[jeff]

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Post by Another71.

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[rachel525]

West, an Indiana real estate broker, misrepresented to Zimmer that West was licensed in Kansas under the Kansas statute that regulates real estate brokers and requires all brokers to be licensed. Zimmer signed a contract agreeing to pay West a 5% commission for selling Zimmer’s home in Kansas. West did not sign the contract. West sold Zimmer’s home. If West sued Zimmer for nonpayment of commission, Zimmer would be:

A.

liable to West only for the value of services rendered.

B.

liable to West for the full commission.

C.

not liable to West for any amount because West did not sign the contract.

Incorrect D.

not liable to West for any amount because West violated the Kansas licensing requirements.

The answer is C. A legally enforceable contract must have both an offer and an acceptance. Since Zimmer signed the contract, an enforceable acceptance would be for West to also sign the contract.

But West failed to have a license, doesn't this render the contract void?

[Anonymous]

@Rachel, I could agree with you. At the first glance, I would have picked out (incorrect) choice D as well.

But by recalling the mnemonic MYLEGS, the proposed answer (C) seems to be correct.

The violation of licensing requirement in Kansas is irrelevant here.

This situation is the same with the example I encountered yesterday:

AA, 1st customer brought in a (broken) clock to the BB Appliance (Buy & Sell) Trading and Repair Shop. The deal was for the clock to be repaired by BB. CC, store clerk mistakenly sold the repaired clock to DD, 2nd customer.

The question was: Can AA claim his clock back and recover it from DD?

My first response was, “Of course, AA is the legal and rightful owner!” (I was wrong!)

The answer was No. Accordingly, DD has the full vested title of the clock since BB has a permit to transfer a right/title.

Only, AA can come after BB for damages, but not after DD.

[Anonymous]

[Anonymous]

@CPAsucks, is the answer here D?

This is a shipment contract, so the title to the radio passes to the buyers as soon as they are delivered to the carrier.

a. The buyer need not be notified if the goods have been shipped.

b. It is FOB – Wizard, Loading Dock, so it is the buyer who bears the risk and shoulders the freight.

c. No such thing as inspection a must at the time of delivery.

[rachel525]

@Amor D Thank you! I guess the example I asked is similar to this question

Kram sent Fargo, a real estate broker, a signed offer to sell a specified parcel of land to Fargo for $250,000. Kram, an engineer, had inherited the land. On the same day that Kram's letter was received, Fargo telephoned Kram and accepted the offer. Which of the following statements is correct under the common law statute of frauds?

a. A contract was formed and would be enforceable against both Kram and Fargo.

b. No contract could be formed because Fargo's acceptance was oral.

c. A contract was formed but would be enforceable only against Kram.

d. No contract could be formed because Kram's letter was signed only by Kram.

The answer is C because the contract could be enforced against Kram, but could not be enforced against Fargo due to the lack of a signed writing by Fargo.

[Anonymous]

@rachel525, you are welcome!

I just came across a similar question to the above situation:

Aqua, Inc., a Florida corporation, entered into a contract for $30,000 with Sing, Inc., to perform plumbing services in a complex owned by Sing in Virginia. After the work was satisfactorily completed, Sing discovered that Aqua violated Virginia’s licensing law by failing to obtain a plumbing license. Virginia’s licensing statute was regulatory in nature, serving to protect the public against unskilled and dishonest plumbers. Upon Sing’s request, independent appraisals of Aqua’s work were performed, which indicated that the complex was benefited to the extent of $25,000. Sing refuses to pay Aqua. If Aqua brings suit it may recover

a. $30,000.

b. $25,000.

c. Nothing.

d. An amount sufficient to cover its out-of-pocket costs.

HINT: Violation of a regulatory licensing statute results in an unenforceable contract.

The correct answer is C because if a contract violates a regulatory licensing statute, it will be unenforceable by either party. The main function of a regulatory licensing statute is to protect the public against unskilled or dishonest persons. Another type of licensing statute is a revenue-seeking statute. The purpose of these types of statutes generally is to gain revenue for the governmental unit issuing the license. A contract that violates a revenue-seeking statute is enforceable. In this case, the facts stipulate that a regulatory licensing statute is violated. Consequently, Aqua may not enforce the agreement.

I picked out the wrong answer here earlier (letter A). I thought, Aqua could still recover. Common law contracts are very misleading to me, so frustrating!

[rachel525]

@Amor, I know right. I guess if a party violates the licensing requirement, then they can't recover anything if they sue the other party for nonpayment or whatever.

[Anonymous]

I am seeing no consistencies here.

@Rachel, In your West-Zimmer question above, let's say West signed the contract, what would be the correct answer then?

[rachel525]

@Amor, I guess Zimmer would be liable to West??? But still that doesn't make sense because West violated the licensing requirement.. this is so confusing! Eeeek

[Anonymous]

A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is only worth $17,500. The other party agrees to give the taxpayer a trailer worth $3,500 in addition to the new auto, and the taxpayer agrees to pay $1,000 cash in addition to the trade-in. What is the taxpayer's basis in the new automobile received?

a.

$14,500

b.

$17,500

c.

$17,000

d.

$19,500

can someone explain why the gain recognized would not be 2500 instead of 3000 (gain realized)?

[rachel525]

@cpa The recognized gain is the lesser of gain realized or boot received.. in this case, gain realized is 3,000 and the boot received is 3,500 so recognized gain is 3,000

[Anonymous]

@rachel i thought paying cash would decrease the gain recognized?

so 3500 received – 1000 cash paid = 2500?

Is gain recognized(boot) only cash received, mortgage given up (net of mortgage received) and cash paid out does NOT matter?

[rachel525]

@cpa I know it is confusing but you don't net the cash paid out with the cash received.. Cash received is cash received. However, you do net the mortgage given up and mortgage received.

Example:

A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is only worth $17,500. The

taxpayer agrees to assume a liability secured by the new auto of $1,000. The other party also agrees to assume a liability secured by the taxpayer's old auto of $3,500. What is the gain or loss recognized by the taxpayer on this transaction?

In this case, the recognized gain is the lesser of realized gain (3,000) or the net relief from liabilities (2,500)

But in your example, cash received is cash received.

[Mika]

According to my calculation:

Step 1: Calculate boot

Boot = Net debt relief (Old liabilities – New liabilities) + cash + unlike property (e.g.vehicles)

which in this case, $3,500 only

Step 2 – Calculate the gain recognized

FMV of the new property ($17,500) + Boot ($3,500) = 21,000 – old basis (17,000) – Cash given up (1,000) = $3,000 (this is the gain REALZIED)

Compare $3,500 and $3,000, we pick 3,000 as the gain RECOGNIZED

Step 3

DR Unlike property 3,500

CR Old Basis 17,000

CR Cash 1,000

CR Gain recongized 3,000

So the new basis should be $17,500, Ans B?

REG - 80 (02/13/2015) Roger + Ninja Flash Card + Ninja MCQ + Becker's Note
FAR - 84 (05/29/2015) Roger + Ninja MCQ + Some Wiley book questions
BEC - 77 (08/27/2015) Roger + Ninja MCQ + Half Wiley book questions
AUD - 87 (08/28/2015) Roger + Ninja MCQ + Half Wiley book questions

[Anonymous]

i understand it now. its funny how you think you think your solid on one chapter and after just a few days you feel like your not.

anyone use wiley for reg? i just got last years wiley book and plan on using it for MC practice just because i feel like i am starting to recognize a lot of the becker mcs

[Author]

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