Flashcards in Business Law Deck (129):
3 ways that an Accountant can charge Contingent fees for a tax client
1. IRS Examination
2. Where a claim for refund is solely in connection with determination of statutory interest or penalties
3. Representing the client in judicial proceedings
Is there a requirement for written communication for tax advice?
No, but it would be wise
Should a CPA warn clients about tax return consquences
Yes, it is required of SSTS No.1
Can a position lacking a reasonable basis be taken when properly discosled
No, it does not have a reasonable basis
If documentation is required for a deduction and the accountant doesn't ask for the documents can they be punished?
If a tax position is "more likely than not" that it will be sustained if challenged is the accountant required to inform the client about the disadvantages?
Disclosure of estimates is not required in most situations (T/F)
Tax Return prepare is required to give their ID number to whom and who not
Must give to IRS, not required to give to client
Would a trustee who prepares a tax return for his trust be considered a TRP?
Reasonable basis that has a 25% chance or greater to be sustained should be disclosed (T/F)
Ultramares always look for what?
Proper delay of IRS request is only proper when...
the CPA believes after investigation in good faith the information is prvelaged
If a state board of accountancy takes away a CPA license, a CPA is automatically expelled from what?
JEEP stands for what?
Joint Ethics Enforcement Program
Fraud liability runs to who?
Reasonable Foreseeable Parties
Negligence liability typically runs to who?
Limited class of parties the accountant knows will relay on the information
Negligence provides for what types of damages
Negligence does not provide for what type of damgages
Constructive fraud is equal to what?
What is required for an accountant to be convicted under common law?
Make a misstatement with knowledge or recklessly make the misstatement
What is a good defense against negligence for an auditor?
The audit was performed under GAAS
Are CPA's liable for written and oral promises?
What can be a defense under common law liability
Lack of Scienter (Intent)
Scienter can be established by what?
1. Knowledge of material misstatement
2. Acted Recklessly
FCPA requires what 4 items?
1. Transactions are executed with management's instructions
2. Transactions are recorded to properly prepare financial statements and maintain accountability for assets
3. Access to assets is authorized
4. Recorded assets are compared to existing assets on a requital interval
What must happen before a RICO suit for Securities Fraud can be brought?
The defendant must already be convicted of Securities fraud criminally
The accounting portion of FCPA is only required for who?
To be found guilty of Racketeering under the RICO act what must have occurred?
Conducted or Participated in the Conduct
Who recognizes accountant-client privilege?
Congress at 15 states
Exceptions to accountant-client privilege under IRC
1. Criminal Matters
2. Matter before IRS or Federal Court brought by or against the U.S.
3. Tax Advice on State and Local Matters
4. Written advice of Tax Shelters
Securities that are exempt from under SEC
2. Common Carrier
3. Bankruptcy receivers
4. Insurance Policies/Annuities
What are the Regulation D Exemptions
1. 504 (under $1 mm)
2. 505 (under $5 mm)
3. 506 (private-placement unlimited)
What are the primary Securities transactions that are exempt
1. Small offerings
2. Private Placements
3. Intrastate Transactions
Requirement for rule 147
1. All offerees must be in state
2. 80% of issures asset and revenues must be in state
3. 80% of proceeds must be used in state
How is a Unilateral Contract accepted?
How is a Bilateral Contract formed?
Each party makes a promise
What is a executory contract?
A valid contract where performance has yet been completed
What is a executed contract?
Performance has been completed
What does the Uniform Commercial Code govern?
Sale of Goods
What does common law govern?
Services and Real Property transactions
Are Advertisements Offers?
No, the are invitations to trade
If the offer is conditioned for a specific date and a letter is put in the mail that day and not received until the next has the offer been successfully accepted?
No, because the offer had to be received by that date
Consideration for a contract must have what characteristic?
Be legally sufficent
The Parole Evidence Rule excludes what?
Actions taken before a contract was formed
Does Accord and Satisfaction work for Unliquidated Debt or Liquidated Debt
Can a contract be formed but not enforceable?
Yes, but if not in writing under the Statute of Frauds then it's not enforceable
If an unilateral error in a contract was made and the other party knew about it is the party that drafted the contract liable?
Physical threats do what to a contract?
Fraud in the inducement of a contract does what?
Makes it Voidable
Methods to Discharge a contract (5)
1. Accord & Satisfaction
2. Mutual Recession
When does the Statute of Limitations start for a breach of contract?
When the contract is breached
A party is considered what when a party to the contract at issue owes the them money and the contract at issue was made to satisfy the debt?
Is a UCC contract enforceable even is it is silent as to terms?
Faxes are part of the "Mailbox Rule" (T/F)
A contract under the UCC must have what?
3 ways that a seller can accept a buyers offer under UCC
1. Shipment of Conforming Goods
2. Prompt Promise to ship goods
3. Shipment of nonconforming goods without notice of accommodation (breaches contract)
Is an oral modification of a contract under $500 binding?
Open Acceptance of a UCC contract does what to a contract
makes it unenforceable
Contracts under Statute of Frauds (5 types)
1. Guaranty of debt
2. Real property
3. Performance takes longer than 1 year
4. Goods priced over $500
5. Executors personal liability for debts of estate
Where are goods delivered to under FOB Destination Contract?
Placed stated in the contract
Under UCC when does the title and risk of loss shift to the buyer
When goods are delivered to a Common Carrier
The seller must do what before title can pass?
Identify the goods
Implied Warranty of Merchantability is implied by what?
How does implied Warranty of Merchantability Arise?
Automatically upon a sale by a merchant
How does express warranty of merchantability arise?
Goods are sold as described
Implied warranty of fitness occur how?
Seller selects goods knowing the buyer's intent and the buyer relays on the seller's selection
3 was to create Express Warranty under UCC
1. Affirmation of Fact or Promises
2. Description of Goods
3. Sample or Model
3 Implied Warranties
3. Usage of Trade
Failure of a buyer to reject goods after inspection does what?
Can injured parties always collect liquidated damages?
No if they are viewed as a penalty
A seller can retain the lesser of what if a buyer defaults
For Specific Performance or Replevin items must have what qualities?
Unique or Identified
A Promissory Note is made between how many parties?
A Draft is a instrument made between how many parties?
Is a note that says "Pay six months After I go to College" negotiable?
2 Categories of "Orders to Pay", Draft instruments
2 Categories of "Promise to Pay" instruments
Is an instrument subject to another agreement negotiable?
Who is the drawee on a check or draft?
Who is the Payee on a check or draft
Who is receiving the money
Who is the Drawer on a check
Person is wrote the check
What type of endorsement limits the warranties that the transferor of the instrument gives?
What type of endorsement limits the liability of the endorser to a subsequent holder
What type of endorsement is made to a specific person
Requirements for a Security Interest to Attach
1. A Writing (few exceptions)
2. Secured Party gives the debtor something of value
3. Debtor has "rights" to the collateral
What is it called when the creditor gains rights in the collateral of a loan?
Security Interest Attaches
Does a security interest always have to be in writing to attach?
No, if the creditor has possession of the collateral
Methods to Perfect security Interest
If a not is non-negotiable, can a transfer create a holder in due course?
What must a draft have in order to be negotiable?
"Pay to Order" or "Pay to Bearer"
What is the exception to a draft saying "Pay to Order" or "Pay to Bearer"
If it's a check, payable on demand
An instrument that is not a check says, "Pay to Bob". Is it negotiable?
If a check, which is demand paper, is postdated. It is payable when?
Until the date it is postdated
If the bank is not given notice by the drawer that a check is postdated are they liable if the pay it before the post-date?
No, the drawer must give notice
When the seller ships nonconforming goods is the contract voided or voidable? And by whom?
Once a seller ships nonconforming goods, what has occurred?
Breach of Contract
If a seller ships nonconforming goods FOB Shipping point, title and loss is with who?
Title is with the Buyer, Risk of loss is still with the Seller
If a buyer receives nonconforming goods and does not accept them what must they do?
Follow the Seller reasonable instructions in returning them at the seller expense
If a buyer cancels a contract that the cannot cancel what must the seller do?
Trying to sell the goods, and recover the difference from the buyer
If goods are accepted under an oral contract and those goods and that part of the contract enforceable?
UCC Exceptions to General Statue of Frauds (4)
1. Merchant Confirmation Memo
2. Oral contract for Special Goods substantially completed
3. Admission under Oath of an Oral Contract
4. Buyer takes possession, performance
What is the Shelter Provision?
Preserve HDC even if someone acquires from HDC a note with knowledge of a personal defense, but not Real Defense
If a HDC does not present a check within 30 days and there is a bank failure is the drawer liable?
What are real defenses?
Those that can be asserted Universally
How is liability of a note transferred?
Signature liability stays, bearer liability is only the last bearer
Do drawers of a check have primary or secondary liability?
Holder in Due course takes a promissory note free of what defenses?
Personal of the maker
Fraud in the execution is what type of defense?
Are Letters of Credit Transferable
Are Domestic Letters of Credit revocable?
Are International Letter of Credit revocable?
Who must a carrier deliver goods to under a nonnegotiable bill of lading?
When a document is forged is it negotiable?
When does a security interest attach if a secured party takes possession of the collateral then signs a security agreement?
At time of possession
What must the debtor have in order for a security interest to attach?
Rights to the Collateral
Is proper filing required to create a security interest?
Does a security interest where the secured party has possession of the collateral need to be in writing?
When does a Purchase Money Security Interest require filing?
If for Equipment or Inventory
A sale to whom typically provides a PMSI automatically?
A pawnbroker lending money is an example of what?
Takes a Perfect Security Interest by Posssession
How can a buyer be protected from a security interest?
In the Ordinary Course of Business
What is the time period for a secured party to file a new PMSI when the collateral moved to a new jurisdiction?
If a buyer has knowledge of a security agreement and takes title of the goods in the ordinary course of business do they take it free of the security interest?
When must the Creditor Sell Collateral (2 ways)
1. Consumer Goods
2. 60% or more of the purchase price paid by the debtor
Upon default a secured party has what options?
1. Recover under UCC 9
2. Judicial Remedies
Requirements for the filling of a PMSI
1. List or description of collateral
2. Names of Debtor & Secured Party
3. Address of the Debtor & Secured Party
Endorsement "without recourse" disclaims what liability?
How is a check different from a draft?
Payable on Demand