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Flashcards in REG 4 Deck (150):
1

Does a partner has apparent authority to convey a real property held in the partnership name?

if the sale of real estate is within the regular course of a partnership’s business, a partner has apparent authority to convey real property held in the partnership name.

2

The last endorsement on a negotiable instrument is a special endorsement : is instrument bearer or order?

If the last endorsement on a negotiable instrument is a special endorsement, the instrument is order paper. A special endorsement specifies the person to whom or to whose order it makes the instrument payable.

3

A check endorsed in blank : bearer or order paper?

A check endorsed in blank is bearer paper.

4

A check made payable to the order of cash : bearer or order paper?

A check made payable to the order of cash is bearer paper?

5

Are Trust with an independent trustee that was established for a minor included or excluded in a grantor’s gross estate?.

Trust with an independent trustee that was established for a minor would be excluded from a grantor’s gross estate.

6

When alternate valuation is elected and distribution occur before alternate valuation date, what is the basis of the stock?

The $240,000 FMV of the stock on date of distribution

7

Why is a partnership restricted in choosing a tax year?

A partnership generally is restricted in choosing a tax year in order to prevent the deferral of income to partners that could otherwise occur. Thus, a newly formed partnership is required to adopt the same taxable year as is used by its one or more partners owning a more than 50% interest in profits and capital. This insures that there will be no deferral of reporting of income for more than 50% of the partnership's income.

8

The following note was executed by Elizabeth Quinton on April 17, year 1, and delivered to Ian Wolf:
(Face) April 17, year 1
On demand, the undersigned promises to pay to the order of Ian Wolf
Seven Thousand and 00/100 Dollars
El

This note was originally order paper because it was payable to the order of Ian Wolf. It next became bearer paper when Ian Wolf endorsed it on the back in blank, that is, without specifying any endorsee. When Samuel Thorn endorsed it and wrote "Pay: George Vernon," it became order paper. Next, when George Vernon endorsed it, it remained as order paper since he designated "Pay: Alan Yule." The last endorsement by Alan Yule was a blank endorsement which converted it to bearer paper. ->Order, bearer, order, order, bearer.

9

When does apparent authority exists?

Apparent authority exists when the principal represents the agent to third parties to be his/her agent. In this case, the principal wished to be undisclosed.

10

What is the result of he filing of the bankruptcy petition?

The filing of the bankruptcy petition acts as an automatic stay of lawsuits by the debtor’s creditors.

11

To which prohibting infectinos are subject Tax preparers who aid and abet federal tax evasion?

Tax preparers who aid and abet federal tax evasion are subject to both injunction prohibiting them from acting as tax preparers and general federal criminal prosecution

12

Under the Securities Exchange Act of 1934, in which timeframe is a corporation’s officers (and all other insiders) required to report any changes in ownership of the corporation’s stock?

Under the Securities Exchange Act of 1934, a corporation’s officers (and all other insiders) are required to report any changes in ownership of the corporation’s stock within 15 days.

13

Under the 1934 Act, the proxy statement, when must the proxy itself, and any proxy soliciting material concerning securities required to be registered under the 1934 Act be filed with and approved by the SEC?

Under the 1934 Act, the proxy statement, the proxy itself, and any proxy soliciting material concerning securities required to be registered under the 1934 Act must be filed with and approved by the SEC before it can be sent to shareholders.

14

What are the ficuciary duty of an agent?

The fiduciary duties of a gratuitous agent are the same as the duties of an agent who is compensated. Under a gratuitous agent's duty to account, s/he must account to the principal for profits and everything that rightfully belongs to the principal including the principal's property. However the agent has a duty not to commingle funds.

15

When must The federal estate tax return (Form 706) be filed and the tax paid in case of decedent’s death?

The federal estate tax return (Form 706) must be filed and the tax paid within nine months of the decedent’s death, unless an extension of time has been granted.

16

To what kind of sales is the firm offer rules applying?

The firm offer rule does not apply because this contract does not involve the sale of goods.

17

What is the condition for te presence of an option in a contract?

An option is present if consideration is given for the opportunity to purchase

18

Who wins under a notice-type statut

Under a notice-type statute, a subsequent bona fide (good-faith) purchaser, whether s/he records or not, wins over previous purchaser who did not record before that subsequent

19

Who wins under a race-notice type (notice-race) statute

Under a race-notice type (notice-race) statute, the subsequent bona fide purchaser wins over a previous purchaser only if s/he also records first (i.e., a “race Eto file first)

20

Who wins under a race statute

Under a race statute, the first to record deed wins

21

What nature must havee the acts of a creditor for the surety's relase from liability?

The general rule is that a surety is released from liability for acts of the creditor which materially increase the surety’s risk. In this case the failure of the creditor to give notice of the prior embezzlement materially increased the surety’s risk.

22

What must be proven by plaintiff under the Securities Exchange Act of 1934, Section 10(b) and Rule 10b-5

The plaintiff must prove that damages were incurred as a result of the act, that there was a material misstatement or omission, that s/he relied upon the financial information, and that scienter exists. Scienter is generally defined as the knowledge of or the intent to deceive, defraud, or manipulate.

23

What is the effect of Anticipatory repudiation?

Anticipatory repudiation discharges the nonrepudiating party (Kemp) from the contract and gives this party two options: (1) sue immediately for breach of contract or (2) for a commercially reasonable time, ignore the breaching party’s repudiation and wait for the repudiating party to perform at the appointed time.

24

In case of Anticipatory repudiation, what may happen if the repudiating party does not subsequently perform at the appointed time?

If the repudiating party does not subsequently perform, the nonrepudiating party may then sue for breach.

25

In case of Anticipatory repudiation, what is used in computing the buyer's damage?

The market value to be used in computing the buyer’s damages would be the market value at the time the buyer learned of the breach.

26

How can an executor treat medical expenses paid by the decedent’s estate for the decedent’s medical care?

The executor may elect to treat medical expenses paid by the decedent’s estate for the decedent’s medical care as paid by the decedent at the time the medical services were provided.

27

What are the requirement to be eligible to treat medical expenses paid by the decedent’s estate for the decedent’s medical care as paid by the decedent at the time the medical services were provided?

To qualify for this election, the medical expenses must be paid within the 1-year period after the decedent’s death, and the executor must attach a waiver to the decedent’s Form 1040 indicating that the expenses will not be claimed as a deduction on the decedent’s estate tax return.

28

To which defense is subject a HDC?

HDC takes a negotiable instrument free of personal defenses, but not real defenses.

29

Give types of personal defenses

Defenses assertable against any party including a HDCBreach of contract, Lack or failure of consideration, Prior payment, Unauthorized completion, Fraud in the inducement, Nondelivery, Ordinary duress or undue influence, Mental incapacity, Illegality

30

Which bonds are an obligation of a surety?

Official bonds. This is a secondary obligation: Basically a party is guaranteeing that a public official will discharge duties in compliance with laws and regulations.

31

When an executor may elect The alternate valuation?

The alternate valuation can be elected only if its use decreases both the value of the gross estate and the estate tax liability.

32

Is valuation election revocable or irrevocable?

The alternate valuation election is irrevocable

33

To what kind of property in the estate does the alternate valuation apply?

Applies to all property in the estate; it cannot be made on an individual property basis.

34

What is the meaning of gross income?

The term gross income means income from whatever source derived and specifically includes alimony and separate maintenance payments.

35

Give examples of elements excluded from gross income

Compensation for injuries and sickness, the rental value of parsonages furnished to ministers of the gospel, and tuition scholarships are generally excluded from gross income as well as adjusted gross income.

36

What is the earned income credit?

The earned income credit is a refundable tax credit for eligible low-income taxpayers.

37

What are the requirement to be eligible for the earned income credit?

To be eligible, an individual must have earned income and generally must maintain a household for more than half the year for a qualifying child.

38

What is "qualifying child" included in the earned income credit eligibility requirement?

A qualifying child includes the taxpayer's child or grandchild who lives with the taxpayer for more than half of the taxable year, and is under age 19, or a full-time student under age 24, or permanently or totally disabled. The earned income credit is not available to married taxpayers filing separately.

39

Who bears the risk of loss and title to goods being purchased on a sale on approval basis until the sale is completed?

Provided there is no agreement to the contrary and neither party is in breach, both risk of loss and title to goods being purchased on a sale on approval basis remain with the seller until the sale is completed

40



Question 80:
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EMEN-0026)

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Which remedies is(are) allowed when a company is found to have violated the Age Discrimination in Employment Act when firing an employee

Remedies for violation of this Act include reinstatement of the employee to his or her job. The employee can also receive monetary damages for any wages or salary lost until reinstatement.

41

How are the increase in value of property due to improvements made by lessee treated?

Lease improvements. The increase in value of property due to improvements made by lessee are excluded from lessor’s income unless improvements are made in lieu of fair value rent.

42

Aent and principal have agreed that agency was irrevocable : can the principal elect to terminate the agency relationship?

principal can elect to terminate the agency relationship and be liable for breach of contract even though he has agreed that the agency is irrevocable.

43

How are treated lossed on worthless securities?

Worthless securities generally receive capital loss treatment. However, if the loss is incurred by a corporation on its investment in an affiliated subsidiary corporation (80% or more ownership), the loss is generally treated as an ordinary loss.

44

For deposit only, without recourse, (signed) Jan Brake : what kind of endorsement is it?

restrictive, qualified, and blank.

45

Pay to Jenny Eaton if she completes the contract dated August 2, (signed) Jan Brake. what kind of endorsement is it?

special and restrictive.

46

Without recourse, (signed) Jan Brake. what kind of endorsement is it?

blank and qualified

47

upon foreclosure, which mortgagee has priority and must be paid in full?

Upon foreclosure, the first mortgagee has priority and must be paid in full before any payment is made to a subsequent mortgagee (second or third mortgagees).

48

What is the use of the doctrine of marshalling of assets?

A second mortgagee remains a secured creditor in the bankruptcy proceedings although his interest is inferior to a first mortgagee.The doctrine of marshalling of assets may help a second mortgagee since it allows him to compel a first mortgagee to foreclose on other property available to the first mortgagee as security before foreclosing on property which a second mortgagee has a claim on.

49

What is an estate DNI's

An estate’s DNI represents the maximum amount of available distribution deduction, and the maximum amount on which beneficiaries can be taxed.

50

Which is the maximum credit amount for adoption expenses?

The credit for adoption expenses is a nonrefundable credit of up to $13,190 (for 2014) for qualified adoption expenses incurred for each eligible child.

51

Morris Corporation’s income tax return for 2014 shows deductions exceeding gross income by $75,000. Included in the tax return are the following items:
Net operating loss deduction (carryover from 2013) $13,400
Dividends received deduction 6,600
What is

The requirement is to determine the NOL for 2014 given that deductions in the tax return exceed gross income by $75,000. In computing the NOL for 2014, the DRD of $6,600 would be fully allowed, but the $13,400 NOL deduction (carryover from 2013) would not be allowed. $75,000 ? $13,400 = $61,600.

52

What is required to an individual whose tax liability is not sufficiently covered by withholding?

An individual whose tax liability is not sufficiently covered by withholding must pay estimated tax in quarterly installments or be subject to penalty.

53

When is there no underpayment penalty in case an individual whose tax liability is not sufficiently covered by withholding?

Generally, there will be no underpayment penalty if amounts withheld plus estimated payments are at least equal to the lesser of 90% of the individual’s current year’s tax (determined on the basis of actual income or annualized income), or 100% of the preceding year’s tax.

54

What are the conditions to be able to base one current year’s estimated tax payments on the preceding year’s tax liability?

An individual whose AGI for the preceding year exceeds $150,000 must use 110% (instead of 100%) if s/he wishes to base his or her current year’s estimated tax payments on the preceding year’s tax liability.

55

Who can apply the use of the adjusted seasonal installment method?

The use of the adjusted seasonal installment method is available to corporations, but is not available for individuals.

56

Who can a A subsequent bona fide purchaser defeat?

A subsequent bona fide purchaser will not defeat a prior perfected secured interest in consumer goods for which a financing statement has been filed. Such a purchaser will only defeat a prior perfected security interest that was perfected through automatic perfection by attachment.

57

What does a Trustee have priority over?

trustee in bankruptcy does not have priority over a prior perfected security interest. A trustee would only have priority over unperfected security interests and security interests perfected subsequent to the filing of the bankruptcy petition

58

to who has a Lien creditor priority over?

Lien creditor would only have priority over an unperfected security interest or a security interest perfected after the attachment of the lien.

59

What is bylaws?

Bylaws are requirements adopted by the board of directors to guide management in performing its duties.

60

What is a certificate of authority

Certificate of authority is a certificate that must be obtained for the corporation to do business in another state.

61

What is a shareholder agreement?

shareholders Eagreement sets forth the rights and obligations of shareholders

62

What is required for a mortgage to be effective against subsequent third parties who acquire an interest in property with no knowledge of the prior mortgage.

A mortgage must be recorded to be effective against subsequent third parties who acquire an interest in property with no knowledge of the prior mortgage.

63

What is the timeframe to file a claim for refund?

A taxpayer must file a claim for refund within 3 years from the date a return was filed, or 2 years from the date of payment of tax, whichever is later. If a return is filed before its due date, it is treated as filed on its due date.

64

What is the liability status of the drawer of an instrument?

Also, a drawer is secondarily liable on the instrument. This means the holder must first present the instrument to the drawee, the instrument must be dishonored and notice of dishonor must be given to the drawer before his secondary liability comes into effect.

65

What is the liability status of the drawee of an instrument?

A the drawee has no liability on the instrument until he accepted the draft and then he has primary liability.

66

What is the accumulated earnings tax?

The accumulated earnings tax is a penalty tax that can be imposed on a corporation if it accumulates earnings in excess of reasonable business needs, regardless of the number of shareholders that the corporation has.

67

Can personal holding tax be imposed accumulated earnings tax?

Since the personal holding company tax takes precedence, the accumulated earnings tax cannot be imposed on personal holding companies.

68

Can a corporation that distributes all of its accumulated earnings be imposed accumulated earnings tax?

Since the accumulated earnings tax is imposed on an unreasonable retention of corporate earnings, it cannot be imposed on a corporation that distributes all of its accumulated earnings.

69

Whih entity can be imposed accumulated earnings tax?

The accumulated earnings tax can only be imposed on corporations.

70

What are the conditions for a corporation to be exempt of corporate AMT for its first year?

A Corporation is exempt from the corporate AMT for its first tax year.

71

What are the conditions for a corporation to be exempt of corporate AMT for its 2nd year?

It is exempt for its second year if its first year’s gross receipts were $5 million or less.

72

What are the conditions for a corporation to be exempt of corporate AMT for its 3rd year?

To be exempt for its third year, the corporation’s average gross receipts for the first two years must be $7.5 million or less.

73

What are the conditions for a corporation to be exempt of corporate AMT for its 4th year?

To be exempt for the fourth year (and subsequent years), the corporation’s average gross receipts for all prior three-year periods also must be $7.5 million or less.

74

What is the difference of treatment of appreciated property distributed by LLC and S corporation?

LLC follows partnership rules so it may distribute appreciated property tax-free. S-Corporation must recognize the gain on the appreciated property distributed to a shareholder.

75

How must a tax payer treat capital interest in partnership received as compensation for services rendered?

A taxpayer must recognize income when a capital interest in a partnership is received as compensation for services rendered. The amount of income to be reported is the fair market value of the partnership interest received

76

When muusy a gift tax return be filed?

Generally, a gift tax return must be filed by a donor if the donor makes a taxable gift (e.g., a gift of a future interest, or a gift of a present interest that exceeds the amount of annual exclusion [$14,000 for 2014]).

77

When unlimited exclusion to file a gift tax return is available for amounts paid on behalf of a donee?

In determining the amount of taxable gifts, there is an unlimited exclusion that is available for amounts paid on behalf of a donee to an educational organization for tuition, as well as for amounts paid on behalf of a donee to medical care providers for medical services.

78

Are gain or loss recognized by a parent corporation on the receipt of property in complete liquidation of an 80% or more owned subsidiary?

No gain or loss will be recognized by a parent corporation on the receipt of property in complete liquidation of an 80% or more owned subsidiary

79

Does issuance of stocks increase or decrease stockholders' equity?

issuance of stock increases stockholders Eequity.

80

When is a loss incurred in sales transactions between a partnership and its partners disallowed?

Although gains and losses incurred in sales transactions between a partnership and its partners are generally recognized, a loss is disallowed if incurred in a transaction between a partnership and a partner owning (directly or constructively) more than a 50% capital or profits interest.

81

Can a debtor in possession be compensated in the same manner of a trustee under the Reorganization Chapter of the Bankruptcy Code if the debtor remains in possession of its business?

The Bankruptcy Code states that although the debtor in possession does have many of the same rights as a trustee, it does not have the right to be compensated in the same manner.

82

Is a person disqualified for employment by a debtor because of such person’s employment by the debtor before the commencement of the Reorganization proceedings under Under the Reorganization Chapter of the Bankruptcy Code?

Under the Reorganization Chapter of the Bankruptcy Code, a person is not disqualified for employment by a debtor because of such person’s employment by the debtor before the commencement of the Reorganization proceedings.

83

When does UCC rules concerning risk of loss apply?

UCC rules concerning risk of loss only apply if the parties have not allocated risk of loss in their contract.

84

Under tenancy in common, when will a deceased tenant’s interest in real property pass to the individual named in a will?

Under tenancy in common, a deceased tenant’s interest in real property will pass to the individual named in a will if the deceased died testate (with a valid will), or to her legal heir(s) if she died intestate (without a valid will).

85

Does the right of survivorship (dead tenants' interests pass to the survivor) applies to tenancy in common or joint tenancy?

Tenancy in common, unlike joint tenancy, does not have the right of survivorship.

86

What is a writ of garnishment?

writ of garnishment allows a creditor to collect money from a debtor’s wages. Garnishment is a statutory proceeding in which money or property belonging to the debtor but under the control of a third party is applied to payment of the amount owed to the creditor.

87

What is the limit of the distributed property’s basis to the partner on proportionate distributions in complete liquidation of a partnership

Since a distribution cannot reduce the basis for a partner’s partnership interest below zero, the distributed property’s basis to the partner is limited to the partner’s basis for the partnership interest before the distribution.The adjusted basis of Smith’s interest in EVA partnership was $230,000 immediately before receiving the following distribution in complete liquidation of EVA: Basis to EVA /Fair market value Cash $150,000 /$150,000Real estate 120,000/146,000What is Smith’s basis in real estate?Here, Smith’s partnership basis of $230,000 is first reduced by the $150,000 of cash received, to $80,000, which then becomes the basis of the real estate to Smith.

88

Are accountants required to notify their clients that the accountants are providing their confidential information to outsourcing firms for processing?

No, this is not required by the law

89

Accountants are prohibited from disclosing to a nonaffiliated third party any nonpublic personal information about their clients : which act is requiring this?

the Gramm-Leach Bliley (Financial Modernization) Act of 1999.

90

Accountants are required to develop, implement, and maintain a comprehensive information security program that outlines the ways in which they protect client information : which regulations require this?

FTC regulations

91

Accountants are responsible for maintaining the confidentiality of information that is outsourced for processing: which act requires this?

the Gramm-Leach Bliley (Financial Modernization) Act of 1999

92

What is a negotiable certificate of deposit?

A negotiable certificate of deposit is an instrument that complies with the requirements of a negotiable instrument and contains an acknowledgment of receipt of money by a bank with an agreement to repay it.

93

What is a banker’s acceptance?

A banker’s acceptance is a draft drawn on and accepted by a bank.

94

What is a banker’s draft?

A check drawn by one bank against funds deposited in its account in another bank.

95

How are Amounts received for noncompetition agreements taxed?

Amounts received for noncompetition agreements are taxed as ordinary income in the year received.

96

Which kind of principals may normally ratify an unauthorized contract made by an agent?

Both partially disclosed and fully disclosed principals can ratify an unauthorized contact.

97

under the Federal Unemployment Tax Act, is an employer entitled to a credit against his/her federal unemployment tax for contributions paid under state employment compensation laws?

under the Federal Unemployment Tax Act, an employer is entitled to a credit against his/her federal unemployment tax for contributions paid under state employment compensation laws.

98

Describe Rule 506

Rule 506 permits the sale of an unlimited amount of securities to an unlimited number of accredited investors and to no more than 35 nonaccredited investors within 12 months that are also defined as sophisticated. No general offering or solicitation is permitted.

99

With respect to an involuntary bankruptcy proceeding under the liquidation provisions of the Bankruptcy Code, what happens if debtor files the bond requested by the court?

The debtor may regain possession of property in the possession of an interim trustee if the debtor files the bond requested by the court.

100

On which schedule Income taxes paid on business income are deducted>

Income taxes paid on business income are deducted as an itemized deduction on Schedule A

101

On what can be a deduction applied when carryinig on any trade or business if such trade or business consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted. However, a deduction is allowed for the cost of merchandise purchased.

102

When may a taxpayer not deduct life insurance premium?

A taxpayer may not deduct life insurance premiums in which the taxpayer is directly or indirectly the beneficiary

103

When can taxpayer deduct group term life insurance premiums?

A taxpayer may deduct the group term life insurance premiums if the insured employee or his/her beneficiaries would get the insurance proceeds

104

Are The ordinary, necessary, and reasonable expenses of operating illegal businesses deductible?

The ordinary, necessary, and reasonable expenses of operating illegal businesses (other than illegal drug activity) are permitted (as long as the expense itself is not against public policy). Therefore, all of these expenses are deductible against the revenue earned from the activities.

105

When do Cash basis taxpayers report income?

Cash basis taxpayers report income when cash or property is actually or constructively received.

106

Is there constructive receipt for deductions (For cashbasis taxpayers)?

For cashbasis taxpayers There is no constructive receipt for deductions.

107

When are deductions for cash basis tax payers taken?

Deductions for cash basis taxpayers generally are taken when actually paid. However, for expenses covering 12 months or more, the deduction must be spread over the period for which the expenses apply.

108

Are fines and penalties deductibe?

Fines and penalties generally may not be deducted as a business expense, including those paid to the federal government.

109

In which case and how an employee may deduct the jury duty pay from her gross income as an adjustment arriving at adjusted gross income.

If an employer requires jury pay to be remitted in exchange for regular compensation for the period the employee was performing jury duty. He may deduct the jury duty pay from her gross income as an adjustment arriving at adjusted gross income.

110

Which are the requirement making Alimony payments make under a divorce or separation instrument, such as a divorce decree or a written agreement incident thereto deductible?

Alimony payments you make under a divorce or separation instrument, such as a divorce decree or a written agreement incident thereto, are deductible if all of the following requirements are met: ?You and your spouse or former spouse do not file a joint return with each other,?You pay in cash (including checks or money orders),?The divorce or separation instrument does not say that the payment is not alimony,?If legally separated under a decree of divorce or separate maintenance, you and your former spouse are not members of the same household when you make the payment,?You have no liability to make any payment (in cash or property) after the death of your spouse or former spouse; and?Your payment is not treated as child support.

111

Do unreimbursed employee business expenses and charitable contribution affect the computaion of adjusted gross income?

The unreimbursed employee business expenses and charitable contribution are itemized deductions, so these do not affect the computation of adjusted gross income.

112

How much of group-term life insurance provided by an employer is a tax-free fringe benefit?

The first $50,000 of group-term life insurance provided by an employer is a tax-free fringe benefit.

113

What are the requirement of cafeteria plans?

The requirements of cafeteria plans are: 1) all participants must be employees; 2) participants may choose between two or more benefits composed of cash or qualified benefits; 3) participants are required to make elections among the benefits; 4) the plan must be in writing and have certain specified information; 5) the plan may not provide participants with deferred income, except for under 401(k) plans.

114

What does Cafeteria plans allow employee to do?

Cafeteria plans allow employees to select from a menu of fringe benefits and cash and not include the value of the nontaxable benefits in their gross income.

115

How are treated reimbursement of employee's business expenses under a non-accountable plan?

If not an accountable plan, all reimbursements are included in the employee's income and all employee deductions will be 2% miscellaneous itemized deductions.

116

How is considered Employer-provided medical insurance coverage?

Employer-provided medical insurance coverage is a non-taxable employee fringe benefit.

117

How is considered inherited land?

Land inherited is not included in taxable income of the recipient.

118

Which rule provide that if an item deducted in a previous year is recovered in the current year, the recovery is included in income only to the extent that the deduction provided a tax benefit in the year of deduction.

The tax benefit rule

119

Which doctrine provides that if income is made available without substantial restrictions or limitations, it is deemed received to a cash basis taxpayer and taxed currently.

The constructive receipt doctrine provides that if income is made available without substantial restrictions or limitations, it is deemed received to a cash basis taxpayer and taxed currently.

120

When are prepaid income excluded from income?

Prepaid rental income is included in income when received unless it is potentially refundable.

121

Where are Interest income accrued to the date of sale is included?

Interest income accrued to the date of sale is included in income. The remaining proceeds are applied against the adjusted basis in the bond (capital recovery) to determine the gain or loss on sale.

122

Where are increases in wealth are included?

All increases in wealth are included in gross income unless a specific exclusion exists.

123

Under which rule Jogging cash are Included in income?

Jogging cash are Included in income under the treasure trove rule.

124

Where is an age discrmination award included?

Discrimination award: Age-discrimination is considered a non-physical injury so the payment is included in income. Damages received due to non-physical injuries are included in income.

125

How is treated a security deposit when it is required be returned the tenant?

The security deposit is not treated as rent and only will be included in gross income when not returned to the tenant.

126

Is unemployment compensation taxable?

Unemployment compensation is generally taxable

127

When will a stock dividend will be taxable?

Although generally nontaxable, a stock dividend will be taxable if any shareholder can elect to receive the distribution in either stock or in property

128

How are distribution from the traditional IRA taxable?

Distribution from the traditional IRA is taxable at the taxpayer's marginal tax rate for federal income tax purposes.

129

What happen if IRA distribution is an early distribution?

If IRA distribution is an early distribution (before age 59 and 1/2) and none of the exceptions for early distributions are met, the distribution is subject to a 10% penalty tax.

130

What is the difference between contributions to Roth IRAs and traditional IRAs?

Contributions to Roth IRAs are never deductible whereas contributions to traditional IRAs are deductible if certain requirements are met.

131

Mr. Kitten purchased an annuity contract for $50,000 from the XYZ Company on March 31, 2014. He is to receive $1,000 per month starting April 1, 2014 and continuing for life. He has a life expectancy of 10 years as of March 31, 2014. Mr. Kitten's reportab

Mr. Kitten's expected return is 120 months ÁE$1,000, or $120,000. His basis in the annuity is $50,000, so his exclusion ratio is 41.67% ($50,000/$120,000). He received nine payments totaling $9,000 in 2014, and $3,750 is excluded from income. Therefore, $5,250 is included in income ($9,000 ? $3,750).

132

How much may deduct Individual taxpayers not active in certain employer-sponsored retirement plans

Individual taxpayers not active in certain employer-sponsored retirement plans may deduct cash contributions to individual retirement accounts to the extent of the lesser of $5,500 or 100 percent of the taxpayer's gross income in 2014.

133

May Taxpayers who are active participants in qualified plans may take individual retirement account deductions?

Taxpayers who are active participants in qualified plans may take individual retirement account deductions subject to a phase-out based on their adjusted gross income

134

When are taxes paid on the interest income earned on individual retirement accounts?

No taxes are paid on the interest income earned on individual retirement accounts until the retirement savings are distributed.

135

Which adjustment is the individual retirement account deduction?

The individual retirement account deduction is an adjustment to income in arriving at adjusted gross income.

136

How is defined eanred income for determining the amount of income that a self-employed individual may contribute to a Keogh profit-sharing plan?

For determining the amount of income that a self-employed individual may contribute to a Keogh profit-sharing plan, earned income is defined as net self-employed earnings less the deductible Keogh contribution and one-half of the self-employment tax.

137

When must be made IRA contributions?

IRA contributions must be made by the original due date of the return even if the return is extended.

138

How much is the maximum deduction for contributions to a traditional IRA by an individual at least age 50

The maximum deduction for contributions to a traditional IRA by an individual at least age 50 is the lesser of $6,500, or 100% of compensation

139

Can a refund of federal income taxes be included in gross income?

Since federal income taxes are not deductible in computing a taxpayer's federal income tax liability, a refund of federal income taxes is excluded from gross income.

140

How is treated guaranteed payment in a partnership?

A guaranteed payment is deductible by the partnership, and the receipt of a guaranteed payment must be included in the partner's gross income, and is reported as self-employment income in the computation of the partner's self-employment tax.

141

How are treated the proceeds of life insurance policies paid by reason of death of the insured?

The proceeds of life insurance policies paid by reason of death of the insured are generally excluded from the beneficiary's gross income.

142

How are gambling winnings treated?

Gambling winnings must be included in gross income.

143

How are gambling losses treated?

Gambling losses cannot be offset against gambling winnings, but instead are deducted from AGI as a miscellaneous itemized deduction limited in amount to the gambling winnings included in gross income.

144

How are interest on federal income tax refund treated?

Although a federal income tax refund can be excluded from gross income, interest on the refund must be included in gross income.

145

Which basis is applied to life and death transfers by unified transfer tax schedule?

The unified transfer tax schedule applies on a cumulative basis to both life and death transfers.

146

How is unified transfer tax computed at death?

At death, a unified transfer tax is computed on total life and death transfers, then is reduced by the tax already paid on post-1976 gifts, the unified tax credit, foreign death taxes, and prior transfer taxes.

147

Can databases be copyrighted?

Databases are considered derivative work and therefore can be copyrighted.

148

Is it an infrigement of software copyright if purchaser makes copies that will be used if the purchased copy becomes unusable?

It is not an infringement of a software copyright if the purchaser makes copies that will be used if the purchased copy becomes unusable.

149

When is an agent or employee liable for his own torts?

An agent or employee is always liable for his own torts, even if committed in the course of discharging his duties.

150

When is the right to regain possession and collect money damages granted?

for the tortious act of conversion committed upon the buyer.