REG Flashcards

Question

What are the priority rules for payment in a secured transaction?

Answer 1

If two parties are perfected; then the first one to file wins If neither party is perfected; then the first one to attach wins

Answer 2

Creditor holds priority over claims to collateral vs. unperfected security interests Beats perfected security interests filed after lien attachment Exceptions: Purchase money security interest; which has a 10 day grace period to be filed Buyers purchasing in the ordinary course of business are immune from security interests held by merchants

Answer 3

Cost of property + Purchase expenses + Debt assumed + Back taxes and interest paid = Basis. Note: taxes and interest related to time when a taxpayer did not own the property are not deductible - they are added to basis.

Answer 4

Sold at a gain: use donor's basis Sold at a loss: use lesser of donor's basis or FMV at time of distribution Sold in between donor's basis and FMV: No gain or loss

Answer 5

FMV at date of death or alternate valuation date (6 months later) If alternate date is elected by property is sold before 6 month window; use FMV at date of death. Property inherited is LTCG property regardless of how long it is held by the recipient.

Answer 6

Holding period of new stock received from a dividend takes on the holding period of the original stock

Answer 7

Real for real or personal for personal business property only US property only

Answer 8

Cash received + unlike property received + liability passed to other party

Answer 9

DO NOT subtract the boot paid amount from the cash received Ignore the boot paid amount from the mortgage completely

Answer 10

Occurs when you receive money for a property involuntarily converted There is no gain if you reinvest the proceeds completely If proceeds not completely reinvested; gain is LESSER of realized gain or amount not reinvested.

Answer 11

Must live there 2 out of 5 years Loss on sale of home is NOT deductible

Answer 12

30 Day rule applies Disallowed loss adds to basis of new stock New stock takes on date of acquisition of old stock

Answer 13

Ancestors; siblings; spouse; descendants; corporation or partnership where you're a 50% shareholder Seller cannot take a loss on sale to a related party; but gain is always recognized. Related party gets to use the disallowed loss when they sell. Related party's holding period begins when they acquire the property. In-laws are NOT related parties.

Answer 14

capital losses only offset capital gains Carryback 3 years - if you elect NOT to carryback; you lost the option in the future Carry forward 5 years - only as STCL

Answer 15

Inventory; Business interest; Accounts Receivable; Covenant not to compete Goodwill IS a capital asset

Answer 16

Net all STCG and STCL Net all LTCG and LTCL Add together Deduct $3;000

Answer 17

$3;000 per year. Unused is carried forward and taken $3;000 each year. No carryback is allowed.

Answer 18

Real or Personal Business Property held more than a year Inventory is never 1231 Property

Answer 19

Casualty Losses on 1231 Property - Net the losses * Net Loss = Ordinary Loss * Net Gain = Combine with other 1231 Gains 1231 Net Loss - If 1231 Losses exceed gains; treat as Ordinary Loss 1231 Net Gain - If 1231 Gains exceed losses; treat at LTCG 1231 Gain = LTCG 1231 Loss = Ordinary Loss

Answer 20

To the extent of depreciation; treat as ordinary gain Remainder is 1231 gain; which is LTCG - There are no 1245 Losses 1231 Gain = LTCG 1245 Gain = Ordinary Casualty Gain = LTCG 1231 Loss = Ordinary 1245 Loss = N/A Casualty Loss = Ordinary

Answer 21

1250 property is Real Estate that is not 1231 Property Use 1250 for Gain only. For losses; use 1231 Individuals: Post-1986 property with a gain is 1231 LTCG If Straight Line depreciation is used; don't use 1250 - Entire gain is 1231 Corps: Section 291 requires 20% of depreciation classified as ordinary gain Remainder is 1231 LTCG

Answer 22

When the asset is held less than one year.

Answer 23

Only sales of goods are covered under the UCC.

Answer 24

Offer - You offer to sell something at a price Acceptance - the other party accepts Consideration - Something of value has been exchanged for the goods Note: The UCC only covers sales of goods.

Answer 25

You offer to sell something at a price and keep that offer open for a set period of time 3 months max Only merchants can make firm offers Must be in writing and signed

Answer 26

If value of goods sold is > $500; sales contract must be in writing Exceptions: Merchants can enter into oral contracts for > $500 items. Oral contracts are binding for special or uniquely-made items (i.e. custom cabinets or custom furniture that could not be sold if buyer reneged)

Answer 27

If terms are: FOB shipping point: Title transfers at point of shipment (i.e. when loaded on truck) FOB destination: Title and risk transfers once item is delivered

Answer 28

The seller has the right to sell the good and no one else can stake claim to that good

Answer 29

This good will do its intended purpose Can be disclaimed

Answer 30

This good is the right choice for you based on the seller's expert opinion Can be disclaimed

Answer 31

Manufacturers of goods cannot disclaim that their products will be safe Can be liable if negligent

Answer 32

Buyer can reject some or all of the shipment if the seller didn't perform as agreed and ship what was expected Must give notice Must give seller a chance to remedy the situation

Answer 33

Buyer must sue to recover damages within 4 years.

Answer 34

The Dodd-Frank Wall Street Reform Act of 2010

Answer 35

Banking Institutions maintain healthy capitalization ratios

Answer 36

Limits banking institutions from owning more than 3% of a hedge fund's total ownership interest Limits banking institutions from owning interests in hedge funds that exceed 3% of their Tier 1 Capital (Common Stock + Retained Earnings + non-redeemable; non-cumulative Preferred Stock)

Answer 37

Relationships with hedge funds must be fully disclosed to regulators

Answer 38

Property transferred while taxpayer is living

Answer 39

$14,000 per year per spouse to each individual In order to get the exclusion, the recipient must immediately acquire a present interest in the property and get unrestricted access to the property and all of its benefits

Answer 40

If the Gift is an annuity, use Present Value to determine the gross Gift

Answer 41

Gross Gifts - 1/2 of Gifts (treated as given by spouse) - Total # of donees x $14,000 exclusion = Taxable Gift

Answer 42

Recipient must gain ownership and all rights to property to get the annual exclusion. If recipient merely gains a future ownership, then the present value of the Gift is 100% taxable to donor and cannot exclude from Gift tax calc

Answer 43

Tuition and medical expenses paid directly to the provider organization (note: NOT books or dorm fees) Political contributions Charitable Gifts Unlimited Gifts to spouse

Answer 44

If a loss on sale, basis is FMV on the date of the Gift If a gain on sale, basis is same as donor's basis No G/L if donor basis is less than sales price, and sales price is less than FMV @ Gift date

Answer 45

Calendar-year basis only Due April 15

Answer 46

Income distributions are optional Accumulation of income ok Charitable contributions ok Contributions using tax-exempt income are not deductible Allowed personal exemption of $100 Key Point: Distribution of Trust corpus (principal) ok

Answer 47

Income distributions mandatory Accumulation of income disallowed No charitable contributions Distribution of Trust corpus DISALLOWED Allowed personal exemption of $300

Answer 48

Trusts can have a Net Operating Loss Any unused NOL flows through to the beneficiaries

Answer 49

Expenses and fees from tax-exempt income are not deductible for either a Complex or Simple Trust

Answer 50

After the death of the donor

Answer 51

The First $5,250,000 is exempt with a 40% tax on amount above that

Answer 52

Medical expenses paid after death, but incurred within 1 year of death go on decedents personal tax return

Answer 53

Estates can have a Net Operating Loss Any unused NOL flows through to the beneficiaries

Answer 54

Cash and Property FMV at death, or alternate valuation.

Answer 55

When two non-spouses jointly own property FMV at death X % Ownership = Amount in Estate

Answer 56

1/2 of marital assets go to deceased spouses Estate

Answer 57

A, B, and C own property If A dies, FMV of As share goes to heirs

Answer 58

Property received through inheritance not income to recipient Property value is FMV at date of death or 6 months later If property is sold prior to 6 month date and the alternative date is used, FMV at date of sale is used to value property Basis in property automatically assumes LT holding period

Answer 59

DNI = Taxable Income Expenses (from income production) Trust beneficiaries only pay tax if earnings are distributed Estate beneficiaries pay tax on DNI, regardless if distributed

Answer 60

If a tax exempt organization has more than $1,000 of UBI, it must file a Form 990-T

Answer 61

Organized and Operated exclusively for exempt purposes No earnings can benefit an individual or private shareholder Cant attempt to influence legislation as a major part of its activities Cant campaign politically

Answer 62

Land, Buildings fixed to the land, and Property under/above the land.

Answer 63

``` Must be in writing Signed Description of Property Delivered Recorded ```

Answer 64

Must be in writing Signed Description of property Delivered

Answer 65

No writing required if < 1 year Warranty of habitability is implied Death does not terminate a lease Sale of property does not terminate a lease

Answer 66

Tangible property; such as cars; equipment; etc. Intangible property such as patents; trademarks; copyrights; etc.

Answer 67

Intent for it to be a gift Delivery of the gift Acceptance of the gift

Answer 68

Lost property - Finder's rights to property are less than Owner's Abandoned property - Finder's rights to property are greater than Owner's

Answer 69

Undivided interest in a portion of the property Upon death; property goes to decedent's heirs

Answer 70

Undivided interest in entire property Upon death; property goes to other joint tenants

Answer 71

A promise to pay a specific amount. There are two parties involved - maker and a payee. It can reference other transactions without harming the instruments negotiability. Example: Bank Certificate of Deposit (CD)

Answer 72

A commercial paper involving three parties- a drawer; a payee and a drawee A drawer orders a sum to be paid to a payee by the drawee May be payable on demand or in the future

Answer 73

A check is a type of draft that is payable ON DEMAND; payable to order of drawer or bearer Drawer - person writing the check Payee - person being paid Drawee - the bank

Answer 74

A check is payable on demand; even if post-dated. A negotiable time draft is not payable until the date designated for payment.

Answer 75

Seller extends credit to Buyer Buyer agrees to pay Seller - Buyer has primary liability Seller is both Drawer and Payee - Seller has Secondary Liability

Answer 76

Transfers ownership to another party

Answer 77

Must be in writing Signed by drawer/maker Be without conditions for payment (other than limitations on payment sources) Amount of money must be stated Payable to order or bearer

Answer 78

An additional promise is stated in addition to the promise to pay (like the option to purchase Real Estate) The promise to pay occurs after some action by another party or an event; it cancels negotiability Cannot allow for an alternative such as payment or some other action by the maker Note: a stated amount of payment plus a stated % of interest is OK

Answer 79

Must have delivery and endorsement If paper is exchanged for value; transferor must give an UNQUALIFIED endorsement

Answer 80

Blank - Doesnt name a new payee; transforms into a bearer paper Special - Names a new payee; transforms into an order paper Restrictive - Adds restrictions; doesnt stop further negotiation Qualified - Payment not guaranteed; without recourse added to endorsement

Answer 81

Within 7 days

Answer 82

Written amount supersedes the numerical dollar amount. For example; if the words say One hundred dollars and the numerical amount states $1000.00; the value of the paper will be $100.00.

Answer 83

First in line to pay on the note/draft Maker of a Promissory Note has primary liability and must pay according to terms of the note With a Check; no party has Primary Liability Exception: Drawee (your bank) is primarily liable to pay if they certify - i.e. promise to pay

Answer 84

Drawers are Secondarily Liable if Drawee fails to pay a Draft Endorsers (the payee) are secondarily liable Holder in due course can hold Endorser liable Exception: Endorsed Without Recourse

Answer 85

Guarantees payment of a liability

Answer 86

Occurs when you negotiate commercial paper By signing; you warrant to all future parties By not signing; you warrant to current party only

Answer 87

Warranty of Title No defense will stand against it No material alteration No knowledge of bankruptcy proceedings All signatures are legitimate

Answer 88

Holding a negotiable instrument Taking instrument in Good Faith - Even if you buy a stolen note and you dont know that its stolen; youre still an HDC Having no knowledge of defenses again instrument; i.e. problems with the instrument Giving a *present value* for the instrument (a future value doesnt count)

Answer 89

An HDC takes an instrument free of Personal Defenses (LOSE vs. HDC) Lack of consideration/value given Breach of contract/warranty Duplicate payments Fraud (in the inducement only) Voidable contracts

Answer 90

A holder in due course takes an instrument subject to Real Defenses (WIN vs. HDC) Material alterations to the instrument Forgery Bankruptcy Maker not competent to Contract Fraud in the execution

Answer 91

$1 Billion

Answer 92

General Solicitation and Advertising now allowed

Answer 93

Reg. A Capital ceiling raised from $5M to $50M

Answer 94

Restricts a state's authority to tax interstate commerce

Answer 95

A state can't collect income tax on sales within its borders as long as the orders are filled and shipped outside of the state Applies to tangible property only Does not protect a Corporation in the state where incorporated Does not protect from taxes using metrics other than income (Ex: Sales Tax)

Answer 96

Uniform criteria for determining taxable income of multi-state corporations Also known as the Multi-State Tax Compact

Answer 97

Designed to ensure a company is not taxed more than once on its income Forces a corporation to segregate Business Income from Non-Business Income

Answer 98

Part of the corporation's regular course of business Includes acquisition of tangible and intangible property if such activities are part of the regular trade or business

Answer 99

False. Income and expenses flow through to the partner to be taxed via a Form K-1.

Answer 100

Neither gain nor loss is recognized in an exchange of property for a partnership interest. It is a non-taxable event.

Answer 101

Initial basis for partnership property is the basis of the property that was contributed or exchanged for the partnership interest.

Answer 102

It is a taxable event; treated the same as compensation for the services. The taxable income equals the % of partnership interest received times the FMV of the partnership. i.e. the FMV of the interest received is the taxable income for the service provider.

Answer 103

The basis in the partnership interest is the amount of taxable service revenue provided by service provider.

Answer 104

The partnership inherits the holding period of the asset contributed. The exception of inventory- the holding period begins when contributed.

Answer 105

Tax treatment is the same as that of an individual taxpayer. However syndication fees are not deductible or amortized.

Answer 106

COGS Wages - except for partners Guaranteed payments to partners Business bad debt (if on accrual basis) Interest paid Depreciation (except section 179) Amortization (Startup costs; goodwill; etc)

Answer 107

Losses cannot be taken beyond a partner's basis in the partnership Losses in excess of basis are carried forward until basis is available

Answer 108

They appear in partner's income during the year in which the partnership's fiscal year CLOSES.

Answer 109

Health insurance; life insurance and other benefits paid on behalf of the partner are treated as guaranteed payments and are includable as self-employment income.

Answer 110

Partner's % share of ordinary income from partner's K-1 + Guaranteed payments - Partner's % share of section 179 expense from K-1 = Self-employment income (subject to SE tax)

Answer 111

Partner's basis is basis of goods exchanged or for services exchanged is FMV of partnership interest received. If purchased; purchase price less liabilities incurred = basis. For a gifted interest in a partnership; gift basis rules apply.

Answer 112

Foreign tax paid Investment interest expense Section 179 expense Charitable contributions Mnemonic: IFC179

Answer 113

Passive Income Portfolio Income 1231 Gain or Loss Mnemonic: PP1231

Answer 114

Beginning partnership basis + Capital contributions + Share of ordinary partnership income + Capital gains + Tax-exempt partnership income (DON'T FORGET!) = Ending partnership basis

Answer 115

Money distributed Adjusted basis of property distributed Partners's share of ordinary losses Partnership is relieved of a liability (considered a distribution)

Answer 116

Partnership getting a loan Capital contributions Ordinary income Capital gains Tax-exempt income

Answer 117

If the partnership gets a loan; this INCREASES basis. If partnership is relieved of a liability; this DECREASES basis.

Answer 118

They do not affect basis- they are already included in ordinary income; which affects basis.

Answer 119

1. Increase basis (all items; including tax-exempt income) 2. Distributions 3. Losses (limited to basis)

Answer 120

It must be the same as 50% of the partners and use the same tax year for 3 years once adopted.

Answer 121

The taxable year closes with respect to the decedent partner's interest ONLY.

Answer 122

1. They have inventories 2. Partnership is a tax shelter 3. Has a corporate partner 4. Gross receipts are $5 Million or more Exception: If gross receipts are $1 Million or LESS and Partnership maintains inventories; Cash method is ok.

Answer 123

When there is less than 2 partners (only one partner) When 50% of the partnership interests sell within a 12 month period- partnership IMMEDIATELY terminates.

Answer 124

Gain or Loss = Amount realized on sale - basis in partnership interest

Answer 125

Basis = Capital account + Liabilities assumed

Answer 126

As ordinary gain/loss. Items that fall into non-capital category would be unrealized receivables; appreciated inventory; and similar.

Answer 127

FMV of Assets (non-capital) - Adjusted basis of assets = Ordinary gain x Partner's % interest = Partner's share of gain Note: No gain or loss will be recognized by a partnership upon distribution of property.

Answer 128

1. Money distributed 2. Adjusted basis of unrealized receivables and inventory 3. Adjusted basis of other property Note: Only MONEY distributions will trigger a gain in a partnership distribution.

Answer 129

Only in a liquidating distribution.

Answer 130

1. Money was distributed 2. Unrealized receivables were distributed 3. Appreciated inventories were distributed Otherwise; no loss recognized.

Answer 131

Must have two or more partners. Must intend to engage in business for profit. Life of partnership is of limited duration in most cases. Agency/fiduciary relationship is created. Partnership interest is always considered personal property.

Answer 132

Yes; corporations and other partnerships can become partners of a partnership

Answer 133

Agreement can be very informal - either ORAL; IMPLIED or WRITTEN Intent is to make a profit

Answer 134

Must be WRITTEN if partnership activity falls within Statute of Frauds: A. Can't be completed in 1 year B. Even if partners reside in different states; not necessary unless within Statute of Frauds C. Neither dollar amount of transactions nor purchasing of real estate has bearing on whether partnership agreement must be in writing

Answer 135

Profit sharing is equal by default A. Unless partnership agreement says otherwise B. Unless specified; sharing of losses follows same pattern as sharing of profits

Answer 136

Joint Liability - Partners are collectively liable for debts/torts Several Liability - Partners are individually liable for debts/torts

Answer 137

Creditors must go after partnership assets first before suing partners individually

Answer 138

General Partners have joint control over the management of the partnership and its affairs Unanimous vote needed to change the structure of the partnership Each partner has full right to inspect partnership accounting and business Partner has the authority to assign their interest to another partner

Answer 139

1. Other party gets that partner's share of the profits and/or capital contribution. 2. Does NOT give assignee authority to vote on partnership business 3. Assignee does NOT have right to inspect partnership books 4. Assignor still maintains liability 5. Partner does NOT have the right to assign their interest in partnership property or allow partner's creditors to attach a lien.

Answer 140

Has authority to bind the partners to a contract.

Answer 141

A third party reasonably believes partner has authority to bind partnership to contract Cannot use apparent authority to add a new partner Cannot use apparent authority to sell or bind partnership assets

Answer 142

Partner not liable assuming notice given. Notice must be given to nullify apparent authority People who had knowledge of their role must be personally notified Public must be notified

Answer 143

Old partners: Jointly and severally liable unless creditors grant novation New partners: Only capital account at risk on preceding debts. For subsequent debts; they are joint and severally liable.

Answer 144

Partner's estate gets share of partnership profits and capital account Estate does NOT get any partnership assets Remainder of partners own partnership assets Heirs of decedent are not added as partners unless remaining partners unanimously agree

Answer 145

1. Creditors get paid; Partners can also be creditors 2. Distributions in arrears get paid 3. Partners get return of Capital accounts 4. Any remaining distributions Note: NO documents need to be filed with state to dissolve general partnership.

Answer 146

Governed by state L.P. laws Must file L.P. certificate with Sec. of State Only General Partners must be listed Future additions or subtractions of G.P. require certificate to be updated with state

Answer 147

Unlike G.P.; L.P. profits/losses are split according to capital contributions by default

Answer 148

True. A Limited Partner; however; cannot also be a General Partner and maintain limited liability.

Answer 149

No. Limited Partners are do not have a fiduciary responsibility to Limited Partnership

Answer 150

1. Right to inspect records of the business. 2. Can still vote on partnership business without losing limited liability 3. Can consult and advise partnership without losing limited liability (assuming they don't actually make the decisions)

Answer 151

1. They have no authority as an agent to bind the partnership 2. They can't participate in management decisions and maintain limited liability.

Answer 152

Limited partners are liable to the extent of their capital contributions only Exception - A Limited Partner (who cannot participate in management decisions) becomes involved with management decisions Becomes liable to third parties *IF* they knew of their involvement

Answer 153

Automatically happens 1. Once final General Partner leaves 2. Time specified in certificate lapses 3. Event specified in certificate happens 4. Unanimous consent by partners 5. Illegal activity

Answer 154

1. Majority vote required to form LLP 2. Articles of LLP filed with Secretary of State 3. Governed by laws of that State 4. Limited Liability Partnership must be in name 5. No General Partners - each LLP partner has limited liability - Exception: Negligence of partner or those under partner's supervision

Answer 155

Members can participate in management and retain limited liability Members don't own any interest in LLC property Members can assign interest; but not transfer it Members divide profits equally unless otherwise stated

Answer 156

Similar to a General Partnership; except generally; a JV is for a single business activity Example: two companies promote a concert Ability to bind other JV partners is limited JV partners still have a fiduciary responsibility to JV No state filings or paperwork necessary

Answer 157

Shareholders have limited liability to the extent of their capital contribution C Corporations have a perpetual life and continue even after shareholder death Corporations are a separate legal entity from their owners and can own property; sue; be sued Corporations must file Articles of Incorporation in state of governance

Answer 158

Ability to raise capital Limited liability - unless actions occur that pierce the veil Ease of ownership transfer

Answer 159

Commingling of assets Fraud Under-capitalization

Answer 160

Board adopts Corporate Bylaws to govern company business

Answer 161

Name; purpose; powers of Corporation Name of registered agent & incorporators Stock share classes authorized; par values Name of corporate officers NOT required

Answer 162

Double taxation

Answer 163

Promoter issues prospectus; arranges capital; and is a fiduciary of the corporation. A promoter may profit from work performed if the corporation is aware of it.

Answer 164

Promoter personally liable unless third party agrees to a novation and releases Promoter from liability; UNLESS the corporation adopts.

Answer 165

Corporations are only incorporated in one state Become adomestic corp. in that state Become aforeign corp. in any other state they do business in

Answer 166

Dividends are NOT a shareholder right Once declared; dividends become a liability to corporation

Answer 167

No voting rights Get first rights to dividends and liquidation Cumulative Preferred Stock dividends that go undeclared accumulate and Corporation must pay it before issuing dividends to Common Stockholders Participating Preferred Stock gives shareholder right to dividends in addition to what they get as Preferred Stockholders

Answer 168

Valid consideration must be given for shares Cash; property; or prior services performed No promises to pay or perform services

Answer 169

No Gain/Loss recognized on Treasury stock Have no voting rights Can be re-purchased below par Cannot produce dividends

Answer 170

An offer to buy shares of stock Must be accepted by corporation to be valid Offer cannot be revoked for 6 months Subscriber becomes liable once accepted

Answer 171

If committed within the normal scope of the employee's job Even if they were disobeying orders Per respondeat superior

Answer 172

Appointed by the Board of Directors Act as Agents Owe a fiduciary duty to the corporation Can have legal fees paid by corporation for defense in lawsuit brought on them from carrying out their normal duties (exception- suit brought against officers by shareholders)

Answer 173

Elected by shareholders Owe fiduciary duty to corporation Must act in good faith to avoid being liable for bad judgment Good faith is NOT a defense for negligence

Answer 174

Corporation management acting beyond what the Articles of Incorporation allow Shareholders can sue for Ultra Vires

Answer 175

Shareholders can inspect Board minutes and records only if request is in good faith

Answer 176

Boards must approve Shareholders must approve by Majority Disapproving shareholders can get an appraisal and get their stock back at current market price Merger does NOT need creditor approval

Answer 177

Shares owned only by licensed professionals (CPAs; attorneys; etc.) Limited Liability for debts Personal Liability for negligence

Answer 178

CAN be owned by Estates; Trusts; and Individuals CANNOT be owned by a C-Corporation

Answer 179

Avoidance of Double Taxation

Answer 180

No more than 100 shareholders allowed One class of stock allowed Shareholders must be US Citizens/Residents

Answer 181

Offer, Acceptance, Consideration, Proper form (oral or written), Legal subject matter, 2 Competent parties

Answer 182

Can be written or oral Must be in the form/method required by offeror Must be mirror image - i.e. no changes in terms

Answer 183

Must be accepted by intended party (offeree) Acceptance can only be made by a party who knows an offer has been made and has all of the facts - AKA a meeting of the minds They must intend to accept

Answer 184

It is not acceptance; but instead becomes a counter-offer and the original offeror is now the offeree

Answer 185

When they RECEIVE the acceptance. If the offeree rejects; then accepts - whatever gets to the offeror first is what is binding.

Answer 186

If offeror dies or becomes insane before acceptance; offer is void. Contract is binding if acceptance occurs before death/insanity.

Answer 187

Offeror revokes and offeree receives revocation Offeree finds out prior to acceptance that offeror has sold the item In the case of an Option; offeror cannot revoke until the time of the option has elapsed Initial rejection by offeree doesn't void the option.

Answer 188

Some amount of consideration (like money) is put forth by offeror to keep the offer open for a stated period of time

Answer 189

These are contracts where someone becomes the exclusive provider of something in exchange for consideration Companies can't get locked in to one and then have market conditions force them to sell something at what has become an unreasonable price

Answer 190

Promises to donate are legally enforceable Basically; you can't tell a charity; Hey; if you buy this $100;000 piece of land; I'll pay for the building that will go on it; and then renege on your promise

Answer 191

Fraud in the execution Formed under extreme duress - extreme Illegal

Answer 192

Fraud in the inducement Party not competent to contract Formed under SIMPLE duress Undue influence

Answer 193

The contract is unenforceable. Example: Person signs a contract to pay $500.00 to have their lawn re-seeded but due to clerical error; it actually reads $5000.00

Answer 194

They must be in writing.

Answer 195

o Cannot be completed within one year o Involves the purchase of real estate o $500+ Sale of Goods o Co-signing and guaranteeing the debt of another

Answer 196

Prevents one party to a written contract from coming in after the fact and claiming that a certain conversation took place that conflicts with what is agreed upon in the written contract It also prevents using an oral argument to read into the meaning of what is written on paper If it's on paper; it trumps what was agreed-upon orally prior to the written contract Note: does not negate oral agreements made AFTER the contract or disallow oral words from clarifying ambiguous contract language.

Answer 197

Contracts are assignable to a third party beneficiary; but must be done so in good faith Obligations may be assignable- Assignor is still liable Assignor may be released from liability if other party grants a novation

Answer 198

Party under contract is bankrupt Party under contract dies or is incapacitated Party cannot physically complete the contract (i.e. They are in prison so can't finish building your house)

Answer 199

Bankruptcy gives creditors protection from their creditors and stops them from either permanently (Chapter 7) or temporarily (Chapter 11 or 13) collecting a debt. The filing halts collection activity; grants automatic stay (with certain exceptions), and stops creditors from suing debtor.

Answer 200

``` Student Loans Income taxes from previous 3 years Alimony & Child Support Debts/judgements resulting from drunk driving Pension obligations Debts relating to SOX violations Debts arising from illegal activities Debts not listed in the bankruptcy filing ```

Answer 201

It doesn't; because the corporation is a separate legal entity. Under bankruptcy; corporations are dissolved Under bankruptcy; individuals are discharged

Answer 202

If a debtor fails to keep good records or falsifies documents; a discharge will be denied

Answer 203

Discharges all non-exempt debt Can only be filed every 8 years from previous Chapter 7 filing Voluntary or involuntary filing Certain businesses are disallowed from Chapter 7 bankruptcies - Railroads; Banks; Insurance companies; Savings & loans (think: 7th inning RBIs)

Answer 204

Must pass means test Your income must be below the median income for your state (Note - median; i.e. middle; not mean; i.e. average) Credit card companies made it harder for people to declare Chapter 7 when they lobbied Congress in 2005

Answer 205

In some cases; your creditors can force you into Chapter 7 or Chapter 11 BK Creditors must be able to prove that they are not being paid on time (i.e. debtor is insolvent) or that within the past 120 days the debtor assigned a custodian of the secured property If 12+ unsecured creditors - at least 3 must file; claims must be in excess of $14;425 If less than 12 unsecured creditors - only 1 must file; claim(s) must be in excess of $14;425 Upon filing; a judge will declare an order for relief unless the debtor protests

Answer 206

Charities Farms

Answer 207

If the debtor pays the court-assigned bond to keep a property in an involuntary BK; they can reclaim possession of their property from the interim BK trustee

Answer 208

Allows a business a reprieve from creditors Creates a payment plan for the debt Business remains in operation At least 2/3 of each debt class of creditors must consent to reorganization Ch. 11 Involuntary petitions are allowed

Answer 209

Similar to Chapter 11; but for individuals Gives individuals a reprieve from creditors Creates a payment plan for the debt Ch. 13 Involuntary petitions are not allowed

Answer 210

Represents the bankruptcy estate Can sue or be sued Oversees bankruptcy and watches for preferential creditor payments Oversees priority transfer of assets to creditors

Answer 211

Optional - Creditors decide Can be elected by creditors or can be appointed by the court

Answer 212

Trustee can void payments on antecedent (past) debts that occur within 90 days of a BK filing A Trustee cannot void a payment made to a creditor that is an even swap (contemporaneous exchange) and for new value A voidable preference must be on an old debt where the debtor is basically picking and choosing which creditors they send money to (AKA a voidable preference)

Answer 213

Made within One Year of BK to insider - Corporate officers/directors; Partners; Relatives Made within 3 Months of BK non-insider Creditor receives larger payment than BK liquidation would have granted

Answer 214

Superior to claims of other types of creditors Can take either collateral or cash proceeds from the sale of an asset If collateral doesn't satisfy amount owed; Secured Creditors become a general creditor for the difference.

Answer 215

1. BK Trustee and Attorney fees get paid before all other unsecured credit cards 2. Salaries required to continue business once BK proceedings begin 3. Any claims filed resulting from business operations that occur after involuntary BK is filed 4. Wages owed to employees 5. Retirement contributions within last 6 months 6. Consumer deposits for undelivered goods 7. Child Support & Alimony 8. Taxes 9. Other general unsecured claims

Answer 216

The bankruptcy trustee can act in the best interest of the creditors and assign the leases under contract to the creditors The trustee has 60 days to assume leases on equipment after bankruptcy is granted or the leases will be rejected

Answer 217

The pool of assets available to creditors until liquidation

Answer 218

Social security Disability payments Unemployment; Child Support; Alimony; Wages; Pensions; Annuities to the extent that they provide reasonable support for debtor and dependents

Answer 219

Inheritance/Insurance payments received within 180 days of filing for a Chapter 7 bankruptcy become part of the BK Estate

Answer 220

Court allows a creditor to garnish or take a portion of the debtor's paycheck

Answer 221

Lien on real property to secure payment for a repair/improvement done to the house A contractor builds an addition to your house and you won't pay. They can't repo your house; so they get a Mechanics Lien that sticks until you sell your house and they get paid

Answer 222

Applies to personal property like a car If the dealership does $500 in repairs to your car; you don't get the car back until you pay

Answer 223

A third party agrees to be liable for a loan Example: A parent co-signs on their child's car loan

Answer 224

A surety is primarily liable Surety can be released from liability if the creditor behaves in a way that increases the risk that they initially agreed to Surety can be released from liability if the debtor changes the loan agreement in a way that materially increases the surety's risk

Answer 225

Two sureties are guaranteeing the same debt Proportionately liable - If one cosurety is released from their obligation; then the remaining cosureties have their proportionate share reduced by the released party's percentage If one surety pays more than their proportionate share of the risk; then the other sureties must compensate them for the difference; which is called Right of Contribution

Answer 226

Similar to surety; but a guarantor is secondarily liable

Answer 227

Basically - your creditors have the right to collect from you; but not abuse you or embarrass you The can't contact you once you're represented by an attorney They can call other people to find out where you are; but they cannot identify themselves as collectors They must stop calling you at work if you send them a certified letter that says my employer doesn't allow me to take calls at work. They must call you only at reasonable hours of the day - according to your time zone; not theirs

Answer 228

Adjusted basis of property transferred + Gain recognized (if less than 80% ownership) - Boot received = Shareholder basis. If shareholders have 80% control after a property transfer, no taxable event occurs. If liabilities exceed basis on contributed property to a Corporation, a gain is recognized.

Answer 229

Transferor's basis + Gain recognized by shareholder = Basis OR FMV of Corporate Interest - Adjusted basis of property = Gain

Answer 230

They both use ADJUSTED BASIS, NOT FMV of property.

Answer 231

A loss on worthless stock is an ordinary loss.

Answer 232

Taxpayer must be original stock owner, and either an individual or partnership $50k (single) or $100k (MFJ) limit - remainder is a capital loss Must have been issued in exchange for money or property (not exchanged for services) Shareholder equity must not be in excess of $1 million Both common and preferred stock is allowed

Answer 233

Return is due regardless of income level Return is due 3/15 if on a calendar year basis, or 2 1/2 months after end of fiscal year An automatic six-month extension is available

Answer 234

Required if more than $500 in tax liability expected, or 100% current year liability 100% previous year liability Note: If Corporation had more than $1 Million in revenue the previous year, the first estimated payment must be based on the previous year and the remainder based on the current year.

Answer 235

``` Taxable Income +Tax Preference Items +/- Adjustments = Pre-ACE +/- ACE Adjustments = AMTI - 40,000 Exemption = Tax Base x 20% = Tentative Minimum Tax - Regular Tax Liability = AMT ```

Answer 236

Real Estate purchased between 1986 and 1999 using Straight Line Depreciation must depreciate over a useful life of 40 years Personal Property - use 150% MACRS, not 200% Construction must use % completion method

Answer 237

Municipal Bond Interest Life Insurance Proceeds 70% Dividends Received Deduction Organizational Expenditures must be capitalized, not amortized Note: AMT paid gets carried forward indefinitely, but never carried back

Answer 238

In year one In year two, if year one gross receipts were less than $5 Million In year three, if the average gross receipts for years 1 and 2 were less than $7.5 Million In year four and beyond, if the average from the previous 3 years is less than $7.5 Million

Answer 239

Corporations have no gain/(loss) from transactions involving their own stock, including Treasury Stock. If Corporation gets property in exchange for stock, there is no gain/(loss) on the transaction.

Answer 240

Amortization of costs begin the month the Corporation commences business activity If the Corporation doesn't amortize organization costs in year one, they can never be amortized Costs associated with offerings are neither deductible nor amortized

Answer 241

Sales -COGS= Gross Profit Gross Profit + Rent, Royalties, Gross Dividends, Capital Gains =Total Income Total Income - Deductions (No charitable contributions, Dividends Received Deductions (DRD), or NOL Carrybacks allowed) - NOL Carryforwards =Taxable Income before charitable contributions, DRD, NOL Carrybacks x 10% =Deductible Charitable Contributions

Answer 242

Excess charitable contributions get carried forward 5 consecutive years (No Carryback)

Answer 243

The Board of Directors can authorized charitable contributions up to 3/15 and have them count in the previous tax year

Answer 244

80% Interest = 100% DRD 20-79% = 80% DRD less than 20% = 70% DRD Only allowed if no consolidated return is filed. Qualified dividends from domestic Corporations only.

Answer 245

Only take DRD % x Taxable Income Note: If DRD brings a loss situation, then you can take the full DRD If Taxable Income remains after DRD, only a partial DRD (T.I.. x DRD %) is allowed

Answer 246

A loss on a sale to a Corporation where taxpayer owns a 50% or more interest is disallowed

Answer 247

Capital Losses are deductible only to the extent of Capital Gains

Answer 248

Net Short Term Capital Gains are taxed at ordinary income rates

Answer 249

Corporations can carry back losses 3 years and carry forward losses 5 years as a Short Term Capital Loss

Answer 250

Bad debt losses are classified as ordinary

Answer 251

No floor on Corporate casualty loss like there is with an individual taxpayer If destroyed, the loss is the property's basis (minus proceeds) Calculation: Adjusted basis - Proceeds from Insurance = Loss If partially destroyed, take the lesser of FMV or adjusted basis reduction (minus proceeds)

Answer 252

If loss includes NOL Carryforward, reduce the loss (add back the amount) to get the loss without the Carryforward Then, carry back the NOL 2 years starting with the earliest year and reduce the taxable income there and then move to the most recent year Any leftover NOL = This year's NOL

Answer 253

Unlike individual taxation, investment interest expense is not limited to investment income. Investment interest on tax-free investments are NOT deductible.

Answer 254

Schedule M-1 reconciles book to tax income before Net Operating Loss/Dividend Received Deduction Includes permanent differences (such as tax-exempt interest and non-deductible expenses) and temporary differences (accelerated depreciated tax depreciation, straight-line, etc.)

Answer 255

Reconciles beginning to ending retained earnings Beginning Unappropriated Retained Earnings + Net Income + Other Increases - Dividends paid - Other decreases = Ending Unappropriated Retained Earnings

Answer 256

Like M1, but for Corporations with $10M+ in assets

Answer 257

Consolidation election is binding going forward Dividends between them are eliminated, Advantage- Gains are deferred, Disadvantage- losses are deferred. One AMT exemption One accumulated earnings tax allowed Note: In order to consolidate, the parent must have 80% voting power and own 80% of the stock value

Answer 258

Distribution is a dividend to the extent of current accumulated earnings and profits (ordinary income) Then, remainder (if any) is a return of basis. Then, add'l remainder (if any) is a Capital Gain Distribution amount = FMV of Property + Cash - Liability Assumed Shareholder basis = FMV of Property + Cash received (basis not reduced by the attached liability)

Answer 259

1. Distribution is a dividend to the extent of current and accumulated earnings and profits 2. Shareholder basis is then exhausted 3. Remainder, if any, is a Capital Gain

Answer 260

Beginning Accumulated Earnings and Profits + Net Income + Gain on Distribution (if not already in book income) - Distribution (but cannot create a deficit) - NOL of prior years = Ending Accumulated Earnings and Profits

Answer 261

If Capital Property, then Capital Gain If Non-Capital Property, then Ordinary Income Gain characterization is the same for both the Corporation and the shareholder

Answer 262

Corporation: Depends on if property is capital in nature, otherwise ordinary loss Individual: capital loss only

Answer 263

No G/L to parent company

Answer 264

Consented by the Board of Directors but not yet paid Treat as if distributed by the end of the year

Answer 265

No banks or financial institutions can be PHCs 5 or fewer individuals own more than 50% of the stock 60% of the PHC's income must be from passive means PHC tax is self-assessing - 20% tax rate on undistributed PHC Income

Answer 266

Not Self-Assessing like a PHC

Answer 267

Take greater of $250,000 ($150,000 for Service Corps) or the legitimate balance based on future needs (i.e. purchasing a building)

Answer 268

Only individuals, estates and trusts can be shareholders Domestic only, no international S-corps or foreign shareholders Up to 100 shareholders allowed, and only one class of stock allowed Calendar tax year only

Answer 269

Election for S Corp status must be made by 3/15 and counts as being an S Corp since the beginning of the year To make election, 100% of the shareholders must consent

Answer 270

To terminate election, 50% of the shareholders must consent No S Corp election allowed for 5 years after termination S Corp termination effective immediately following an act that terminates status

Answer 271

These items are included on Schedule K, not in ordinary income: ``` Foreign Taxes paid deduction No Investment Interest expense Section 179 Deduction 1231 Gain or Loss Charitable Contributions Portfolio Income (dividends or interest) ```

Answer 272

Beginning Basis +Share of Income Items (including non-taxable income!) -Distributions (cash or property) -Non-deductible expenses -Ordinary Losses (but don't take income below zero) = Ending basis

Answer 273

FMV of Assets @ S-Corp Election Date - Adjust. Basis of Assets = Built-in Gain x 35% Corporate Rate

Answer 274

Governs Initial Public Offerings (not subsequent sales). Covers registration statements and accompanying information filed with SEC. Information must include audited financial statements & a prospectus. Note: Even if a company is exempt from registering under the 1934 Act; they still must adhere to the anti-fraud provisions of the Act

Answer 275

Banks; Commercial Paper; Farmers; Co-ops; Charities; Governments Also exempt: Securities sold in ONE state; where investors are residents; 80% of business done in one state; and resales can't occur within 9 months to interstate parties.

Answer 276

Issuer can issue $5M of securities per year and be exempt if they file a notice with the SEC Non-issuers (AKA a private individual) can sell $1.5M per year and be exempt

Answer 277

Rule 504- Max Amount per year: $1M; Max Investors: Unlimited Rule 505 - Max Amount per year: $5M; Max Investors: 35 Unaccredited or Unlimited Accredited Rule 506 - Max Amount per year: Unlimited; Same as 505; but Unaccredited investors must be sophisticated

Answer 278

S-1 - Long Form or S-2 and S-3 - Less Detailed and preferred by issuers

Answer 279

``` Stocks Stock Options Stock Warrants Limited Partnership Interests - General Partnerships not allowed Bonds ```

Answer 280

Purchasers of securities only

Answer 281

Damages & Material Misstatements Only o Reliance on financial statements are not a requirement unless purchased more than a year after the security is registered Proving negligence is not a requirement

Answer 282

Accountant used Due Diligence Accountant followed GAAP Damages weren't caused by accountant's work Plaintiff knew of the material misstatements

Answer 283

The trading/selling of securities after the IPO

Answer 284

Form 10-K Annual Report - Must be audited Form 10-Q Quarterly Report - Must be reviewed; but not audited Form 8-K - A notice of a material event; Must be filed within 4 days of event

Answer 285

Purchases and Sellers of Securities

Answer 286

Damages Material Misstatements Reliance on financial statements Scienter or reckless disregard for the truth

Answer 287

Accountant must have procedures in place to: Determine if Going Concern is an issue Determine if any material related party transactions occurred Determine if material illegal acts occurred

Answer 288

Officers; Directors and 10% Owners

Answer 289

Proxy must give shareholders audited balance sheets from 2 most recent years o Requirement holds true even if one class of stock

Answer 290

This engagement helps the client be more efficient with personnel and resources in order to accomplish their goals.

Answer 291

Competence; Due Professional Care; Planning; Supervision; Obtain Sufficient Data; Serve Client Interest; Agreement: Written or Oral; Communicate w/ Client; Objectivity NOT REQUIRED: Independence

Answer 292

Express: Contract specifies what accountant will do Implied: Accountant performs without negligence

Answer 293

DUTY - DAMAGES - RESULT Duty - Accountant must have had duty to perform with due care exercised by an average accountant. Damages - The client experienced actual damages. Result/Causation - The damages were as a result of the negligence.

Answer 294

It is not the accountant's job to find fraud and they are not normally liable for not detecting it

Answer 295

When a normal audit following GAAS would have detected the fraud. When an accountant agrees to take on more responsibility than what is required under a normal audit. When accountant words the audit report to indicate this greater responsibility.

Answer 296

Misrepresentation - Accountant misrepresents MATERIAL fact(s) Scienter - Accountant commits scienter Damages - Client has actual damages. Reasonable Reliance - Client reasonably relied on the misinformation.

Answer 297

To report something knowing it is false. Characterized by reckless disregard for truth Intentionally conceal facts

Answer 298

Lack of privity defends against contract breach and negligence. NOT a defense against fraud.

Answer 299

Accountants are not liable to third parties unless the third party was an intended beneficiary of the engagement AND the accountant knew they would be relying on the financial statements.

Answer 300

Regular fraud Misrepresentation of Material Fact Scienter Damages Reasonable Reliance

Answer 301

Gross Negligence - reckless disregard for truth CPAs usually not liable for simple negligence; but Gross Negligence (aka Constructive Fraud) opens the CPA up to be liable to third parties.

Answer 302

Accountant must report discovered illegal activity to Audit Committee or Board of Directors If material in public company; BOD has *1 DAY* to notify SEC.

Answer 303

NO Federal Accountant-Client privilege for non-disclosure of private conversations to a court unless a particular state recognizes such a privilege. If your client tells you Yeah; I cheated on my taxes; a court could force an accountant to testify about that conversation.

Answer 304

1. Can be subpoenaed 2. Can be looked at by another CPA doing peer review 3. Property of the accountant who created them Note: Source documents supplied by client must be returned to client if they request them back; even if there is a billing dispute.

Answer 305

Accountants have no way of auditing individual's personal finances and are not required to do so when preparing a return

Answer 306

If a past error is found; accountant should inform client of this error. Contacting the IRS is NOT required. If client won't fix it; then the accountant should reconsider whether they want to do business with the client

Answer 307

Accountant must prepare the return in good faith and ask for more information if something is missing When recommending a tax position; the accountant should realistically believe that it would stand up under the scrutiny of a court

Answer 308

Cash Basis. Note: This basis is NOT allowed for Corporations, Partnerships with a C-Corp partner, or for inventories.

Answer 309

*MSA/HSA contributions *Investment penalties for early withdrawal *Self-employed medical insurance premiums *Self-Employment Tax (approx. 50%) *IRA Contributions *Student loan interest (can't be another taxpayer's dependent) *Moving expenses *Alimony *Tuition - can't take AOC/Lifetime Learning Credit for same expense *Teacher expenses *Attorney fees in discrimination lawsuit

Answer 310

Investment interest expense in excess of investment income Charitable contributions Excess Section 179 Capital losses AMT Paid Passive Activity Losses

Answer 311

No carryback Can carry forward indefinitely

Answer 312

Carry forward to next year. Use in any year is limited to taxable income.

Answer 313

Indefinitely.

Answer 314

Can be carried forward 5 years.

Answer 315

It can be carried forward indefinitely. It may be applied against future *regular* income tax, but not against future AMT tax liability.

Answer 316

$3,000 net capital loss can be taken in each year, the rest is carried forward indefinitely. The loss retains its character (STCL or LTCL).

Answer 317

Corporate capital loss carryovers may be carried back 3 years and forward 5 years. Individual capital losses are carried forward indefinitely. Individual capital loss carryovers retain their character (STCL or LTCL). Corporate loss carryovers are carried forward as STCL only.

Answer 318

Gross Profit / Contract Price

Answer 319

Contract Price = Sales Price - Liability assumed by buyer

Answer 320

$1,000,000

Answer 321

$25 per person for gifts Service awards up to $400

Answer 322

They may only offset active business income. Note: W2 wages are considered active business income.

Answer 323

Only passive income such as rental income or limited partnership income. Note: Wages are ACTIVE (cannot be offset by passive) and Interest/Dividends are PORTFOLIO (cannot be offset by passive)

Answer 324

Neither. They are portfolio income.

Answer 325

Mid-year/Mid-quarter

Answer 326

For depreciation when 40% or more of all purchases occur in 4th quarter.

Answer 327

15 year straight line (S/L)

Answer 328

Up to $5,000 Amortized over 180 months Reduced dollar-for-dollar by amount over $50,000

Answer 329

On Schedule A: Amounts in excess of 10% of AGI may be deducted

Answer 330

Accident or disability insurance premiums are not deductible.

Answer 331

Must be a citizen of North America Must live with you, or if they do not, must be mother/father or a relative closer than a cousin. Benefactor must provide more than 50% support to the beneficiary.

Answer 332

Foreign INCOME and REAL ESTATE taxes are deductible. Foreign personal property taxes are NOT deductible. Foreign tax assessments are not deductible- they are added to the basis.

Answer 333

Gross investment income - investment expense in excess of 2% of AGI = net investment income Investment interest expense in excess of net investment income is deductible.

Answer 334

Investment interest expense on tax-free securities is not deductible.

Answer 335

They are deductible if they represent prepaid interest on purchase of a new home or improving a home. Refinance points are amortized over the life of the mortgage.

Answer 336

Deducted at fair market value (FMV), up to 30% of AGI

Answer 337

Deduction is taken for adjusted basis in the property, up to 50% of AGI.

Answer 338

No. It decreases the fair market value (FMV) of the property.

Answer 339

Take the lower of either A) Decrease in FMV or B) Basis in property (call this number GROSS LOSS) GROSS LOSS - insurance proceeds received - $100 - 10% of AGI = Deductible casualty loss

Answer 340

Deductible in excess of 2% of AGI Continuing Education - if required to keep your job Business travel 50% Meals and entertainment Union Dues Tax prep fees Legal fees to collect alimony Appraisal fees to value casualty loss of charitable contributions

Answer 341

Medical Casualty Gambling Investment Interest Expense

Answer 342

Must be resident of North America Under age 19, or under age 24 if a student

Answer 343

Must be citizen of North America Must live with you, unless mother/father or relative closer than a cousin You must provide more than 50% support to the individual

Answer 344

Child's unearned income - early withdrawal penalties - $1,000 - Greater than $1,000 or child's itemized deduction related to unearned income = Amount taxed at parents' rate

Answer 345

Yes, if they each own a small business. All non-business income is cash basis.

Answer 346

15.3% of net earnings from self-employment (Note: executor of an estate is NOT self-employment income)

Answer 347

A tax credit which takes the taxpayer's tax owed on the return below zero, resulting in a refund to the taxpayer. Earned Income Credit (EIC), American Opportunity Credit and the Additional Child Tax credit. Note: the REGULAR child tax credit is NOT refundable.

Answer 348

American Opportunity Credit - per student Lifetime Learning Credit - per taxpayer Note: The American Opportunity Credit is refundable.

Answer 349

The lesser of: 90% of current year's total tax 100% of prior year's total tax 110% of prior year's total tax (if AGI is $150,000 or more)

Answer 350

Deductible: Costs incurred to PRESERVE soil/water Non-deductible: Costs incurred to drain wetlands or prep for irrigation (i.e. improve land)

Answer 351

3 years, generally 6 years if 25% or more of gross income was omitted The clock starts on the LATER of the due date or the filing date of the return. There is NO STATUTE OF LIMITATIONS for either fraud or failure to file a required return.

Answer 352

It is treated as a STCL

Answer 353

Refunds must be claimed within 3 years of the return due date or within 2 years of being paid, whichever is later.

Answer 354

Premiums paid by an employer for coverage in excess of $50,000 per employee are includable in income.

Answer 355

When they are not in return for services rendered, AND The money is used *only* for tuition and books Note: Scholarships for room and board are includable in income.

Answer 356

State & municipal bond interest US EE Savings Bond interest (note: HH bond interest is taxable)

Answer 357

S-corporation (actually distributions) Life insurance

Answer 358

Payments made to make you whole are NOT taxable (i.e. to pay for losses of property, body parts or earning ability) Any payments for punitive damages ARE taxable.

Answer 359

No - similar to an award for damage to make a person whole.

Answer 360

Alimony IS taxable. Child support and divorce property settlements are NOT taxable.

Answer 361

NO, they are not deductible. However tax benefits are available through the adoption CREDIT.

Answer 362

2nd Year: (3rd year - 2nd year - $15,000) 1st Year: 1st Year Alimony Paid - Avg alimony paid in 2nd & 3rd years - $15,000 - Recapture from 2nd year =1st Year Alimony Recapture Total Recapture = 1st Year Recapture + 2nd Year Recapture

Answer 363

Can be carried back 2 years If any left, can be carried forward 20 years.

Answer 364

Traditional IRA = deductible Roth IRA = not deductible

Answer 365

They must be married at the end of the year. If one spouse dies, they must be married at the end of the year.

Answer 366

Must have a dependent child Must provide more than 50% of the child's support Must live with them more than 50% of the year

Answer 367

Must have a dependent child. Essentially gets MFJ status for the year of death + 2 tax years

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