[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for REG.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[ahugemistake]

Thanks Bin, I'm going to try to memorize that. I think I was a little tired last night.

FAR - 78*
AUD - 66, 79
REG - 73, 76
BEC - 79

[nib]

hello friends ,

Following sections , defenses , and differences are spinning in my head .How much i have tried to remember , just in vain .

sec 10-b, sec 10 b-5, sec 18 Sections 11, and 18, common law, and differences between 1933 and 1934.

If any one has created or using mnemonics or tricks to conquer . Please share and help.

[Anonymous]

Year 1933
Year 1934
They are two separate years
Section 1933 deals with registration statement requirements; IPO = Initial Public Offering
Section 1934 deals with periodic compliance reports
…5%TIPS
5% Persons who own at least 5% in any equity security registered under 1934 Act
Tender offers
Insider trading
Proxy solicitations
Short-swing profits

S-1933
…Section 11
…Need to Prove “LAM”
L – Loss
A – Acquired the stock
M – Material misrepresentation or material omission of fact

Under Section 11, need not prove to create liability:
5 [FRISPN]
F – Fraud
R – Reliance
I – Intent
S – Scienter (or Knew of the Misstatements)
P – Privity
N – Negligence

Note: Liability under S-11 is based on misstatement or omission rather than negligence.

S-1934
Rule 10b-5
…Need to prove “LAM” +
…FIDGS-JR {As in Mr. Fidgs Jr. if you knew him)
F – Fraud
I – Interstate Commerce
D – Damages
G – Gross Negligence
S – Scienter
JR – Justifiable Reliance

Elements of Fraud (Actual Fraud)
MAIDS
1. M – Misrepresentation of material fact by the defrauding party
2. A – Actual and Justifiable (reasonable) reliance by the victim on the misrepresentation
3. I – Intent to induce the victim to rely on the misrepresentation
4. D – Damages
5. S – Scienter => intent to deceive / reckless disregard for the truth

Elements of Constructive Fraud (Gross Negligence)
Same elements as of the “MAIDS”, except instead of intentionally deceiving, the defendant acts recklessly (i.e., makes a statement without knowing whether it is true or false).
“MARDS”
Misrepresentation of material fact
Actual and justifiable reliance by plaintiff on the misrepresentation
Reckless Disregard for the Truth
Damages
Scienter: Intent to deceive (knowing the statement was false)

[ahugemistake]

Do you remember all this Amor!?

FAR - 78*
AUD - 66, 79
REG - 73, 76
BEC - 79

[ahugemistake]

also how do you guys remember Parole Evidence? Specifically keeping track of what's allowed and what's not allowed?

FAR - 78*
AUD - 66, 79
REG - 73, 76
BEC - 79

[Anonymous]

@Huge, I should, hahaha.
And I still get things mixed up.
The best advantage of remembering mnemonics (mixed with a solid understanding) of the topic is that, it's easier to answer the question by way of elimination. It is especially true when a tricky question uses triple negative words like non-exempt, excluding, and “except” as the last word.
I was averaging 85% on tax until I got to BLAW where I averaged down to 79% till I saw all MCQs. I scored high 60% at the last BLAW 200 questions. BLAW is all over the place!

[ahugemistake]

I know! I'm praying I don't get nailed on BLAW topics tomorrow. I have seen some recent posts about how BLAW is tested much heavily on the exam than the review courses would lead you to believe, so all I can do i read my notes and hope for the best. When is your exam?

FAR - 78*
AUD - 66, 79
REG - 73, 76
BEC - 79

[Anonymous]

Monday. Can I push it back (again)? I should not chicken out no more!!!

[ahugemistake]

I know how you feel. If I wasn't so stressed with work already I would push mine back a week.

FAR - 78*
AUD - 66, 79
REG - 73, 76
BEC - 79

[Anonymous]

Under the terms of a partnership agreement, Anna is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. Her distributive share of the partnership income is 10%. The partnership has $50,000 of ordinary income after deducting the guaranteed payment. Which of the following states the amount and character of Anna's income from the partnership?
A. $15,000 of ordinary income
B. $10,000 capital gain and $5,000 of ordinary income
C. $15,000 of capital gain
D. $10,000 of ordinary income and $5,000 capital gain

Correct answer is A.
Guaranteed payments are included in income in the partner's tax year in which the partnership's year ends.
The calculation is:

Guaranteed payment……… $10,000
Distributive share………………..5,000 ($50,000 x 0.10)
………………………………………….$15,000

My question:
I know when guaranteed payments of a partner or SH are classified as ordinary income since these payments are treated like compensation.
I just get confused when to treat other distributions as straight ordinary income as against capital gain.
I remember seeing one example classified as self-employment income for a retired director receiving income out of his service as part of the board of trustees or something.

[Anonymous]

I just could not understand how the distributive share of $5,000 was treated as ordinary income.

[Anonymous]

@Huge, hope this helps.

PAROLE EVIDENCE RULE:

It is a legal rule that applies to written contracts. Parol evidence is evidence pertaining to the agreement that isn't included in a written contract. Courts generally don't allow this extra evidence, because the court must determine the parties' intentions. The written contract is considered to be the best description of the parties' intentions.

The rule works like this:
1.The parol evidence rule applies after the parties put their final agreement in writing.
2.The parties have to intend that the written contract is complete and final.
3.No parol, or extra evidence, will be allowed to contradict or modify the written contract.

For example, let's say that you and I agree that I'm going to build three custom birdhouses for you, and deliver them to you on March 1. You're going to pay me $50 per birdhouse. We sign and execute a written contract.

I deliver the birdhouses, but you don't pay me. I take you to court, and ask for my $150, plus I want an additional $50 penalty fee since you didn't pay me on time. The court will likely grant me the $150 you owe me, but our agreement didn't mention a penalty fee. Any evidence of a penalty fee is parol evidence. The court will only enforce the exact terms of our contract.

https://study.com/academy/lesson/parol-evidence-rule-definition-examples-purpose.html

[fruitsyrup]

Hi can someone help with this question? The correct answer is B. I thought I read somewhere in another question that buyers are allowed to inspect goods unless it was specifically disallowed? Thanks!

Under the Sales Article of the U.C.C., and unless otherwise agreed to, the seller’s obligation to the buyer is to:

A.
deliver the goods to the buyer’s place of business.

B.
hold conforming goods and give the buyer whatever notification is reasonably necessary to enable the buyer to take delivery.

C.
deliver all goods called for in the contract to a common carrier.

Incorrect D.
set aside conforming goods for inspection by the buyer before delivery.

FAR - 71, 78
AUD - 71, 72, 78
BEC - 75
REG - 48, 60, 67, 76

[Anonymous]

@rosecpa –> insurance will be allocated similarly to utilities. interest and real estate taxes are the only ones w different allocation because they are also deductible on Sch A. insurance/utilities are, on the other hand, Schedule E deductions only and hence prorated differently

@AmorD —> partnership income is ALWAYS ordinary income to partners-thisis the 10% of 50000=5,000 you are wondering about. this is on K-1 Box 1. Partnership Guaranteed Payments are also also always ordinary income (Box 4 on K-1) and also subject to FICA(s/e) taxes.

partners can also receive capital gain income from the partnership but that would be reported on sch k/sch k-1 and NOT on the 1065. this would be if a partnership sold stock or something like that, or received qualified dividends, but NOT from just partnership regular business activity. but dont confuse this with the ordinary income thye generally receive as a result from partnership's activities(most questions will be on this type of income with a variation of guaranteed payments for service to one partner thrown in and not the others)

[Anonymous]

Thanks @eesti. That was very helpful (including the absolute treatment of interest and taxes to itemized deductions).

For nonliquidating distribution of cash and property in excess of basis, that's always treated as capital gain (regardless of participation of the partner/SH), correct?
Do the same rule applies to liquidating distribution?

[Author]

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