[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

[rzrbkfaith]

@cpa8488

Yes. I watch all the lectures first. If you don't, you won't be as successful because the always throw material in from another section within that chapter. Sometimes material from other chapters too.

AUD - 99
BEC - 97
REG - 91
FAR - 1/8/16

[Evwy_Mom]

Anyone want to help me on getting something straight on Commercial Paper?

A trade acceptance is considered a draft, right? Isn't a draft specifically 3 party? Isn't a trade acceptance specifically two party? Am I missing something here?

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[leglock]

for sure draft is 3 party and note is 2 party. I know the becker lecture specifically addressed a trade acceptance but can't recall if it is or is not considered commercial party. I was leaning towards it not being commerical party but hopefully someone else chimes in.

[rzrbkfaith]

@Evwy_Mom – I'm not there in my studying yet, but a trade acceptance is a draft and drafts are specifically 3 party. Trade acceptances are three party. I believe they are drawer (seller), drawee (buyer), and payee (entity paid)? The example in Becker is a little confusing.

I found this example to be a little clearer…

The procedure in trade acceptance practice is as follows. The seller of merchandise upon making shipment forwards with the shipping documents an acceptance form (in reality a time draft). This form is often sent in duplicate to enable the buyer to retain a copy for his files. If the goods are subject to cash discount, the buyer may avail himself of this opportunity by remitting immediately; otherwise the buyer is expected to sign the acceptance form by writing his name across the face of the instrument, indicating the date, and designating the bank where it is payable. In the great majority of cases, an acceptance is payable at the drawee's (acceptor's) bank. It may be made payable at any bank or trust company in the United States. It is then returned to the drawer (seller).

AUD - 99
BEC - 97
REG - 91
FAR - 1/8/16

[Evwy_Mom]

Hmmm, this is what I found in a quick google search:

trade acceptance (plural trade acceptances)

(business, banking, finance) A negotiable instrument in the course of international trade similar to a Banker's Acceptance (BA) except it is drawn on and accepted by a buyer/importer (as opposed to a bank). May be sold to a bank or investor at a discount becoming a marketable money-market instrument.

It says here that it is drawn on and payable to a business (the same business), which was my understanding, and payable by another business, which in my mind, makes it a two party instrument.

Do they consider the entity that the instrument is drawn on and payable to as two parties plus the debtor party makes three? That seems unlikely.

The only other thing I can think of is once it's negotiated to another party (as it is a negotiable instrument, right?) then it meets “draft” criteria? That still seems unlikely…

I'm a little puzzled by this one. :-

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[Anonymous]

What's the tax treatment on receiving installments over a period of years when selling a CPA practice?

Good luck on your exams.

[Ganbatte]

Hi, new to the study group here! I'm using Yaeger to study for REG.

I'm studying the Business Law portion right now and find that there is so much detail already, and BLaw is only 20%….I'm dreading getting to the Tax portion 🙁

How much do you guys focus on BLaw? Do you gloss it over at the end of your REG studies after covering Tax, or did you start with BLaw, only to forget it by the end of studying? Advice/tips are appreciated!

7/14 FAR ☑
8/14 AUD ☑
10/14 REG ☑
1/15 BEC

[Windel]

Can someone please shed some light on this MCQ:

Hall was bequeathed 500 shares of common stock under his father’s will. Hall’s father had paid $2,500 for the stock 10 years ago. Fair market value of the stock on February 1, Year 1, the date of his father’s death, was $4,000 and had increased to $5,500 six months later. The executor of the estate elected the alternate valuation date for estate tax purposes. Hall sold the stock for $4,500 on June 1, Year 1, the date that the executor distributed the stock to him. How much income should Hall include in his individual income tax return for the inheritance of the 500 shares of stock that he received from his father’s estate?

A.

$5,500

B.

$4,000

C.

$2,500

D.

$0

—

The Answer is D because the AVD was chosen and the property was disposed of before the 6-month period had expired. It also stated that “Since Hall sold the stock before the 6-month period ended, his basis equals his sale price, and no gain or loss exists.

I thought the question was asking about the amount of income earned from the sale of his inherited property; so I don’t understand why is there’s no gain if the FMV [$4000 on the date of the decedents death] is a basis assumed and the property was sold (before AVD) for $4500?

[Windel]

By the way @Evwy_Mom,

I’m not sure if you were able to gain a better understanding of trade acceptance but I found this explanation sufficient enough for the MCQ’s I’ve encountered.

Trade acceptance – a bill of exchange for a specific purchase; drawn on the buyer by the seller and bearing the buyer's acceptance.

Bill of exchange, draft, order of payment is a document ordering the payment of money; drawn by one person or bank on another

[pghpens]

Why is this one C? I thought a buyer in the ordinary course of business had priority over a perfected interest, even if it was perfected before the purchase.

Wine purchased a computer using the proceeds of a loan from MJC Finance Company. Wine gave MJC a security interest in the computer. Wine executed a security agreement and financing statement, which was filed by MJC. Wine used the computer to monitor Wine’s personal investments. Later, Wine sold the computer to Jacobs, for Jacobs’s family use. Jacobs was unaware of MJC’s security interest. Wine now is in default under the MJC loan. May MJC repossess the computer from Jacobs?

A.

No, because Jacobs was unaware of the MJC security interest

B.

No, because Jacobs intended to use the computer for family or household purposes

Correct C.

Yes, because MJC’s security interest was perfected before Jacobs’s purchase

D.

Yes, because Jacobs’s purchase of the computer made Jacobs personally liable to MJC

[leglock]

@ king coffee:

fmv on date of death, feb 1 was 4000 but they elected the alternative valuation date which enables you to use the fmv of the stock on the date not to exceed 6 months after date of death (6 months after date of death is aug 1). however the problem states the beneficiary sold the stock bequeathed to him on june 1. Therefore, the benef would use fmv on june 1 as the alternative valuation date not aug 1, because he disposed of the stock. the fmv on june 1 is 4500 which becomes his basis and he sold it for 4500 on that date , so gain of 0.

Had he held the stock and not sold it, he could have elected to use the alternative valuation date of aug1 and then his basis would have been 5500 when he sold it at some future later date.

[Windel]

@pghpens,

If I remember correctly, Becker lists the order of priority as:

1. Buyer in the ordinary course of business (with exception to whether or not the buyer knew…)

2. PMSI (Purchase Money Security Interest) which in this MCQ…that would be MJC Financial

3. Perfected Security Interest

4. Unperfected Security Interest

5. Debtor

MJC may repossess the computer from Jacobs because the sale violated the rights of the party (MJC) that had secured that property as collateral. Jacob is a 3rd party purchaser (consumer to consumer transaction vs merchant to consumer transaction) and as a result…he’s not a “buyer in the ordinary course of business.”

The term “buyer in ordinary course of business” is defined in U.C.C. Article 1 as “a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person . . . in the business of selling goods of that kind.”

I may be wrong but I read somewhere that the Courts assume that a prudent person/buyer should have knowledge of goods that are secured by a creditor, granted PMSI is perfection by possession or filing which is information available to a prudent buyer.

I may be wrong but that’s my understanding.

[Windel]

@ leglock.

Thanks for clearing that up…I really appreciate it.

[leglock]

@pghpens:

wine was the original purchaser who then sold to jacobs. jacobs would have been safe from repossession had mjc not filed to perfect the security interest. This is because by filing, mjc put all on notice there was a security interest. Note that mjc did not need to file to perfect; however, by doing so, they preserved their rights against second hand consumers like jacobs. This falls under the “garage sale” rule.

you are correct that a buyer in ordinary course of business is protected against perfected security interest. A buyer in ordinary course of business is protected against the seller's supplier attempting to repossess goods. For ex, if you buy a tv from best buy, and best buy screwed samsung over, samsung cannot come to your house and repossess your tv bc you were a buyer int he ordinary course of business.

[pghpens]

thank u

[Author]

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