid leave without losing job if you worked for the employer at least 12 months and at least 1,250 hours during previous 12 months
leave for - child birth, serious health condition, or caring for family member with serious health condition

Answer 291

A

to provide nearly-automatic compensation for employees who suffer work-related injuries or disease
doesn’t cover independent contracts
employer must pay worker’s compensation insurance

Answer 292

A

promote job safety

Answer 293

A

provide a workplace free from “recognized hazards” likely to cause death or serious physical harm
comply with OSHA standards
keep records of job-related injuries and report them to OSHA

Answer 294

A

file a request for inspection
refuse in good faith to work
not be retaliated against for exercising rights

Answer 295

A

right to form, join , or assist unions
right to bargain collectively through their chosen union
right to engage in concerted activities like strikes for the purpose of collective bargaining

Answer 296

A

section 1 prohibits conspiracies in restraint of trade

- section 2 prohibits monopolies and attempts to monopolize

Answer 297

A

section 2 prohibits price discrimination
section 3 prohibits tying and exclusive dealing arrangements
section 7 forbids anti-competitive mergers

Answer 298

A

section 5 prohibits “unfair methods of competition”

Answer 299

A

section 2 further addresses price discrimination

Answer 300

A

trademarks
trade secrets
copyrights
patents

Answer 301

A

“original works of authorship”

Answer 302

A

fixed in some tangible medium of expression
creative
original

Answer 303

A

life of the author plus 70 years

Answer 304

A

shorter of 95 years from the date of publication or 120 years from the date of creation

Answer 305

A

20 years from the date of filing

- must be filed within one year of coming up with invention

Answer 306

A

a government-granted exclusive right to make, use or sell an invention

Answer 307

A

Non-functional ornamental design elements in a functional product

Answer 308

A

patentable subject matter
it is useful - not useful if it doesn’t work, is a hoax, or is merely an abstract idea
it is novel
it is non-obvious - to a person with ordinary skill in that area

Answer 309

A

14 years from the date of filing

Answer 310

A

the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate
relevant to drug dealing, terrorism, and tax evasion

Answer 311

A

banks to report cash transactions over $10,000
identify persons conducting all transactions
maintain a traceable paper trail

Answer 312

A

to break large transactions down into pieces smaller than $10,000 each in order to evade the reporting requirements

Answer 313

A

Section 1956

- Section 1957

Answer 314

A

prohibits transaction money laundering

- prohibits transportation money laundering

Answer 315

A

monetary transactions in criminally derived property over $10,000

Answer 316

A

single owner business

- firm’s assets and liabilities belong solely to its owner

Answer 317

A

association of two or more persons to carry on as co-owners a business for profit
profits are allocated and taxable directly to the partners
legal entity for most purposes

Answer 318

A

one-shot general partnership type relationship

Answer 319

A

partnership with at least one general partner and one limited partner
limited partners give up certain general management rights for limited liability

Answer 320

A

carry greater protection from liability than either general or limited partnerships
created primarily to protect professionals from undue malpractice liability arising from errors of their partners
must carry minimum levels of malpractice insurance

Answer 321

A

allows the general partner(s) of a limited partnership to enjoy limited liability, just like limited partners
third parties must protect themselves contractually
authorized in about only 20 states

Answer 322

A

enjoys limited liability

- double taxation

Answer 323

A

no double taxation - flow-through entity
no more than 100 shareholders
unanimous election
only certain types of shareholders

Answer 324

A

liability-limiting advantages of the corporate form
pass-through tax benefits of the partnership form of business
can operate like a general partnership - member managed
can operate like a corporation - manager-managed

Answer 325

A

sole proprietorship
general partnership
may file statement of partnership authority

Answer 326

A

corporations - articles of incorporation
LLCs - operating agreement
LPs - partnership agreement
LLPs - partnership agreement
LLLPs - partnership agreement

Answer 327

A

name - indicated corp. status
number of authorized shares
address of registered office
name of registered agent at the office
names and addresses of incorporators

Answer 328

A

a person who takes the initiative in founding and organizing a corporation

Answer 329

A

the proposed corporation
other promoters
contemplated investors

Answer 330

A

to take actions contrary to the partnership agreement
to take actions regarding “extraordinary matters” like admitting a new partner, assigning partnership property, or disposing of goodwill

Answer 331

A

commingling of funds and other assets of the corporation with those of individual shareholders
diversion of the corporation’s funds or assets to the personal use of shareholders
failure to maintain the necessary corporate formalities
failure to adequately capitalize the corporation

Answer 332

A

the partnership dissolves and is wound up

- the departing partner is bought out

Answer 333

A

value of account on day of dissociation - damages caused - if wrongful disassociation
valued by greater of liquidation value or going-concern value

Answer 334

A

90-day “cooling off” period between dissociation and liquidation

Answer 335

A

creditors - including partners - are paid first
partners will have to contribute if there is not enough money to pay creditors
if there is money left over, will make distributions to partners

Answer 336

A

voluntarily dissolved upon approval of their directors and shareholders
involuntarily dissolved administratively by the Secretary of State
involuntarily dissolved judicially
an action by creditors

Answer 337

A

sale of all or substantially all of a corporation’s assets
mergers or consolidations with other corporations

Answer 338

A

contribution + share of profits - liabilities = account balance
* may be reduced by distributions and losses

Answer 339

A

in the same way

Answer 340

A

quality tests - shares can be issued in exchange for cash, promissory notes, or any other items of tangible or intangible value to the corporation
quantity tests - must be issued for at least par (face value) or amount authorized by the board

Answer 341

A

authorized by the board of directors
must be consistent with shareholders’ rights, not render corp. unable to meet its bills as they come due, and not leave corp. with fewer assets than liabilities

Answer 342

A

if after doing so the firm would be insolvent

Answer 343

A

equal management rights
to have their capital contributions repaid and share in profits equally
entitled to use or possess partnership property, but only on behalf of the partnership

Answer 344

A

creditor gets a judge to order the other partners to pay any distribution to the debtor partner to that partner’s creditor instead

Answer 345

A

partners may veto admission of potential new partners

- new partners may be added only upon unanimous consent of existing partners

Answer 346

A

duty of loyalty, which includes accounting for any benefit derived, avoiding conflicts of interest, and refraining from competing with partnership business
duty of care, which includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law

Answer 347

A

to vote for corporate directors
to inspect corporate records for proper purposes at proper times and in proper locations
to have their financial priorities respected if they hold preferred shares

Answer 348

A

to exercise appraisal rights when they dissent from major organic changes
to file derivative lawsuits against officers, directors and others who have committed wrongful acts that have injured the corporation

Answer 349

A

duty of attention - attend most board meetings, gain a basic familiarity with the company’s business, and study the company’s financial statements
duty of care - must act in good faith, with the care of an ordinarily prudent person in a like position, and in a manner reasonably believed to be in the best interests of the corporation
duty of loyalty - avoid conflicts of interest

Answer 350

A

approved by a affirmative majority of disinterested directors
approved by a majority of knowledgeable shareholders or
they are “fair” to the corporation

Answer 351

A

right to rely - can rely upon the reports of officers and other directors assuming no red flags
business judgement rule - business judgement of the directors will not be interfered with by the courts without a showing of bad faith or a gross abuse of discretion

Answer 352

A

whether member-managed or manager-managed, managers owe duties of care and loyalty to the (other) members

Answer 353

A

an act of a partner for apparently carrying on in the ordinary course of the partnership business binds the partnership unless -
the partner had no authority to act for the partnership in the particular matter, and the third party knew they lacked authority

Answer 354

A

When they act with actual authority (express or implied) or apparent authority

Answer 355

A

partnerships are generally liable for the torts committed by their partners or other agents within the scope of their employment

Answer 356

A

they are personally-liable for all subsequently-incurred debts, but are liable for preexisting debts only out of their partnership contribution

Answer 357

A

shareholders are passive investors who vote for directors
directors set overall corporate policy and select officers
officers make the day-to-day decisions that bind the firm

Answer 358

A

borrow money
sell corporate property
hire and fire officers and other employees
declare or refuse to declare dividends
make or refuse to make other distributions to shareholders
set the salaries of employees, officers, and themselves
propose for shareholder approval major changes in the corporation

Answer 359

A

express authority derived from articles of incorporation, by-laws, directors’ resolutions, and statutes
implied authority derived by virtue of their offices

Answer 360

A

whether it is member managed or manager managed

- absent provision to the contrary, it is assumed that an LLC will be member-managed

Answer 361

A

a member is not an agent of the limited liability company solely by reason of being a member

Answer 362

A

accounts and notes receivable
inventory
trade or business assets owned for a year or less

Answer 363

A

trade or business assets owned for more than a year

Answer 364

A

all other assets are capital assets

- the most common ones are those used in one’s personal activities and in investment activities

Answer 365

A

sales, exchanges, trade-ins, casualties, condemnations, thefts, and retirements

Answer 366

A

amount realized - adjusted basis = realized gain/loss

Answer 367

A

cash received, fmv of any property received, liabilities assumed by the buyer, less selling expenses

Answer 368

A

cost includes any liabilities or expenses connected with the acquisition - minus depreciation, amortization, and depletion + capital improvements

Answer 369

A

all expenditures required to place an asset in service including: transportation, installation, testing, and taxes

Answer 370

A

gain basis = adjusted basis of the donor
loss basis = lower of fmv at date of gift or adjusted basis of the donor
depreciable basis = gain basis
basis is increased for the portion of any gift tax paid by the donor due to appreciation in the property

Answer 371

A

basis to the beneficiary is the fmv of the asset at the date of death or the alternate valuation date (six months after the date of death) if elected by the estate’s executor

Answer 372

A

if sold for a gain, the holding period carries over

- if sold for a loss, the holding period doesn’t carry over

Answer 373

A

always long-term

Answer 374

A

can only use a net capital loss to offset capital gain net income
unused net capital losses are short-term capital losses and can be carried back 3 years and forward 5 years
no preferential rate for long term capital gains

Answer 375

A

0% in the 15% or lower tax brackets
15% for most taxpayers
20% for those in the 39.6 tax bracket

Answer 376

A

joint filers with a MAGI above $250K
single and head of household filers with a MAGI above $200K
applies to all investment income

Answer 377

A

25% for net capital gain attributable to straight-line depreciation claimed on real estate
28% maximum rate for net capital gain attributable to collectibles

Answer 378

A

The group of long-term gains taxed at the highest rate is offset first

Answer 379

A

the trade date

Answer 380

A

the first $50,000 ($100K for MFJ) from the sale of Section 1244 stock will be treated as an ordinary loss
individual selling the stock must be original holder of the stock
to qualify as Section 1244, total capitalization of the corp. can’t exceed $1 mil. at the time the stock is issued

Answer 381

A

treated as a long-term capital gain subject to a lookback limit for losses during the previous 5 years

Answer 382

A

the loss is deductible as an ordinary loss

Answer 383

A

net Section 1231 gains must be offset by net Section 1231 losses from the five preceding tax years that have not been previously recaptured - to the extent of these losses, the net Section 1231 gain is treated as ordinary income

Answer 384

A

Realty - land and assets permanently attached to land

*recapture only applies to Section 1231 assets

Answer 385

A

Personalty - assets other than realty

Answer 386

A

If the Section 1231 property was depreciable, the gain from the sale is subject to recapture as ordinary income
the amount not recaptured is categorized as Section 1231 gains

Answer 387

A

depreciable realty is Section 1250 property

- only the excess of actual depreciation over straight-line depreciation is subject to recapture as ordinary income

Answer 388

A

the 25% rate is usually the straight-line depreciation on the asset

Answer 389

A

straight-line depreciation is not taxed at 25%
instead, additional depreciation is recaptured to the extent of 20% multiplied by:
recapture if the property was Section 1245 property
less - Section 1250 depreciation recapture

Answer 390

A

200% declining balance method with a half-year convention; taxpayer gets one-half year depreciation in the year of acquisition and one-half year in the year of disposal

Answer 391

A

trucks, automobiles, computers and machinery and equipment

Answer 392

A

office furniture and fixtures

Answer 393

A

if more than 40% of all personalty is placed in service during the last quarter of the taxable year

Answer 394

A

straight line depreciation with the mid-month convention - taxpayer gets one-half month depreciation in the month of acquisition and one-half month in the month of disposal

Answer 395

A

residential realty is depreciated over 27.5 years

- nonresidential realty is depreciated over 39 years

Answer 396

A

taxpayers can elect to expense a certain amount of tangible personalty used in a trade or business
investment property is not eligible
new or used property is eligible

Answer 397

A

annual limit is reduced dollar-for-dollar for personalty placed in service during the year that exceeds a threshold - not carried over
section 179 expense can’t exceed taxable income - carried over to future years

Answer 398

A

taxpayers can elect to immediately depreciate 50% of many types of personalty
only applies to new property
AMT adjustments are not required

Answer 399

A

$25,000 for the first year

Answer 400

A

to use accelerated cost recovery the business use of listed assets must exceed 50% of total use - investment use is not considered

Answer 401

A

cost recovery is limited to straight-line (ADS)
ADS depreciation must be used for the entire depreciable life of the asset
excess depreciation from prior years must be recaptured

Answer 402

A

intangible assets that are acquired, not created, can be amortized on a straight-line basis over 15 years

Answer 403

A

i.e. covenants not to compete, patents, and copyrights

- qualify if acquired in connection with the acquisition of a trade or business

Answer 404

A

losses are never recognized from a like-kind exchange

- recognized gain is the lesser of realized gain or boot received

Answer 405

A

any non-like kind property received as part of the exchange. Liabilities assumed by the other party to the exchange are considered boot.

Answer 406

A

only to business and investment property

- business property can be exchanged for investment property

Answer 407

A

FMV of property received - postponed gain + postponed loss

Answer 408

A

the property’s FMV

Answer 409

A

holding period of like-kind property surrendered tacks on to the holding period of like-kind property received

Answer 410

A

includes destruction, theft, seizure, and condemnation of property
replacement property must be similar or related in service or use to the involuntarily converted property

Answer 411

A

property must be replaced within 2 years after the close of the taxable year in which the conversion took place
3 years for condemned business or investment real property

Answer 412

A

amount realized from conversion - cost of replacement property = recognized gain (limited to realized gain)
losses are never deferred under these rules

Answer 413

A

amount realized from conversion - adjusted basis of old property = realized gain/loss

Answer 414

A

FMV of property received - postponed gain + postponed loss
if gain is deferred, holding period of the converted property tacks on to the holding period of the replacement property

Answer 415

A

When a taxpayer sells a stock or security and has a realized loss, but acquires substantially identical stock or securities within 30 days before or after the date of the sale, the loss is disallowed

Answer 416

A

cost + disallowed loss

Answer 417

A

includes the holding period of the old stock or securities

Answer 418

A

realized losses from sales or dispositions of property between related taxpayers is not recognized

Answer 419

A

spouse, descendants, ancestors, and siblings

* doesn’t include in-laws and aunt, uncles, and cousins

Answer 420

A

after a related party loss is disallowed, can be used to offset any gain recognized when the current owner disposes of the property in future, but only to zero

Answer 421

A

Holding period of the original buyer doesn’t include holding period of the seller

Answer 422

A

applies to only one sale or exchange every two years

Answer 423

A

recognized gain = cash received * gross profit percentage

Answer 424

A

15, 25, 34, & 35%

Answer 425

A

Requires a cash basis taxpayer to include the value of property in income in the period in which the right to the property is acquired

Answer 426

A

the amount is readily available to the taxpayer

- actual receipt is not subject to substantial restrictions

Answer 427

A

income is taxed to the individual who earned the income, it can’t be assigned to others

Answer 428

A

requires a taxpayer to include an expense reimbursement in income if the expense was deducted in a prior period and the deduction reduced the taxpayer’s taxable income

Answer 429

A

requires a taxpayer to include property in income in the period in which an apparent claim to the property materializes
a later repayment of the property generates a deduction

Answer 430

A

all interest income is taxable except for municipal interest, which is interest paid on bonds owned by state and local governments

Answer 431

A

interest earned from mutual funds is also tax-free to the extent that the funds own municipal bonds
gain from the sale of municipal bonds is taxable

Answer 432

A

owner of the bond is at least 24
proceeds used to pay higher education expenses in the year of redemption
higher education expenses are for taxpayer, spouse, or dependent
exclusion is phased-out at higher income levels

Answer 433

A

can elect to amortize the premium
amortization reduces the basis of the bond
amortization offsets the interest income from the bond
amortized bond premium is computed using the constant yield to maturity method

Answer 434

A

using the effective interest rate method

- amortization increases interest income

Answer 435

A

taxed at maturity as ordinary income for cash basis taxpayers
reported as earned for accrual basis taxpayers

Answer 436

A

must be received from a domestic corporation or a foreign corporation who’s stock is tradable on an established U.S. securities market

Answer 437

A

dividend income to the extent of E&P
reduction of basis in stock
capital gain

Answer 438

A

not taxable on common stock

- taxable on preferred stock

Answer 439

A

it is taxed to recipient and the payer is granted a deduction for AGI

Answer 440

A

not taxable and basis stays the same

Answer 441

A

payment must be in cash or via expense payment
payment must be contingent on the life of the recipient
payment must be required by a written agreement or decree
payment is not child support or specifically identified as “non-alimony”

Answer 442

A

payments for physical injury or physical sickness are excluded from income, as is worker’s compensation
benefits from accident and health policies are generally excluded from income
benefits from disability plans are excluded unless premiums were paid by the employer and not taxed to the employee

Answer 443

A

medical insurance premiums paid by the employer are excluded from income
damages received for emotional distress, employment or age discrimination, or injury to repudiation are must be included in gross income
benefits received under long-term care insurance are excludible from income
punitive damages in general must be included in income

Answer 444

A

for retirement payouts, expected return is annual annuity amount multiplied by life expectancy determined by IRS table
exclusion ratio stays the same until entire cost is fully recovered; additional payments are fully taxable
if annuitant dies before total cost is recovered, unrecovered cost is a deduction on the taxpayer’s final tax return

Answer 445

A

cost of annuity/expected return x payment

Answer 446

A

jury duty pay is includable in income

- if the jury duty pay is given to the juror’s employer then a deduction for AGI is received to offset this income

Answer 447

A

the FMV of these items must be included in income

Answer 448

A

they are for civic, artistic, educational, scientific, or literary achievement and the recipient is:
selected without action on their part
not required to perform services
amount paid is directly to a tax-exempt or or governmental organization

Answer 449

A

proceeds of life insurance received due to the death of the insured are excluded from income
accelerated death benefits from a life insurance policy can be excluded from income if the insured taxpayer is terminally ill or chronically ill

Answer 450

A

excluded from income of the recipient
intent of the donor determines if the transaction is a gift
no such thing as a gift between an employer and employee (except for deminimus rules)

Answer 451

A

generally not included in income
however, if provisional income (PI) exceeds a specified amount, up to 85% of the benefits may be included in income
PI = AGI + tax-exempt interest + 50% (SSB)

Answer 452

A

generally, results in income to the borrower unless the forgiveness is a gift

Answer 453

A

if the taxpayer is bankrupt or insolvent (can only exclude to the extent of insolvent), the debt forgiveness is not taxable
taxpayer must reduce tax attributes such as NOLs, credit carryovers, and the basis of property

Answer 454

A

a taxpayer has no accounts receivable because no accounting entry is made for sales on account

Answer 455

A

unearned income is usually recognized in the year received, rather than the year earned
may elect to defer recognition of service income into the next year if the service is to be provided within the following year

Answer 456

A

if the method of accounting for sales is the same for tax and financial reporting purposes

Answer 457

A

prepaid rent is taxed when received
lease deposits are not income when received if they can be returned to the lessee at the end of the lease term
the fair value of leasehold improvements is income to the landlord if the improvements are made in lieu of rent

Answer 458

A

regular C corporations
partnerships that have regular C corporations as partners
tax shelters

Answer 459

A

when annual gross receipts don’t exceed $5 million
average annual gross receipts for the previous three years can’t exceed $5 million
once the test is failed, accrual must be used in all future years
certain farming businesses
qualified personal service corporations

Answer 460

A

in general, businesses with inventories must use the accrual method to report purchases (cost of goods sold) and sales

Answer 461

A

if it is also used for financial reporting

Answer 462

A

manufacturers and certain retailers and wholesalers are required to use the uniform capitalization method to capitalize all the direct and indirect costs allocable to property they produce and for property bought for resale

Answer 463

A

those with $10 million or less in gross receipts during the preceding three years - uniform capitalization rules don’t apply

Answer 464

A

storage costs if off-site
quality control
taxes (except income taxes)
utilities, repairs, rent, and depreciation

Answer 465

A

marketing and selling
research
advertising
distributions
general & admin. expenses

Answer 466

A

spread over four years beginning with the year of change

* if less than $25,000 the taxpayer can include all income in the year of change

Answer 467

A

the income for that period is first multiplied by 12 months/number of short-term months to annualize the income for 12 months
the corporate tax liability is then computed on this amount for the full 12 months
the amount is then multiplied by # of short-term months/12 to prorate for the short tax year

Answer 468

A

reimbursements of employee business expenses are included in income of the employee
reimbursements under an accountable plan are not required to be reported on the W-2

Answer 469

A

generaly excluded from income as long as the benefit plans don’t discriminate in favor of highly compensated employees

Answer 470

A

excluded from income when group-term policy has a $50,000 face value
for amounts over $50,000, the insurance benefits are taxable
if the employer is paying premiums on a whole-life insurance policy, these are included in income

Answer 471

A

employer paid premiums for long-term care policies are excluded from income
employer paid premiums for wage continuation insurance are included in income

Answer 472

A

premiums paid by taxpayer are not deductible
premiums paid by taxpayer’s employer, excluded from taxpayer’s income, but deductible by employer
benefits received by a taxpayer from a policy paid for by the taxpayer - excluded from income
benefits received by a taxpayer from a policy paid for by the employer - included in income

Answer 473

A

furnished for convenience of the employer
on employer’s premises
meals must be in-kind
lodging must be a condition of employment

Answer 474

A

no additional cost services
employee discounts - limited to gross profit percentage
working condition fringes
de minimus fringes
normal gifts - up to $25
payments for transportation and parking
employer provided retirement planning advice
payments from an employer that would be deductible as moving expenses

Answer 475

A

can excluded up to $5,000 ($2,500 if married filing separately) from gross income the value of child and dependent care services provided by the employer, if the services are provided so that the employee can work

Answer 476

A

can exclude up to $5,250 from gross income the value of assistance provided by the employer for undergraduate and graduate tuition, fees, books, and supplies

Answer 477

A

working at nonprofit educational institutions - waivers for themselves, their spouse, and dependent children

Answer 478

A

excluded from income only for graduate teaching/research assistants

Answer 479

A

if reimbursed by the employer

- the exclusion is phased-out at higher AGI levels

Answer 480

A

grant date, exercise date, and sale date

Answer 481

A

grant date - none
exercise date - none (except AMT)
sale date - ordinary income/capital gain

Answer 482

A

grant date - none
exercise date - ordinary income
sale date - capital gain

Answer 483

A

(FMV of Stock - Exercise Price) x # of shares exercised

Answer 484

A

held more than one year

- not sold until after two years from the date the option was granted

Answer 485

A

the gain on the stock sale is ordinary income

- the difference in the FMV on the sale date and the FMV on the exercise date is capital gain or loss

Answer 486

A

all phase outs are pro-rata over the phase-out range (usually $10,000 or $20,000 range)
those who can’t deduct IRA contributions can still defer the income earned by nondeductible IRA contributions to traditional IRAs

Answer 487

A

by the original due date of the tax return for the previous year

Answer 488

A

by age 70 1/2

Answer 489

A

occurred five years or more from the date of the initial contribution
is made on or after an individual attains age 59 1/2
withdrawals are not required once a taxpayer reaches age 70 1/2

Answer 490

A

taxpayer is disabled
age 59 1/2
separated from service after age 55
has died
made in the form of certain periodic payments
for first-time homebuyers (up to $10,000)
used to pay qualified higher education expenses
pay health insurance premiums if self-employed
used to pay medical expenses in excess of the AGI floor

Answer 491

A

the taxpayer must recognize gain at the time of the conversion to the extent that the conversion amount exceeds the tax basis in the IRA

same rule applies to conversions of 401(k) plans into Roth plans
these conversions are reported on Form 8606

Answer 492

A

to the extent that the employee has basis in the plan

- an employee has basis to the extent that the employee made nondeductible contributions to the plan

Answer 493

A

contributions made by employers
tax deductible employee contributions
tax-free earnings inside the plan

Answer 494

A

distributions from qualified plans must begin by the “required beginning date” and the payment each year must be at least equal to the RMD
if the required distribution is not made, a tax equal to 50% of the required distribution not made must be paid

Answer 495

A

must begin by April 1 of the later of:
the year the taxpayer reaches age 70 1/2 or
the year the employee retires

Answer 496

A

for self-employed taxpayers
contributions are limited to the lesser of the annual limitation or 100% of earned income
earned income equals net earnings from self-employment less 50% of the self-employment tax less the allowable Keogh contribution

Answer 497

A

25% of earned income

Answer 498

A

allows voluntary employee contributions to reduce taxable salary up to an annual limit, plus a catch-up amount for those age 50 and older
employers often match a certain percentage of employee contributions to these plans

Answer 499

A

25% of compensation or
the dollar limitation for defined contribution plans
contributions can be made up to the extended due date of the return

Answer 500

A

contributions are not deductible, and a beneficiary must be specified for the plan
states typically allow lifetime contributions to the plan of as much as $250,000
earnings in the plan are tax deferred
distributions are tax-free if used for qualified education expenses

Answer 501

A

trade or business
investment
personal

Answer 502

A

if they are related to the business operations and are ordinary, necessary, and reasonable

Answer 503

A

if ordinary, necessary, and reasonable

Answer 504

A

expenses related to the management or maintenance or property and in connection with the determination of any tax are deductible

Answer 505

A

if the executive compensation for the CEO and the four other most highly compensated officers that exceeds $1 million per person is not deductible unless the income is based on a performance based compensation plan

Answer 506

A

lobbying expenses at the state and federal level - deductions are permitted at the city and county government level
no expenses can be deducted if the expense is used to generate tax-exempt income
political contributions
no expenses can be deducted if the expenditure is against public policy

Answer 507

A

the cost of goods sold

Answer 508

A

ordinary, necessary, and reasonable expenses as long as they aren’t against public policy

Answer 509

A

an immediate deduction can be taken when paid as long as the benefits from the expenditure don’t extend beyond the earlier of:
12 months after benefits first begin or
the end of the year after the year in which the payment was made

Answer 510

A

the expenses are amortized over the benefit period

- prepaid interest must always be amortized over the life of the loan

Answer 511

A

taxpayer can deduct refunds, rebates, awards, prizes, provision of warranty work or service contracts, taxes, and insurance premiums only when actually paid
vacation pay and bonuses are deducted only if paid within 2 and a 1/2 months after the close of the tax year

Answer 512

A

includes all related expenditures incurred before the date the asset was placed in service, even repairs
a single UOP includes all components that are functionally interdependent
taxpayer can elect to capitalize employee compensation and overhead costs

Answer 513

A

routine maintenance to keep UOPS operating efficiently is expensed, such as testing, cleaning, inspecting, and replacing parts
to be routine it must be expected that the expenditure will be needed more than once during the asset’s life

Answer 514

A

generally rules are same for other businesses
all harvested products held for resale, feed, or seed must be included in inventory
livestock held for resale must be included in inventory
livestock held for breeding or dairy are business assets that must be depreciated
growing crops are usually not included in inventory

Answer 515

A

moving household goods and personal items
traveling (lodging is included, but not meals) from the former residence to the new residence
the moving mileage rate is 23 cents per mile

Answer 516

A

new job location must be at least 50 miles farther from the taxpayer’s old residence than the old residence was from the previous place of employment

Answer 517

A

employee must be employed on a full-time basis at the new location for 39 weeks in the 12-month period following the move (78 weeks during 24 months if self-employed, and 39 weeks must fall within first 12 months)

Answer 518

A

take a deduction for AGI for the amount repaid

Answer 519

A

net investment income (investment income less investment expenses)

Answer 520

A

on the portion that does not exceed the lesser of -

the FMV of the residence less the lower of remaining acquisition indebtedness, or
$100,000

Answer 521

A

5 years

* no carryback

Answer 522

A

FMV is deductible

- deduction is limited to 30% of AGI

Answer 523

A

deduction is the FMV of the property, reduced by any STCG or ordinary income that would be recognized if the property had been sold

Answer 524

A

must be sudden and unexpected - i.e. natural disasters, thefts, and automobile accidents
the deduction equals the lessser of:
the decline in the FMV of the property or
the adjusted basis of the property

Answer 525

A

lower of decline in FMV or AB of property

insurance reimbursements
casualty floor ($100)
10% of AGI

Answer 526

A

unreimbursed employee expenses, and expenses reimbursed, but not under an accountable plan
expenses relating to tax planning and return preparation
investment expenses including fees paid for investment advice and safe deposit box rental fees

Answer 527

A

gambling losses to the extent of gambling winnings
certain expenses of short sales
unrecovered annuity costs

Answer 528

A

the reduction is 3% of the amount of AGI in excess of the threshold
the reduction can’t exceed 80% of the otherwise allowable itemized deductions
the itemized deductions not subject to the 80% phase out are medical expenses, investment interest expenses, casualty and theft losses and gambling losses

Answer 529

A

the reimbursement is not taxable and the employee gets no deduction for the expense

Answer 530

A

reimbursement is included in income and the deduction is a 2% miscellaneous itemized deduction

Answer 531

A

employees must substantiate all expenses to be reimbursed

- all excess reimbursements must be returned to the employer

Answer 532

A

if the assignment is short-term in nature

Answer 533

A

includes transportation expenses and meals and lodging while away from your business home
away from home means that the taxpayer must be gone overnight to be away from home

Answer 534

A

only if greater than 50% of the total days are business days

Answer 535

A

limited to the face value of the ticket (before the 50% rule)

Answer 536

A

to meet minimum standards of current job

- to qualify taxpayer for a new trade or business

Answer 537

A

to maintain or improve existing skills required in current job
to meet requirements of employer or imposed by law to retain employment status

Answer 538

A

the specific charge-off method must be used (financial institutions can use the reserve method)

Answer 539

A

deducted against ordinary income in the year that partial or total worthlessness occurs

Answer 540

A

always treated as a short-term capital loss

- no deduction is allowed until the debt becomes totally worthless

Answer 541

A

a worthless asset is treated as being sold for no consideration on the last day of the tax year
rule applies to stocks and bonds
in general, the security must be totally worthless

Answer 542

A

they must be carried back to the two preceeding tax years (beginning with the second prior year) unless an election is made in the year of the NOL to forego the carryback
the carryover period is 20 years

Answer 543

A

only allowed for business losses and casualty losses

- any nonbusiness losses or expenses must be added back to the taxable loss to determine the NOL

Answer 544

A

profit in three of the last five years

- otherwise is presumed to be a hobby

Answer 545

A

items that would have been deductible anyways
other cash expenses
depreciation

Answer 546

A

used exclusively on regular basis as either:

the principal place of business for a trade/business of the taxpayer or
a place of business used by clients, patients, or customers, and
the use is for the convenience of the employer (if employed)

Answer 547

A

limited to income from the business less all other business expenses
expenses are deducted in the same order as for hobby losses
disallowed expenses are carried forward to future years indefinitely

Answer 548

A

multiply the allowable square footage by $5

- maximum square footage under this method is 300, limiting the deduction to $1,500

Answer 549

A

deemed a personal residence

- rent income is excluded

Answer 550

A

not used for personal purposes for more than the greater of 14 days or 10% of the total days rented
* if it exceeds these numbers, a loss is not allowed

Answer 551

A

one in which the taxpayer does not “materially participate”
applies to most rental activities and any limited partnership interest

Answer 552

A

if the taxpayer “actively participates” in a rental real estate activity, $25,000 of losses from such activities can offset active and portfolio income
phased out between a modified AGI of $100K & $150K

Answer 553

A

they are carried forward indefinitely until the related activity is sold

Answer 554

A

perform more than 50% of his or her personal services in trades or businesses involving real property and
must perform more than 750 hours of services in real property trades or businesses in which he or she materially participates
allows them to deduct rental real estate losses against other income

Answer 555

A

must live with taxpayer more than one half of the tax year

Answer 556

A

must be under 19 or under 24 if a full-time student for at least five months of the tax year

Answer 557

A

individual must be a US citizen or resident, or a resident of Canada or Mexico

Answer 558

A

individual must not have provided more than 50% of their own support

Answer 559

A

they must be a natural child, stepchild, adopted child, foster child, sibling, step-sibling or a descendant of any of these

Answer 560

A

if the individual is married, they can’t be claimed as a dependent by another if they file a joint return with their spouse, unless there is no tax liability on the return

Answer 561

A

relationship test
support test - taxpayer must provide more than 50% of the dependent’s total support
joint return test
citizenship/residency test
gross income test - dependent’s gross taxable income must be less than then exemption amount

Answer 562

A

a group of individuals provides more than 50% of a person’s support
can designate, which person will claim individual as a dependent
person designated must provide more than 10% of the support and meet the other dependency tests

Answer 563

A

when the custodial parent waives the dependent exemption to the other parent
non-custodial parent must attach the form to their return to claim the exemption

Answer 564

A

2% of total exemptions are lost for each $2,500 increment (or portion) above threshold AGI

Answer 565

A

the last day of the tax year

* with one exception - if one spouse dies, a joint return can be filed for the year of death

Answer 566

A

can continue to use the rates for married filing joint for two years after the year of the spouse’s death if:
the spouse provides more than half of the cost of maintaining the household for a dependent child who uses the home as a principal residence

Answer 567

A

unmarried person
provides more than 50% of of the cost of maintaining the household
takes care of a qualifying child or qualifying relative (a non-relative living in the home for the entire year doesn’t qualify)
who uses the home as a principal residence for more than half the tax year

Answer 568

A

if the qualifying child is an unmarried child the child need not qualify as a dependent
if the qualifying related is a parent, the parent need not live with the taxpayer, but the taxpayer must provide more than 50% of the cost of maintaining the parent’s home

Answer 569

A

no personal exemption is allowed

- standard deduction is limited to $1,050 or earned income plus $350 (limited to the regular standard deduction)

Answer 570

A

includes all children who are under age 18
also includes children who are 18, or between 19 and 23 who are full-time students, if their earned income does not exceed 50% of their total support for the year

Answer 571

A

net unearned income in excess of a statutory amount is taxed at the parent’s tax rate ($2,100 for 2015), while the remaining taxable income is taxed at the child’s tax rate

Answer 572

A

26% on the first $175,000 AMT base and 28% on anything over that

Answer 573

A

child & dependent care credit
adoption credit
credit for the elderly and disabled
child tax credit
education credits
IRA credit
nonbusiness energy property credit
residential energy efficient property credit
foreign tax credit

Answer 574

A

the 150% declining balance method is used over the MACRS life versus the 200% declining balance method
* no AMT adjustment is required for property that was depreciated using bonus depreciation

Answer 575

A

the phase-out of itemized deductions is subtracted from taxable income
medical deduction is allowed only to the extent it exceeds 10% of AGI
no deduction is allowed for taxes
2% miscellaneous deductions are not allowed
home equity interest not used for the residence
personal exemptions and the standard deduction (if used) are added back
the compensation element on the exercise date for an incentive stock option

Answer 576

A

for real property and leased personalty purchased before 1987, excess of accelerated over straight-line depreciation
tax-exempt interest on private activity bonds (less related expenses)

Answer 577

A

limited to the amount of AMT generated from timing differences
the credit is available in a year in which the tentative tax is less than regular tax
may be carried forward indefinitely

Answer 578

A

multiply self-employment income by 92.35%

Answer 579

A

joint filers with wages > $250,000
single and head of household filers with wages > $200,000
to self-employment income above these limits

Answer 580

A

the lower of:

net investment income, or
the excess of modified AGI over:
$250,000 for joint filers
$200,000 for single and head of household filers

Answer 581

A

qualified dividends, passive interest, rents, royalties, and flow through income that is passive

Answer 582

A

$1,000 tax credit for each qualifying child under age 17
qualifying children include a dependent child, stepchild, grandchild, siblings, and nieces and nephews
phased-out for higher income taxpayers

Answer 583

A

if enrolled in the first four years of post-secondary education, a credit of $2,500 is allowable
100% credit is allowed for the first $2,000 of tuition, fees and course materials paid
25% credit is allowed for the next $2,000 paid
allowable for each eligible student
must be at least a half-time student

Answer 584

A

a credit for 20% of qualified tuition expenses
maximum credit is $2,000 per taxpayer (per return)
student doesn’t need to be at least half-time for this credit

Answer 585

A

the credit is between 20 and 35% of qualified expenses incurred for care for a qualified individual to enable the taxpayer to work
the qualifying expenses are limited to the lower of $3,000 ($6,000 for two or more qualified individuals) or the earned income of the lowest paid spouse

Answer 586

A

a qualifying child under age 13
a dependent or spouse who is physically or mentally incapacitated and has the same home as the taxpayer for more than half the year

Answer 587

A

wages, salaries, tips, earnings from self-employment, and combat pay can also be included
taxable disability payments from an employer plan also count until the taxpayer reaches normal retirement age

Answer 588

A

credit is disallowed if disqualified income such as interest, dividends, tax exempt interest and other investment income exceeds a threshold
taxpayers between the ages 25 and 64 qualify for the credit

Answer 589

A

medicare, medicaid, children’s health insurance program, employer-sponsored plans, and plans in the individual market

Answer 590

A

$325 per adult and $162.50 per child (up to $975 per family or 2% of family income, whichever is greater)

Answer 591

A

A large employer (generally, at least 100 employees in 2015) not offering coverage for all its full-time employees and their dependents, offering minimum essential coverage that is un-affordable, or offering minimum essential coverage of less than 60% of medical expenses, is required to pay a penalty.
* the annual tax penalty is $2,000 per full-time worker

Answer 592

A

a $3,000 per employee per year tax penalty if the employee purchased health insurance through a state exchange involving a tax credit or cost-sharing reduction paid to the employee, even if the employer already offers health insurance

Answer 593

A

credit is limited to the lower of the foreign tax paid, or the proportion of U.S. tax allocable to foreign source income, which is equal to:
U.S. tax * (foreign taxable income/worldwide taxable income)
excess foreign tax credits carryback 1 year and forward 10 years

Answer 594

A

combination of credits designed to subsidize certain activities
business credit can’t offset all of the regular tax if the liability exceeds $25,000
unused credits are carried back one year and then forward 20 years

Answer 595

A

incremental research expenditures are eligible for a 20% credit
may elect to used an alternative simplified research credit. This is equal to 14% of the excess qualified research expenses over 50% of the average research expenses for the last three years.

Answer 596

A

calculated on the amount of wages paid per eligible employee during the first year of employment
the credit is 40% of qualified wages, with a maximum credit of $2,400
the credit is elective, and it reduces the deduction for wages

Answer 597

A

the credit is 10% of the amount spent for energy efficient improvements and residential energy property expenditures, with a lifetime limit of $500

Answer 598

A

credit is 50% of non-elective health insurance premiums
an eligible employer has:
less than 25 full-time equivalent employees whose average annual wages are less than $51,600
the employer pays at least 50% of premiums
credit applies for any type of business, even a sole proprietorship

Answer 599

A

only property received from the corporation is stock
the stock is received in exchange for property or cash - not services
the group transferring property and receiving stock as part of this exchange collectively own at least 80% of the voting power and each nonvoting class of stock

Answer 600

A

the transferor has wage income equal to the fair market value of the stock received - and basis in the stock equal to that amount
the corporation has a salary expense deduction (unless the services rendered were an organizational expense)

Answer 601

A

the gain recognized to the shareholder is the lower of -

realized gain or
the fair market value of the boot received

Answer 602

A

If their tax liability exceeds $500

Answer 603

A

deductible capital losses are offset against recognized capital gains, but there is no deduction for a net capital loss
a net capital loss is carried back 3 years/forward 5 years to offset against capital gains in other years

Answer 604

A

Corporations using the accrual method can deduct unpaid bonuses and charitable contributions only if:

approved by the board before the end of the tax year
paid within 2 1/2 months after the end of the tax year

Answer 605

A

a corporation whose principal activity is the performance of personal services performed by employees who own substantially all of the stock

Answer 606

A

if at any time during the last half of the tax year, more than 50% in value of its outstanding stock is owned, directly or indirectly, by or for not more than 5 individuals

Answer 607

A

passive loss limits don’t apply to corporations
closely held corporations can use passive losses to offset active corporate income, but not portfolio income
personal service corporations can’t offset passive losses against either active income or portfolio income

Answer 608

A

corporations can choose a fiscal year unless the corporation makes an “S” election or qualifies as a personal service corporation
personal service corporations generally must use a calendar year-end

Answer 609

A

corporations that report total assets of $10 million or more must complete the M-3 instead of the M-1 - much more detailed

Answer 610

A

when corporations contribute inventory to charities that use the property in a manner related to the exempt purpose and solely for the care of the ill, needy, or infants, or where the property is used for research purposes under specified conditions the deduction is the lower of:
AB of the property + 50% x (FMV- AB), or
2 x AB

Answer 611

A

can elect to deduct accrued contributions if the contributions are actually paid in first 2 and one-half months following the year-end
limited to 10% of taxable income (before special deductions for charity, dividends received, and carryovers)

Answer 612

A

the DRD is a % of domestic dividends
if the corporation owns less than 20% of the stock of another corporation, then the DRD is 70% of the dividends received
if the corporation owns 80% or more, then the DRD is 100% of the dividends received
all ownership levels between these two extremes are entitled to an 80% DRD
can’t be a foreign corporation

Answer 613

A

taxable income multiplied by the same % used to compute the DRD
limitation is not required if the full DRD would create or add to a NOL

Answer 614

A

legal services incident to organization, accounting services, organizational meetings of directors and shareholders, and fees paid to incorporate

Answer 615

A

$5,000 of these expenses may be deducted, but the $5,000 is reduced by the amount of expenditures incurred that exceed $50,000
expenses not deducted must be capitalized and amortized over 180 months, beginning with the month that the corporation begins its business operations

Answer 616

A

before the end of the taxable year that business begins

* costs of issuing and selling stock (syndication expenses) must also be capitalized, but can’t be amortized

Answer 617

A

sames rules as organizational expenses
start-up costs are expenditures that would be deductible as trade or business expenses (ordinary, necessary, and reasonable) except that the corporation has not started its trade or business yet

Answer 618

A

corporations engaged in production activities within the U.S. qualify for a deduction equal to 9% times the lower of:
1. qualified production activity income, or
2. taxable income
this deduction may not exceed 50% of the wages allocable to domestic production income

Answer 619

A

gross receipts from domestic production

cost of goods sold
direct expenses allocated to this income, including wages
a pro-rate share of indirect expenses allocated to this income

Answer 620

A

Taxable Income Before the NOL Deduction
\+/- Adjustments (excluding ACE adjustments)
\+ Preferences
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
AMTI before ACE and NOL
\+/- ACE adjustment
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
AMTI before NOL
- NOL Deduction (limited to 90% of AMTI before NOL)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
AMTI
- Exemption
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
AMT Base
X    20%
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Tentative Minimum Tax before the FTC
- Foreign Tax Credit
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Tentative Minimum Tax
- Regular Tax Liability
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Alternative Minimum Tax (if positive)

Answer 621

A

for new corporations the TMT is always zero for its first year of operations
corporate AMT doesn’t apply to small corporations meeting a gross receipts test

Answer 622

A

the tenative minimum tax (TMT) is zero if the corporation’s average annual gross receipts for all three year tax periods ending before the tax year doesn’t exceed $7.5 million ($5 million for the first testing period)
if the corporation fails this test for any year, then it will be subject to the AMT for all future years

Answer 623

A

AMTI is increased by 75% of the excess of ACE over pre-ACE AMTI
or AMTI is reduced by 75% of the excess of pre-ACE AMTI over ACE
negative adjustment is limited to the aggregate of the positive adjustments under ACE for prior years reduced by any previously claimed negative adjustments

Answer 624

A

it is $40,000, which is phased out for AMTI over $150,000 (25% of the amount of AMTI over this trigger)
completely phased out when AMTI equals $310,000

Answer 625

A

it is limited to the amount of AMT generated from timing differences, and this credit is available in a year in which the tentative tax is less than regular tax
may be carried forward indefinitely

Answer 626

A

accumulated taxable income represents earnings that are retained in the business for which there is no reasonable business need to retain the earnings for the future

Answer 627

A

PHC tax for a previous year can be avoided by paying a deficiency dividend within 90 days after a determination by the IRS that the tax applied

Answer 628

A

the rate of the penalty tax is the current top tax rate on dividend income
the two penalty taxes are mutually exclusive - only one will apply in any year

Answer 629

A

the greater of:

earnings needed for reasonable business needs or
Minimum credit of $250,000 ($150,000 for service corporations) less accumulated earnings and profits at the beginning of the year

Answer 630

A

more than 50% of the value of the outstanding stock must be owned directly or indirectly by five or fewer individuals at any time during the last half of the tax year
a substantial portion (60% or more) of the corporate income must consist of income such as dividends, interest, rents, and royalties

Answer 631

A

an individual indirectly owns stock if it is owned by the individual’s family
family includes the individual’s brothers, sisters, spouse and lineal descendants and ancestors
doesn’t include nephews, cousins, uncles, aunts, and any of his/her spouse’s relatives

Answer 632

A

parent-subsidiary corporations, brother-sister groups, and certain insurance companies
controlled group of corporations is limited to one $250 thousand accumulated earnings tax credit and is limited to taxable income in each of the first two brackets as though the group was one corporation

Answer 633

A

stock possessing at least 80% of the voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of each of the corporations, except the common parent, is owned by one or more of the other corporations, and
the common parent owns stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of at least one of the other corporations

Answer 634

A

two or more corporations are owned by five or fewer persons (individuals, estates, or trusts), who have a common ownership of more than 50% of the total combined voting power of all classes of stock entitled to vote or more than 50% of the total value of shares of all classes of stock of each corporation, and
who possess stock representing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of each corporation

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