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Review for REG Flashcards

(78 cards)

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1
Q

R5
Power of Attorney

A

Is a written appointment of agency,
Signed by the principal and
Giving the agent authority to act on the principal’s behalf.

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2
Q

R6
Business judgment rule,

A

A Director is protected from liability
for decisions made on behalf of the corporation
IF
The director acts in good faith and in in the best interest of the corporation,

Exercising care that a reasonably prudent person would exercise in a similar position.

The action must also ostensibly be within the power of the corporation to undertake and ostensibly within the authority of management to make.

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3
Q

R2
Preferential Tax Rates
Things to know

A

STCG - taxed as ordinary tax rates
LTCG - taxed at preferential tax rates

Gain on sale of collectibles and Qualified Small Business Stock (QSBS) is taxed at max 28% tax rate

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4
Q

R1
Charitable Contribution

A

Taxpayer can deduct long-term (i.e., held longer than 12 months) capital gain property at the higher FMV (higher than cost basis) without paying capital gains tax on the appreciated portion.

This deduction is limited to 30 percent of adjusted gross income (AGI). A five-year carryforward period applies.

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5
Q

R5
Agent for an Undisclosed Principal,

A

Broker (agent) has the same actual authority as if the principal’s identity were disclosed.

Actual authority depends on the communications between the principal and the agent and is unaffected by whether the principal’s identity is disclosed to third parties with whom the agent deals.

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6
Q

R5
Agent owes the principal a duty of loyalty

A

and must act solely in the principal’s interest

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7
Q

R4
For a cause of action for negligence,

A

the client must prove at least that the CPA failed to exercise due care.

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8
Q

R5
The impossibility defense can be raised when

A

An event occurs after a contract is formed that will make performance of the contract objectively impossible (i.e., no one can perform).

If a contract specifies the source of the subject matter and that source is destroyed after the contract is formed, performance is objectively impossible because the specified source no longer exists.

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9
Q

R6
Dissolution of a Partnership

A

RULE:
Each partner has liability for partnership debts

Partners will continue to have apparent authority

Partners must inform 3rd parties of the dissolution

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10
Q

R4
The MORE-LIKELY-THAN-NOT

A

Standard involves a position that has a more than 50% chance of succeeding

IN a lawsuit by the IRS

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11
Q

R1
Real Estate Taxes & Mortgage Interest

A

Will be deductible either on Rental Sch E or as itemized deduction Subject to Limitations

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12
Q

R5
Parol Evidence Rule

A

Bars evidence of prior or contemporaneous oral stmts to vary the terms of a fully written contract

Oral evidence is permissible when the contract is incomplete, ambiguous, invalid, or subject to a condition precedent, or to modify after the original contract is written.

A contemporaneous oral agreement will be excluded

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13
Q

R2
Government Bonds as Capital Assets

A
  • Government bonds held by an individual investor are considered capital assets.
  • When these bonds are sold, any profit or loss is reported as a capital gain or loss.
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14
Q

R5
Nonconforming Goods and Risk of Loss

A
  • When nonconforming goods are shipped, the risk of loss is always on the seller.
  • This applies regardless of the shipping terms.
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15
Q

R6
Partnership Agreement & Notice to Creditors

A
  • A partnership agreement can be oral unless it is to last more than one year.
  • Whether it needs to be in writing is decided when the agreement is made.
  • Notice to creditors is not required upon dissolution.
  • Without notice, partners may still be liable for the partnership’s debts after dissolution.
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16
Q

R4
Tax Preparer Responsibilities

A
  • Must make reasonable inquiries if taxpayer’s information is incomplete.
  • Liable for penalties if understatement of liability is due to negligence or intentional disregard of rules.
  • Not required to obtain supporting documentation unless accuracy is in doubt.
  • Must make reasonable inquiries if information appears incorrect or incomplete.
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17
Q

R1
Series EE Savings Bonds Interest Exclusion

A
  • Tax-exempt if used for higher education for taxpayer, spouse, or dependents.
  • Reduced by any tax-free scholarships received.
  • A married taxpayer files a Joint Return
    -Taxpayer is over 24 yo

Phase out:
Single/HOH $96.8k-$111.8k
MFJ $142.2k-$175.2k

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18
Q

R6
Derivative Action

A
  • When a corporation doesn’t enforce its rights against a third party.
  • A shareholder can sue on behalf of the corporation.
  • Example: Suing a third party to enforce the corporation’s rights.
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19
Q

Stockholder and Board of Directors Rights

A
  • Stockholder Approval: Must approve major changes like dissolution.
  • Corporate Borrowing: Approved by board of directors’ resolution.
  • Selecting Officers: Done by the board of directors, not stockholders.
  • Declaring Dividends: Decided by the board of directors; no absolute right for stockholders to receive annual dividends.
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20
Q

R3
For S Corporation

A

Guarantee of corporate debt does not create debt basis.

Only direct loans to the corporation create debt basis.

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21
Q

Golsen Rule

A

US Tax Court will follow the precedents set by the US Court of Appeals for the circuit where the taxpayer resides

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22
Q

R5
Ratification

A

Means that when a minor becomes an adult, they can choose to accept a whole contract they agreed to when they were younger.

They can do this by doing something that shows they agree with the contract or by not doing anything to reject it.

However, they must accept the entire contract, not just parts of it.

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23
Q

R5
Compensatory Damages

A

Put you back in the same position as if the contract had been performed as agreed

The injured party can receive either Compensatory or Specific but never both

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24
Q

R5
Specific Performance

A

Requires the breaching party to complete the contract

The injured party can receive either Compensatory or Specific but never both

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25
R6 Merger of 2 Corps
Require that a special meeting be held Notify stockholders Copy of Merger plan be given to stockholders of both companies
26
R4 Unemployment compensation insurance and workers'
Compensation insurance both are paid by the employer. They are not deducted from the employee's wages.
27
R6 Partnership
When two or more people work together as co-owners to run a business and make a profit. Key Point: They don't need to specifically plan or agree to be partners for it to be considered a partnership.
28
R6 If a debtor is not paying debts as they become due and has 12 or more unsecured creditors,
At least three of the unsecured creditors who together are owed at least $18,600 must join to bring an involuntary petition.
29
R5 Unilateral Contract
When a promise is exchanged for an act.
30
R3 If it says that it is an unrelated corporation, FOR DRD Deduction
MEANS ownership of less than 20%
31
R6 When a partner commits a tort
Ea partner is jointly and severally liable for torts committed by any partner while in the course of partnership business
32
R4 To Prove Fraud 5 things
Misrepresentation of Fact Intent to Deceive Actual & Justifiable reliance on the misrepresentation Intent to induce that reliance Damages
33
Rule: The authority of partners is governed by agency law. Under agency law, a principal is not bound to the third party unless the agent had actual authority or apparent authority. When the agent has no actual authority and no apparent authority, the principal (in this case the partnership) will only be liable if it chooses to adopt the agreement (i.e., ratify).
Rule: Amending the partnership agreement (presumably to grant authority) will not cause the partnership to be bound because authority must exist at the time the contract is made or the partnership must ratify the contract.
34
R3 NOL for Corporations
Carried back 3 years Carried forward 5 years Cannot apply to ordinary income
35
R3 For book income
Federal Taxes are NOT deductible State Income Tax ARE deductible
36
R5 Under Article 2
an offer can be accepted by a promise to ship or by prompt shipment. Shipment of nonconforming goods constitutes both an acceptance and a breach UNLESS a notice is sent prior to shipping that the goods are only an accommodation.
37
R5 Once an undisclosed principal becomes known
to the 3rd, the third party can elect to hold either the agent or the principal liable for breach of contract.
38
R4 A CPA who commits fraud is liable
to anyone who is injured by the fraud
39
R6 Derivative Suit
To Solicit shareholders to vote for certain directors Vindicate wrongdoings in the corporation Direct Action by the shareholder - when a shareholder seeks to vindicate the shareholder's own rights against the corp
40
R3 DRD Dividend- Received Deduction IS THE LESSER OF
I. applicable %'s (50% for ownership of 20% or less, 65% of 21%-80% and 80% or more) OR II. Applicable % times taxable income BEFORE the following deductions: DRD, any capital loss carryback and ANY NOL carryforward Any capital loss carryovers are still deducted when calculating the DRD taxable income limitation In other words take annual loss away from Dividend received, then calculate according to %'s, get your number then subtract from Dividend, then subtract NOL for the year
41
R5 Consideration to be binding
Must be "legally sufficient" Common examples of Consideration Money A Promise Acting Not Acting
42
R5 Attachment requires that:
i. Parties agree to create a security interest - an authenticated security agreement or the creditor's taking possession or control of the collateral ii. debtor must have rights in the collateral iii. creditor must give value NO Requirement that the security agreement be filed (FILED is considered PERFECTION)
43
R5 In a noncarrier case,
Risk of loss passes from a merchant seller on actual delivery of the goods into the buyer's possession. Mere tender at the seller's place of business does not pass the risk. Neither does the seller's using its truck to deliver the goods. (Note If the seller is using its own truck, it's a noncarrier case, no common carrier was involved.)
44
R3 Rule: Foreign income taxes paid by a domestic corporation may be claimed
either as a deduction or as a credit, at the option of the corporation.
45
R5 Mutual Mistake
Of a material fact will make a contract voidable at the option of the adversely affected party
46
R3 Investment income of a political organization
is not exempt function income and is subject to tax.
47
R4 Work papers belong to the accountant who prepares them
not the client
48
When nonconforming goods are shipped
The risk of loss is always on the seller, regardless of the shipping terms
49
R3 Only Direct Loans to the Corporation create debt basis
Loss is only allowed up to the stock basis and reduces total tax basis to zero In a Corporation includes S Corporation
50
A secured party may take security interest in
After Acquired Inventory AND After Acquired Equipment
51
R1 Provided the taxes due after withholdings were not over $1,000,
there is no penalty for underpayment of estimated taxes Anything under that would fall under Failure to pay penalty if not paid until April 30th
52
R6 A Merger can be effected by giving some parties cash or prop
Not everyone need receive voting shares
53
R5 Specific Performance
Court order to perform under the terms of a contract. It is available only in contract for unique or rare property A patent by definition is unique Specific performance would be available to enforce a contract for the sale of a patent
54
R4 TAX PRACTITIONER PRIVILEGE
In IRC provides same common law protections of confidentiality that apply to attorney client privilege shall apply to Tax Practitioner Privilege This Privilege can only be exercised in a noncriminal tax matter before the IRS or a noncriminal tax proceeding in a federal court brought by or against the US
55
R4 GROSS NEGLIGENCE
Is a Tort When a CPA recklessly departs from the standards of due care
56
R6 Voluntary Dissolution of a Corporation
Requires filing of articles of dissolution with the state This is all that it requires ( simple )
57
R4 This is when An Accountant can show WP
1. Lawful subpoena 2. Prospective Purchaser - just don't disclose confidential info 3. Quality Control Panel 4. AICPA/State Trial Board 5. Court proceedings 6. When GAAP requires disclosure of such info in the financial stmts
58
R5 MECHANIC LIEN Improvements made on real prop Requires notice to the owner for selling the prop to satisfy debt
R5 Artisan's Lien Improvements made to personal prop Requires notice to the owner for selling the prop to satisfy debt
59
R2 AVD = Alternate Valuation Date
Earlier of the date of distribution OR Sale OR 3 months after the date of death
60
R6 Filing of an Involuntary Petition in Bankruptcy
Filing of Involuntary & Voluntary, STOPS the enforcement of all judgment LIENs and COLLECTION ACTIONS against the debtor THIS is called AUTOMATIC STAY
61
R5 THE STATUE OF FRAUDS
Does NOT actually require an agreement to be singed by ANY party INSTEAD It requires written proof of the material terms of the agreement to be evidenced by a writing signed by the party being sued
62
R6 A Chap 7 Liquidation Case The court can deny a discharge if creditors allege and prove that the debtor did any of a number of acts
LIKE: Obtained a prior discharge within 8 years AND Failure to keep books and records is a ground for discharge
63
R2 De Minimis Safe Harbor Rule
If it has A WRITTEN POLICY AND an APPLICABLE FINANCIAL STATEMENT the rule allows the company to expense items UP TO $5k each item If it doesn't have an APPLICABLE FINANCIAL STMT (AFS) can deduct items that cost up to $2.5k
64
R1 If Taxpayer rented his PRIMARY residence LESS than 15 Days during the tax year
TP is NOT required to include the rental income on his income tax return AND CanNOT deduct any expenses related to THAT rental activity
65
R3 Test for Revocation
50% Total of shareholders filing consent to revoke / Total number of shareholders Number must be 50% and over
66
R6 Under Chapter 11 of Fed Bankruptcy Code
The creditors' committee, if appointed, is made up of unsecured creditors
67
R5 Sales Article of the UCC (Article II)
Applies to Sales of Goods. Goods are defined as tangible, movable personal property. UCC Article II is not limited to Merchants, Contracts for personal services is covered by common law contracts. Stock sales on stock exchange is covered by common law contracts
68
R3 Applicable Apportionment Factor
Average of: Property + Payroll + Sales Factor / 3
69
R6 Equity Security Represents
An ownership interest in a corporation All types of STOCK are considered equity securities
70
R1 Charitable Contribution
Must be substantiated
71
R1 Unemployment Compensation
Must be included in Gross Income AND ARE TAXABLE
72
R2 Section 179
Total amount that is deductible over time is the same for both recovery methods Certain Limitations apply
73
R2 MACRS
When calculating, the 1st year placed in service is the % to use. EX: Purchased in year 3 but placed in service year 1 Use year 1 Recovery Period to calculate %
74
R1 Multiple Support Agreement
Contributor MUST have provided MORE than 10% of support
75
R1 An employee who has had social security tax withheld in an amount greater than the max for a particular year may claim the excess as a credit against income tax
IF that excess was correctly withheld by 2 or more employers
76
R3 Expenses related to issuance of the corporation's STOCK (exp for printing and sale of stock certifications)
ARE NOT AMORTIZABLE
77
R3 Only actual bad debts written off are deductible
FOR TAX purposes, ACTUAL WRITE OFF is the only method allowed for taxes
78
R4 For the IRS to prevail in a case with a criminal penalty,
IRS MUST prove beyond a reasonable doubt that the taxpayer willfully and deliberately attempted to evade tax

REG (11 decks)

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