REG Archives Flashcards
(43 cards)
What are the requirements of the AICPA Uniform Accountancy Act (UAA)?
- UAA requires accountants who perform attest services or compilations of F/S to be licensed.
- Contains a substantial equivalency provision to allow for movement between states.
- Contains provisions for continuing education.
They do not contain requirements for the issuance of CPA certificates.
What does the AICPA do if a state board of accountancy revokes a CPA’s license?
The CPA will be automatically expulsed from the AICPA.
Does a conviction for a felony or a misdemeanor result in automatic expulsion from the AICPA?
No, a conviction for a misdemeanor would not result in automatic expulsion from the AICPA, but a felony would.
A CPA who prepares the tax returns of the president of a corporation the CPA audits, without charging the president. Is this scenario applicable to the IRC provision dealing with TRP, and if so, how?
Yes, because a TRP is defined as an individual or firm who prepares returns for compensation, implied or explicit, and this is a example of implied compensation.
Will a CPA be liable to tax client for damages resulting from refusing to sign a client’s request for a filing an extension?
No, not for an extension.
Is an appeal allowed if a taxpayer challenges a proposed deficiency in the Small Cases Division of the U.S. Tax Court?
No appeal is allowed in the Small Cases Division of the U.S. Tax Court.
Can proposed regulations be cited as authority to support a tax position?
No, proposed regulations do not have the effect of law, but they do provide an indication of the IRS’s view on a tax issue.
What are the three courts of original jurisdiction, or trial courts, for tax matters?
1) U.S. Court of Federal Claims
2) U.S. Tax Court (do not have to pay penalty to be heard)
3) U.S. District Court
The U.S. Court of Appeals hears appeals from Tax Court and District Court.
What are the administrative sources of the tax law and who administers them?
The IRS administers:
- Private letter rulings (only usable to addressed taxpayer)
- Technical advice memoranda
- Revenue rulings
What type of tax law authority is committee reports?
Legislative sources of authority that provide insight from:
- House Ways & Means Committee,
- Senate Finance Committee (considers new tax legislation), and
- Joint Conference Committee.
How does a C Corporation avoid an underpayment penalty, and how does it determine the lowest amount that must have been paid as estimated taxes for the current year?
The C corporation can pay the lower of 100% of the prior year’s tax liability or 100% of the current year’s tax liability.
How does an individual determine the minimum amount of estimated tax payments in order to avoid penalty?
The required annual amount is the lower of 90% of the current year’s AGI, or 100% of last year’s AGI. However, if the taxpayer’s AGI was > $150k last year, then the required estimated payment would shift from 100% to 110%.
What is the difference between annualization method and season method when making estimated tax payments?
Seasonal method is not available for individuals. Corporations use seasonal method installments based on previous year patterns.
Whereas annualization method makes all estimated quarterly tax payments equal based on the total annual AGI.
What does a corporation take into account when computing CIT expense for estimated tax purposes?
Unless its tax liability is less reasonably estimated to be under $500, a corporation must make estimated tax payments.
Corp. estimated tax = expected tax liability - allowable tax credits
When it comes to common law and liabilities, what is the Restatement Rule (i.e., the most common rule - the Restatement “limited class”)? Ex: CPA audits a client’s F/S in order for the client to apply for a bank loan.
The CPA owes a duty of care to both. Auditors always owe a duty of care to their clients. Under the Restatement approach, auditors are also liable to one (the bank, in this case) or a limited class of nonclients where the CPA knows (a) the information was supplied to the client for the benefit of this limited class (here, the client was going to give the audited statements to the bank), and (b) the information will influence third parties in a specific transaction of type of transaction (here, it induced the bank to make the loan).
What are the elements needed by a plaintiff to prove negligence against a defendant (CPA)?
1) Proof of the standard of due care
2) Breach of that standard of due care
3) Injury
4) Cause: cause-in-fact and proximate cause
When it comes to negligence, what is the difference between “Ultramares” rule and “Restatement rule?
Based on a case in 1931, the “Ultramares” rule requires privity in order for a CPA to be liable.
The “Restatement” rule is broader in that it allows foreseen users who relied on negligently false statements to sue.
What is the preceding year method and the causes that prevent a corporation from using it?
1) Corp did not file a retrun showing a tax liability for that preceding (e.g., corp had NOL)
2) Preceding year was less than 12 months
3) Corp taxable income was greater than $1M
What is the burden of proof for fraud claims in civil cases?
Clear and convincing evidence.
Are harvested and/or growing crops governed by UCC or common law?
Crops are always governed by UCC.
What are the requirements for a Ch. 7 voluntary and nonvoluntary bankruptcy?
-Voluntary bankruptcy: the debtor must have debts. Insurance companies are an exception and may not voluntarily file Ch. 7 relief.
-Involuntary bankruptcy petition: the aggregate unsecured claims of the petitioners equals or exceeds $18,600.
What is the maximum KERP (key employee retention plan) payment?
The payment to management cannot be more the 10 times the average of reunion payments made to nonmanagement employees.
What is the exception to the general rule of preferential payment (antecedent debt/ 90 day) of filing bankruptcy?
Consumer debts of up to $7,575 may be made without showing a preference, as can alimony and child support payments.
How do you calculate the Medicare surtax? Ex: MFJ active income of $220K and net investment income of $200K
Medicare surtax is 3.8% of the lessor of net investment income, or the excess of AGI over the AGI threshold.
Ex: NII = $200K > excess AGI of $170K ($420K - $250K). Thus, $170K x 3.8% = $6,460 Medicare surtax obligation
