Tax_Reg_Review Deck_4 Flashcards
(22 cards)
True or False:
The Surety is primarily liable to the Creditor.
TRUE!
A surety is directly liable to the creditor on a contract. The creditor can demand performance from the surety or the principal debtor
True or False:
Insolvency or Death of the debtor is not a defense of a Surety.
TRUE!
Surety is Liable directly to the Creditor unless the creditor did not enforce the liability on Surety.
What is Subrogation right of a Surety?
Subrogation is the right a surety has by which the surety succeeds to the creditor’s rights against the principal when the surety pays the principal’s obligations.
When a Non-Compensated Surety is released from the liability to the creditor?
A non-compensated surety will be discharged from liability if the principal debtor and the creditor modify the terms of the contract in any way.
A partial surrender of the debtor’s collateral is a modification that will release a non-compensated surety from liability.
True or False:
State exemption statutes prevent all of a debtor’s personal property from being sold to pay a federal tax lien.
FALSE!
Federal law, not state law, controls what property is subject to federal tax liens.
True or False:
Federal social security benefits received by a debtor are exempt from garnishment by creditors.
TRUE!
Federal law does not allow creditors to institute garnishment proceedings with respect to federal social security benefits.
What is Composition of Creditors?
A composition of creditors is an agreement between a debtor and at least two creditors that the creditors will take less than full payment to discharge the debts owed by the debtor to the creditors who participate in the composition agreement.
The agreement results in discharge of the debts in full because a contract is created by the cross-promises of the parties (i.e., the cross-promises serve as consideration, so the pre-existing duty rule is avoided).
What are the events when Agency is terminated by operation of Law?
Agency will be terminated by operation of law in the following events -
- Death of a Principal
- Principla’s Incapacity
- Agent acting Illegally or unlawfully like not having permissions or licenses to carry business.
However either party Principal or Agent can terminate Agency - Renunciation of Agency.
True or False:
The accuracy related penalty can be reduced or eliminated if the tax return position does not concern a tax shelter and has a reasonable basis.
TRUE!
A penalty of 20 percent of the understatement is assessed for a substantial understatement of tax. This penalty can be avoided if the taxpayer has a reasonable basis for taking the position, the taxpayer has disclosed the position on the tax return, and the position does not pertain to a tax shelter.
Order of payments in case of General Partnership dissolution -
- General partner’s loans
- Partner’s capital accounts
- General partner’s profits
True or False:
Duress through physical harm or the threat of physical harm renders a contract void rather than merely voidable.
TRUE!
True or False:
A Limited Partner in a Limited Partnership is personally liable for the partnership debts and also has the right to take the part in the control of the partnership.
FALSE!
The Revised Uniform Limited Partnership Act of 1976, which is followed by a majority of states, provides that -
1. a limited partner’s liability for partnership debts is limited to his capital contribution.
2. Only general partners have the right to take part in the control of the partnership.
True or False:
A Tax-Preparer / CPA can disclose or transfer working papers of a client to another tax-preparer or CPA without client’s permission.
FALSE!
As a general rule, although a CPA owns his or her working papers, because of confidentiality issues, the working papers cannot be turned over to another accountant without the client’s permission.
True or False:
Tender of performance by the principal debtor completely releases the surety, even a compensated surety.
TRUE!
What are the partner’s continued responsibilities under partnership dissolution?
Upon the dissolution of the partnership, each of the partners continues to have liability for partnership debts.
Upon dissolution of the partnership each of the partners will continue to have apparent authority.
The apparent authority of a partner can only be negated upon proper notice to third parties
True of False:
A General Partner can be a Secured creditor of the Limited Partnership.
TRUE!
Also, a limited partner may be an unsecured creditor of the limited partnership.
True or False:
A Partner can sell or assign his/her interest in the partnership without consent from the other partners.
TRUE!
A partner’s interest in his or her partnership is defined as the partner’s right to receive profits and surplus.
This interest is fully assignable without the approval of the other partners. Such an assignment does not transfer the partner’s management rights and does not cause a dissolution.
True or False:
Involuntary petition in bankruptcy terminates liens associated with exempt property.
FALSE!
The filing of a petition in bankruptcy (voluntary or involuntary) stops the enforcement of all judgment liens and collection actions against the debtor (called “automatic stay”).
Liens against the debtor’s property (exempt or otherwise) are not terminated upon the filing of a petition in bankruptcy (voluntary or involuntary); they are merely stayed.
True or False:
A security interest is not effective against anyone before it attaches to the collateral.
TRUE!
Requirements of Financing Statement under the UCC Secured Transaction Articles -
Under the UCC Secured Transactions Article (Article 9) a financing statement must contain -
1. A general description of the collateral in which the security is being sought.
2. creditor’s name and address, but the financing statement need not be signed by either the creditor or the debtor.
What the right of a Third Party when a principal of the contract is undisclosed by the Agent?
If the principal is undisclosed, the third party with whom the agent dealt can hold the agent liable on the contract.
What document must be filed with the State by Limited Liability Company?
ARTICLES OF ORGANIZATION.
