REGULATION PERSONAL Flashcards

Question

What is the "mirror image" rule?

Answer 1

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

Answer 2

Simply invitations to trade

Answer 3

offer, acceptance, and consideration

Answer 4

1. present intent - objective basis | 2. language - all details

Answer 5

1. present intent - objective basis | 2. language - subject matter

Answer 6

- rejection - counteroffer - revocation * All effective upon receipt

Answer 7

- death of offeror - bankruptcy - illegality

Answer 8

- paid-for offer - consideration required - irrevocable

Answer 9

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

Answer 10

Counter offer and rejection (usually prepositional phrases)

Answer 11

When properly mailed - Mailbox Rule applies

Answer 12

When properly mailed - Mailbox Rule Applies

Answer 13

When received if the offer is still open

Answer 14

When received if the offer is still open

Answer 15

Mailbox Rule

Answer 16

counteroffer and rejection

Answer 17

Upon shipment

Answer 18

breach and acceptance

Answer 19

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

Answer 20

Enforceable despite lack of detriment on one side

Answer 21

Not sufficient consideration

Answer 22

- UCC - in good faith | - Common Law - with additional consideration

Answer 23

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

Answer 24

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

Answer 25

four years

Answer 26

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

Answer 27

$500 or more

Answer 28

1 year or greater

Answer 29

- Record - Signature - Sufficient terms

Answer 30

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

Answer 31

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

Answer 32

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

Answer 33

The contract is still valid

Answer 34

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

Answer 35

They are bound to it and must perform regardless

Answer 36

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

Answer 37

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

Answer 38

- don't understand the nature of contracts | - did not understand the effect of a specific contract

Answer 39

No defense

Answer 40

Defense is within range or offeree knows

Answer 41

Valid defense

Answer 42

- a basis of the bargain | - fact or promise

Answer 43

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

Answer 44

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

Answer 45

Both parties agree to the discharge of their obligations

Answer 46

Discharge of a party's duties

Answer 47

An undoing of a contract

Answer 48

- conditions precedent - conditions concurrent - conditions subsequent

Answer 49

Performance is discharged

Answer 50

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

Answer 51

Breach before performance is due

Answer 52

Under a technical breach

Answer 53

Return parties to original positions as if there was no breach

Answer 54

Agreed-upon in advance damages; alternative to compensatory damages

Answer 55

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

Answer 56

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

Answer 57

1. One party to a contract in question owed the creditor money 2. The contract in question was made specifically to satisfy the debt

Answer 58

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

Answer 59

Price, payment, and delivery

Answer 60

Breach and acceptance at the same time

Answer 61

Acceptance

Answer 62

A counter offer

Answer 63

Contract without additional terms

Answer 64

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

Answer 65

When the goods are placed in possession of the carrier

Answer 66

When the goods are delivered to the buyer's destination

Answer 67

At the time of contracting

Answer 68

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

Answer 69

Collect or cash on delivery

Answer 70

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

Answer 71

Pass good title

Answer 72

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

Answer 73

- Fitness for a particular purpose - Merchantability - The usage of trade

Answer 74

Affirmation of fact or promise of performance

Answer 75

- Must be part of the basis of the bargain | - Can't make a disclaimer inconsistent with a express warranty

Answer 76

- Given in every sale of goods by a merchant

Answer 77

- Only given by merchants

Answer 78

- If written, must be conspicuous | - Must use disclaimer of quality or use "merchantability" or general disclaimer "as is" or "with all faults"

Answer 79

- The seller knows of the buyer's reliance for particular use

Answer 80

Seller must have knowledge - buyer must rely

Answer 81

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

Answer 82

Given in every sale

Answer 83

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

Answer 84

Must state there is no warranty of title

Answer 85

1. Defective condition unreasonably dangerous 2. Defendant in the business of using, selling, or manufacturing the product 3. Condition of product is the same * knowledge of the defect is required for punitive damages

Answer 86

It violates public policy

Answer 87

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

Answer 88

- demand assurance of performance | - cancel the contract

Answer 89

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

Answer 90

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

Answer 91

- insolvency | - advance breach by buyer

Answer 92

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

Answer 93

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

Answer 94

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

Answer 95

- anticipatory repudiation: profits + incidental damages - salvage value

Answer 96

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

Answer 97

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

Answer 98

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

Answer 99

drafts, checks, notes, and certificates of deposit

Answer 100

When it is payable at a definite time or on demand

Answer 101

An order to pay - involves three parties

Answer 102

A promise to pay - involves two parties

Answer 103

A promise made between two parties

Answer 104

- maker | - payee

Answer 105

- drawer - drawee - payee

Answer 106

When presented

Answer 107

In 30 days

Answer 108

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

Answer 109

- handwritten over preprinted and typewritten - typewritten over preprinted - words over numbers

Answer 110

Limits the warranties that the transferor of the instrument gives

Answer 111

Changes order paper to bearer paper

Answer 112

Keeps order paper as order paper or bearer to order

Answer 113

without recourse - limits liability

Answer 114

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

Answer 115

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

Answer 116

The drawee

Answer 117

payee and endorsers

Answer 118

drawer, payee, and endorsers

Answer 119

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

Answer 120

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

Answer 121

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

Answer 122

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

Answer 123

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

Answer 124

HDC still gets paid

Answer 125

- incapacity - illegality - fraud in factum - bankruptcy - lack of payment - forgery

Answer 126

HDC still collects according to original terms

Answer 127

- fictitious payee - negligence - impostors

Answer 128

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

Answer 129

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

Answer 130

It is nonnegotiable

Answer 131

- issued by a carrier | - given to seller to evidence receipt of goods for storage

Answer 132

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

Answer 133

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

Answer 134

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

Answer 135

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

Answer 136

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

Answer 137

the creditor

Answer 138

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

Answer 139

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

Answer 140

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

Answer 141

4 month rule - collateral moved to another state | 21-day rule - negotiable instruments

Answer 142

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

Answer 143

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

Answer 144

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

Answer 145

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

Answer 146

- creditor - suit or repossession | - self-help - no court proceeding required before repossession - can't breach the peace

Answer 147

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

Answer 148

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

Answer 149

- expenses, first priority, second, debtor | * all security interests in the property are terminated

Answer 150

Only stands liable if creditor has exhausted every other avenue

Answer 151

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

Answer 152

totally releases the surety

Answer 153

they can usually avoid liability

Answer 154

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

Answer 155

right of surety to force principal debtor to pay

Answer 156

rights from co-sureties - pro-rata share

Answer 157

right of surety to collect from principal debtor

Answer 158

the surety is released

Answer 159

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

Answer 160

gives the grantee/transferee the best protection on title

Answer 161

all tenants must acquire their interests at the same time

Answer 162

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

Answer 163

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

Answer 164

- statutory right | - improvement of property

Answer 165

5-20 years

Answer 166

warranty for time of ownership, same rights as general warranty

Answer 167

- mortgagor - buyer/borrower | - mortgagee - creditor

Answer 168

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

Answer 169

original mortgagor personally liable, property subject to foreclosure

Answer 170

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

Answer 171

- creation - time, title, interest, and possession

Answer 172

an insurance company

Answer 173

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

Answer 174

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

Answer 175

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

Answer 176

not a "substantial abuse"

Answer 177

they are exempt from garnishment

Answer 178

discharges debts if debtor performs as to all creditors who agreed

Answer 179

creditors may petition debtor in bankruptcy and set aside assignment

Answer 180

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

Answer 181

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

Answer 182

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

Answer 183

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

Answer 184

- consumer debt adjustment plan - voluntary - only for individuals - trustee appointed

Answer 185

if debt plan met, court grants discharge, with exceptions

Answer 186

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

Answer 187

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

Answer 188

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

Answer 189

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

Answer 190

federal or state

Answer 191

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

Answer 192

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

Answer 193

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

Answer 194

- writing - filed with court - not rescinded prior to discharge

Answer 195

- writing, but only if agent's contracts must be in writing | - capacity of the principal

Answer 196

- capacity of agent | - consideration - can be a gratuitous agency

Answer 197

- implied agency authority - whatever is customary

Answer 198

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

Answer 199

- follow instructions | - fiduciary - act only on behalf of the principal

Answer 200

- liability

Answer 201

- compensation unless gratuitous - reimbursement for expenses - indemification

Answer 202

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

Answer 203

- principal liable to third party | - agent not liable to third party

Answer 204

- principal liable to third party | - agent must indemnify principal

Answer 205

- agent is liable to the third party

Answer 206

- principal and agent liable to third party | - principal must indemnify agent

Answer 207

-agent is liable to the third party

Answer 208

- the principal is held liable for tort liability | - must be within scope of employment vs. frolic and detour

Answer 209

- the agent and the principal

Answer 210

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

Answer 211

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

Answer 212

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

Answer 213

- the "red herring" prospectus

Answer 214

- Securities Offering Reform Package | - in 2005, enacted "company registration" for very large firms

Answer 215

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

Answer 216

- "free writing prospectuses" | - supplemental written literature freely used by WKSIs

Answer 217

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

Answer 218

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

Answer 219

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

Answer 220

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

Answer 221

- states can enforce antifraud rules and require "notice" filing - states can't engage in "merit regulation" or register "covered" securities

Answer 222

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

Answer 223

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

Answer 224

- SOX section 404a internal control audits | - numerous rules on executive pay

Answer 225

- issuer cap - $1 million in a 12 month period

Answer 226

can't invest in all crowdfunding endeavors per year more than: - the greater of $2,000 or 5% of investor's annual income or net worth if both are less than $100 thousand - 10% of annual net income or net worth not to exceed $100 thousand if either annual income or net worth greater than $100 thousand

Answer 227

eliminated the ban as long as all purchasers are accredited investors

Answer 228

went from $5 million to $50 million

Answer 229

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

Answer 230

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

Answer 231

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

Answer 232

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

Answer 233

remedies violation of Section 5's registration provisions: 1. sale of unregistered securities 2. failure to deliver prospectus 3. use of inadequate prospectus 4. offer before registration statement is filed

Answer 234

1. defendant violated section 5 2. defendant was a seller 3. plaintiff lost money

Answer 235

- remedies false statements and omissions in oral statements and "free writing"

Answer 236

- false statements or omissions - materiality - defendant is a seller - tracing - damages

Answer 237

- due diligence - alternative loss causation - statute of limitations

Answer 238

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

Answer 239

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

Answer 240

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

Answer 241

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

Answer 242

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

Answer 243

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

Answer 244

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

Answer 245

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

Answer 246

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

Answer 247

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

Answer 248

- race - color - religion - sex and sexual harassment - national orgin

Answer 249

- bona fide occupational qualification (BFOQ) | - legitimate seniority or merit system

Answer 250

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

Answer 251

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

Answer 252

- contributed by at least 40 quarters (10 years) | - entitled to full range of benefits

Answer 253

- entitled to some of the benefits

Answer 254

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

Answer 255

Federal Insurance Contributions Act

Answer 256

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

Answer 257

Federal Unemployment Tax Act

Answer 258

- retirement benefits and disability benefits

Answer 259

- executives | - professional employees, like CPAs

Answer 260

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

Answer 261

- employees are guaranteed a specified monthly income for life once retired

Answer 262

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

Answer 263

- defined benefit plans only

Answer 264

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

Answer 265

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

Answer 266

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

Answer 267

- promote job safety

Answer 268

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

Answer 269

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

Answer 270

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

Answer 271

- section 1 prohibits conspiracies in restraint of trade | - section 2 prohibits monopolies and attempts to monopolize

Answer 272

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

Answer 273

- section 5 prohibits "unfair methods of competition"

Answer 274

- section 2 further addresses price discrimination

Answer 275

- trademarks - trade secrets - copyrights - patents

Answer 276

"original works of authorship"

Answer 277

- fixed in some tangible medium of expression - creative - original

Answer 278

- life of the author plus 70 years

Answer 279

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

Answer 280

- 20 years from the date of filing | - must be filed within one year of coming up with invention

Answer 281

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

Answer 282

Non-functional ornamental design elements in a functional product

Answer 283

1. patentable subject matter 2. it is useful - not useful if it doesn't work, is a hoax, or is merely an abstract idea 3. it is novel 4. it is non-obvious - to a person with ordinary skill in that area

Answer 284

- 14 years from the date of filing

Answer 285

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

Answer 286

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

Answer 287

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

Answer 288

- Section 1956 | - Section 1957

Answer 289

- prohibits transaction money laundering | - prohibits transportation money laundering

Answer 290

- monetary transactions in criminally derived property over $10,000

Answer 291

- single owner business | - firm's assets and liabilities belong solely to its owner

Answer 292

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

Answer 293

- one-shot general partnership type relationship

Answer 294

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

Answer 295

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

Answer 296

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

Answer 297

- enjoys limited liability | - double taxation

Answer 298

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

Answer 299

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

Answer 300

- sole proprietorship - general partnership * may file statement of partnership authority

Answer 301

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

Answer 302

1. name - indicated corp. status 2. number of authorized shares 3. address of registered office 4. name of registered agent at the office 5. names and addresses of incorporators

Answer 303

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

Answer 304

- the proposed corporation - other promoters - contemplated investors

Answer 305

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

Answer 306

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

Answer 307

- the partnership dissolves and is wound up | - the departing partner is bought out

Answer 308

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

Answer 309

90-day "cooling off" period between dissociation and liquidation

Answer 310

1. creditors - including partners - are paid first 2. partners will have to contribute if there is not enough money to pay creditors 3. if there is money left over, will make distributions to partners

Answer 311

1. voluntarily dissolved upon approval of their directors and shareholders 2. involuntarily dissolved administratively by the Secretary of State 3. involuntarily dissolved judicially 4. an action by creditors

Answer 312

1. sale of all or substantially all of a corporation's assets 2. mergers or consolidations with other corporations

Answer 313

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

Answer 314

- in the same way

Answer 315

1. quality tests - shares can be issued in exchange for cash, promissory notes, or any other items of tangible or intangible value to the corporation 2. quantity tests - must be issued for at least par (face value) or amount authorized by the board

Answer 316

1. authorized by the board of directors 2. must be consistent with shareholders' rights, not render corp. unable to meet its bills as they come due, and not leave corp. with fewer assets than liabilities

Answer 317

if after doing so the firm would be insolvent

Answer 318

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

Answer 319

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

Answer 320

- partners may veto admission of potential new partners | - new partners may be added only upon unanimous consent of existing partners

Answer 321

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

Answer 322

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

Answer 323

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

Answer 324

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

Answer 325

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

Answer 326

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

Answer 327

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

Answer 328

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

Answer 329

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

Answer 330

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

Answer 331

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

Answer 332

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

Answer 333

1. borrow money 2. sell corporate property 3. hire and fire officers and other employees 4. declare or refuse to declare dividends 5. make or refuse to make other distributions to shareholders 6. set the salaries of employees, officers, and themselves 7. propose for shareholder approval major changes in the corporation

Answer 334

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

Answer 335

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

Answer 336

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

Answer 337

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

Answer 338

- trade or business assets owned for more than a year

Answer 339

- all other assets are capital assets | - the most common ones are those used in one's personal activities and in investment activities

Answer 340

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

Answer 341

amount realized - adjusted basis = realized gain/loss

Answer 342

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

Answer 343

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

Answer 344

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

Answer 345

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

Answer 346

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

Answer 347

- if sold for a gain, the holding period carries over | - if sold for a loss, the holding period doesn't carry over

Answer 348

always long-term

Answer 349

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

Answer 350

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

Answer 351

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

Answer 352

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

Answer 353

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

Answer 354

the trade date

Answer 355

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

Answer 356

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

Answer 357

the loss is deductible as an ordinary loss

Answer 358

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

Answer 359

Realty - land and assets permanently attached to land | *recapture only applies to Section 1231 assets

Answer 360

Personalty - assets other than realty

Answer 361

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

Answer 362

- depreciable realty is Section 1250 property | - only the excess of actual depreciation over straight-line depreciation is subject to recapture as ordinary income

Answer 363

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

Answer 364

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

Answer 365

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

Answer 366

trucks, automobiles, computers and machinery and equipment

Answer 367

office furniture and fixtures

Answer 368

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

Answer 369

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

Answer 370

- residential realty is depreciated over 27.5 years | - nonresidential realty is depreciated over 39 years

Answer 371

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

Answer 372

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

Answer 373

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

Answer 374

$25,000 for the first year

Answer 375

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

Answer 376

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

Answer 377

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

Answer 378

- i.e. covenants not to compete, patents, and copyrights | - qualify if acquired in connection with the acquisition of a trade or business

Answer 379

- losses are never recognized from a like-kind exchange | - recognized gain is the lesser of realized gain or boot received

Answer 380

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

Answer 381

- only to business and investment property | - business property can be exchanged for investment property

Answer 382

FMV of property received - postponed gain + postponed loss

Answer 383

the property's FMV

Answer 384

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

Answer 385

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

Answer 386

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

Answer 387

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

Answer 388

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

Answer 389

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

Answer 390

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

Answer 391

cost + disallowed loss

Answer 392

includes the holding period of the old stock or securities

Answer 393

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

Answer 394

- spouse, descendants, ancestors, and siblings | * doesn't include in-laws and aunt, uncles, and cousins

Answer 395

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

Answer 396

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

Answer 397

applies to only one sale or exchange every two years

Answer 398

recognized gain = cash received * gross profit percentage

Answer 399

15, 25, 34, & 35%

Answer 400

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

Answer 401

- the amount is readily available to the taxpayer | - actual receipt is not subject to substantial restrictions

Answer 402

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

Answer 403

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

Answer 404

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

Answer 405

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

Answer 406

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

Answer 407

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

Answer 408

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

Answer 409

- using the effective interest rate method | - amortization increases interest income

Answer 410

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

Answer 411

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

Answer 412

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

Answer 413

- not taxable on common stock | - taxable on preferred stock

Answer 414

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

Answer 415

not taxable and basis stays the same

Answer 416

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

Answer 417

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

Answer 418

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

Answer 419

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

Answer 420

cost of annuity/expected return x payment

Answer 421

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

Answer 422

- the FMV of these items must be included in income

Answer 423

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

Answer 424

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

Answer 425

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

Answer 426

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

Answer 427

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

Answer 428

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

Answer 429

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

Answer 430

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

Answer 431

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

Answer 432

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

Answer 433

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

Answer 434

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

Answer 435

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

Answer 436

if it is also used for financial reporting

Answer 437

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

Answer 438

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

Answer 439

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

Answer 440

- marketing and selling - research - advertising - distributions - general & admin. expenses

Answer 441

spread over four years beginning with the year of change | * if less than $25,000 the taxpayer can include all income in the year of change

Answer 442

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

Answer 443

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

Answer 444

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

Answer 445

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

Answer 446

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

Answer 447

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

Answer 448

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

Answer 449

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

Answer 450

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

Answer 451

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

Answer 452

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

Answer 453

excluded from income only for graduate teaching/research assistants

Answer 454

- if reimbursed by the employer | - the exclusion is phased-out at higher AGI levels

Answer 455

grant date, exercise date, and sale date

Answer 456

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

Answer 457

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

Answer 458

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

Answer 459

- held more than one year | - not sold until after two years from the date the option was granted

Answer 460

- the gain on the stock sale is ordinary income | - the difference in the FMV on the sale date and the FMV on the exercise date is capital gain or loss

Answer 461

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

Answer 462

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

Answer 463

by age 70 1/2

Answer 464

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

Answer 465

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

Answer 466

the taxpayer must recognize gain at the time of the conversion to the extent that the conversion amount exceeds the tax basis in the IRA - same rule applies to conversions of 401(k) plans into Roth plans - these conversions are reported on Form 8606

Answer 467

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

Answer 468

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

Answer 469

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

Answer 470

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

Answer 471

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

Answer 472

- 25% of earned income

Answer 473

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

Answer 474

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

Answer 475

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

Answer 476

- trade or business - investment - personal

Answer 477

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

Answer 478

if ordinary, necessary, and reasonable

Answer 479

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

Answer 480

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

Answer 481

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

Answer 482

the cost of goods sold

Answer 483

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

Answer 484

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

Answer 485

- the expenses are amortized over the benefit period | - prepaid interest must always be amortized over the life of the loan

Answer 486

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

Answer 487

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

Answer 488

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

Answer 489

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

Answer 490

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

Answer 491

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

Answer 492

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

Answer 493

take a deduction for AGI for the amount repaid

Answer 494

net investment income (investment income less investment expenses)

Answer 495

on the portion that does not exceed the lesser of - - the FMV of the residence less the lower of remaining acquisition indebtedness, or - $100,000

Answer 496

5 years | * no carryback

Answer 497

- FMV is deductible | - deduction is limited to 30% of AGI

Answer 498

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

Answer 499

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

Answer 500

lower of decline in FMV or AB of property - insurance reimbursements - casualty floor ($100) - 10% of AGI

Answer 501

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

Answer 502

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

Answer 503

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

Answer 504

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

Answer 505

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

Answer 506

- employees must substantiate all expenses to be reimbursed | - all excess reimbursements must be returned to the employer

Answer 507

- if the assignment is short-term in nature

Answer 508

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

Answer 509

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

Answer 510

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

Answer 511

- to meet minimum standards of current job | - to qualify taxpayer for a new trade or business

Answer 512

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

Answer 513

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

Answer 514

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

Answer 515

- always treated as a short-term capital loss | - no deduction is allowed until the debt becomes totally worthless

Answer 516

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

Answer 517

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

Answer 518

- only allowed for business losses and casualty losses | - any nonbusiness losses or expenses must be added back to the taxable loss to determine the NOL

Answer 519

- profit in three of the last five years | - otherwise is presumed to be a hobby

Answer 520

1. items that would have been deductible anyways 2. other cash expenses 3. depreciation

Answer 521

used exclusively on regular basis as either: - the principal place of business for a trade/business of the taxpayer or - a place of business used by clients, patients, or customers, and - the use is for the convenience of the employer (if employed)

Answer 522

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

Answer 523

- multiply the allowable square footage by $5 | - maximum square footage under this method is 300, limiting the deduction to $1,500

Answer 524

- deemed a personal residence | - rent income is excluded

Answer 525

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

Answer 526

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

Answer 527

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

Answer 528

they are carried forward indefinitely until the related activity is sold

Answer 529

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

Answer 530

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

Answer 531

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

Answer 532

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

Answer 533

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

Answer 534

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

Answer 535

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

Answer 536

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

Answer 537

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

Answer 538

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

Answer 539

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

Answer 540

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

Answer 541

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

Answer 542

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

Answer 543

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

Answer 544

- no personal exemption is allowed | - standard deduction is limited to $1,050 or earned income plus $350 (limited to the regular standard deduction)

Answer 545

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

Answer 546

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

Answer 547

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

Answer 548

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

Answer 549

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

Answer 550

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

Answer 551

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

Answer 552

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

Answer 553

multiply self-employment income by 92.35%

Answer 554

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

Answer 555

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

Answer 556

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

Answer 557

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

Answer 558

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

Answer 559

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

Answer 560

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

Answer 561

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

Answer 562

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

Answer 563

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

Answer 564

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

Answer 565

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

Answer 566

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

Answer 567

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

Answer 568

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

Answer 569

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

Answer 570

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

Answer 571

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

Answer 572

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

Answer 573

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

Answer 574

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

Answer 575

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

Answer 576

the gain recognized to the shareholder is the lower of - - realized gain or - the fair market value of the boot received

Answer 577

If their tax liability exceeds $500

Answer 578

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

Answer 579

Corporations using the accrual method can deduct unpaid bonuses and charitable contributions only if: - approved by the board before the end of the tax year - paid within 2 1/2 months after the end of the tax year

Answer 580

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

Answer 581

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

Answer 582

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

Answer 583

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

Answer 584

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

Answer 585

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

Answer 586

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

Answer 587

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

Answer 588

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

Answer 589

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

Answer 590

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

Answer 591

- before the end of the taxable year that business begins | * costs of issuing and selling stock (syndication expenses) must also be capitalized, but can't be amortized

Answer 592

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

Answer 593

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

Answer 594

gross receipts from domestic production - cost of goods sold - direct expenses allocated to this income, including wages - a pro-rate share of indirect expenses allocated to this income

Answer 595

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

Answer 596

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

Answer 597

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

Answer 598

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

Answer 599

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

Answer 600

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

Answer 601

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

Answer 602

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

Answer 603

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

Answer 604

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

Answer 605

1. more than 50% of the value of the outstanding stock must be owned directly or indirectly by five or fewer individuals at any time during the last half of the tax year 2. a substantial portion (60% or more) of the corporate income must consist of income such as dividends, interest, rents, and royalties

Answer 606

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

Answer 607

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

Answer 608

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

Answer 609

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

REGULATION PERSONAL Flashcards

(643 cards)