CPA REG cheat sheet

Circular 230: a practitioner may not take a position on a return unless there is substantial authority, or a reasonable basis with adequate disclosure.

Tax return preparer penalties under IRC 6694: $1,000 per return for unreasonable positions; higher standard applies if the position is willful or reckless.

A preparer must sign returns and furnish the taxpayer a copy; failure to do so triggers per-return penalties.

Preparer must retain a copy of the return or a list of preparer records for three years after the return's due date or filing date.

Confidentiality under IRC 7216: disclosure or use of taxpayer information requires taxpayer consent, with limited statutory exceptions.

Statute of limitations on assessment is generally three years from filing; six years if gross income is understated by more than 25%; unlimited for fraud or failure to file.

A claim for refund must generally be filed within three years of filing or two years of payment, whichever is later.

The IRS may abate penalties for reasonable cause; first-time abatement applies to failure-to-file, failure-to-pay, and failure-to-deposit penalties if no recent violations.

Practitioner who discovers an error must advise the client promptly; the practitioner may not ignore the error but cannot disclose it without consent.

UCC Article 2 applies to transactions in goods; the perfect tender rule lets a buyer reject goods not conforming in any respect unless the contract limits remedies.

Under the UCC, acceptance occurs when the buyer signals acceptance, fails to reject after a reasonable opportunity to inspect, or acts inconsistently with the seller's ownership.

Surety is primarily liable with the debtor; guarantor is secondarily liable and benefits from the defense of suretyship.

Agency terminates by operation of law on death, incapacity, or bankruptcy of the principal; termination by act of parties includes revocation and renunciation.

Bankruptcy Chapter 7 liquidation: exemptions apply, discharge is generally available to individuals; Chapter 11 reorganization; Chapter 13 wage-earner repayment plan.

Preferences under bankruptcy: transfers to creditors within 90 days before filing (one year for insiders) may be avoided if the creditor received more than in a Chapter 7 distribution.

Contract formation requires offer, acceptance, consideration, capacity, and legality; the Statute of Frauds requires writing for land, suretyship, marriage, one-year contracts, and goods over $500.

Negotiable instrument holder in due course takes free of personal defenses but remains subject to real defenses such as fraud in the factum, forgery, and discharge in bankruptcy.

Employment at will may be terminated for any reason except an illegal one; whistleblower and public-policy exceptions vary by jurisdiction.

Basis of property acquired by purchase equals cost; property acquired by gift carries over the donor's basis, increased by gift tax paid on appreciation.

Property acquired from a decedent generally takes a basis equal to fair market value at the date of death (or alternate valuation date if elected).

Amount realized equals cash plus fair market value of property received plus liabilities assumed minus selling expenses.

Realized gain is amount realized minus adjusted basis; recognized gain may be deferred under like-kind exchange rules for real property held for investment or business.

Section 121 exclusion: up to $250,000 ($500,000 married filing jointly) of gain on a principal residence if owned and used for two of the five years before sale.

Depreciation recapture under Section 1245 is ordinary income up to the lesser of prior depreciation or gain; Section 1250 recapture is limited for noncorporate taxpayers with unrecaptured gain taxed at 25%.

Capital losses offset capital gains and up to $3,000 of ordinary income per year for individuals; excess carries forward indefinitely.

Holding period: long-term if held more than one year; short-term if one year or less; net capital gain of individuals is taxed at preferential rates.

Wash sale rule disallows loss on sale of stock if substantially identical stock is acquired within 30 days before or after the sale.

Gross income includes wages, interest, dividends, rents, royalties, and business income; excludes gifts, inheritances, and tax-exempt interest.

Above-the-line deductions include contributions to traditional IRA (within limits), self-employed retirement plans, health savings accounts, and alimony under pre-2019 agreements.

Standard deduction amounts are indexed annually; additional amounts apply for age 65 or older and blindness.

Itemized deductions include state and local taxes capped at $10,000, mortgage interest on acquisition debt up to $750,000, charitable contributions, and medical expenses above 7.5% of AGI.

Qualified business income deduction under Section 199A: generally 20% of QBI, subject to limitations based on W-2 wages and qualified property at higher income levels.

Child tax credit is $2,000 per qualifying child with phaseout; the credit is partially refundable.

Filing status: single, married filing jointly, married filing separately, head of household, qualifying surviving spouse.

Kiddie tax taxes a child's unearned income above an indexed threshold at the parents' marginal rate.

Self-employment tax applies at 15.3% on net earnings up to the Social Security wage base plus 2.9% Medicare with an additional 0.9% on high earners.

Partnerships and S corporations are pass-through entities: income, deductions, and credits flow to owners; the entity generally pays no federal income tax.

A partnership must file Form 1065 and furnish Schedule K-1 to each partner; the partnership tax year generally must match the majority partners' tax year.

Partner's basis increases by contributions and distributive share of income, decreases by distributions and losses; losses are limited to basis.

S corporation eligibility: no more than 100 shareholders, only eligible individuals (and certain trusts/estates), one class of stock, and a domestic corporation.

S corporation shareholder basis includes stock basis plus direct loans to the corporation; losses in excess of basis are suspended.

C corporation tax rate is a flat 21%; dividends received deduction applies to corporate shareholders at 50%, 65%, or 100% depending on ownership percentage.

Accumulated earnings tax penalizes corporations that retain earnings beyond reasonable business needs; personal holding company tax applies to closely held corporations with passive income.

Corporate formation under Section 351 is tax-free if transferors of property control the corporation immediately after the exchange and receive only stock.

Liquidating distributions to shareholders are generally treated as amounts received in exchange for stock, producing capital gain or loss.

Installment sale method: gain is recognized as payments are received, based on the gross profit percentage times each payment.

Like-kind exchange requires replacement property identified within 45 days and received within 180 days; boot received is taxable.

Involuntary conversion: gain may be deferred if replacement property is acquired within two years (three years for certain disasters).

Section 1031 does not apply to inventory, stocks, bonds, or partnership interests.

Related-party loss sales are disallowed; related-party gain sales are taxable.

Depreciation under MACRS: 5-year property uses 200% declining balance; 7-year property uses 200% declining balance; residential rental uses 27.5 years straight-line.

Section 179 expensing allows immediate deduction of qualifying property up to an annual limit, phased out when total purchases exceed the threshold.

Bonus depreciation allows an additional first-year deduction for qualifying property, with percentage phased down over time.

Charitable contribution of long-term capital gain property is generally deductible at fair market value, limited to 30% of AGI for appreciated property to public charities.

An offer in compromise may be based on doubt as to liability, doubt as to collectibility, or effective tax administration.

A taxpayer may request a Collection Due Process hearing within 30 days of a notice of intent to levy or a notice of federal tax lien filing.

Innocent spouse relief includes traditional relief, separation of liability, and equitable relief; the requesting spouse must generally elect within two years of collection activity.

The IRS may issue a summons to obtain records; a taxpayer may petition to quash within 20 days of receiving notice.

Failure-to-file penalty is 5% per month up to 25%; failure-to-pay is 0.5% per month up to 25%; the two are coordinated.

Accuracy-related penalty is 20% of underpayment attributable to negligence or substantial understatement; 40% for gross valuation misstatement.

Civil fraud penalty is 75% of the underpayment attributable to fraud; the IRS bears the burden of proving fraud by clear and convincing evidence.

A taxpayer may rely on written advice from the IRS in limited circumstances; general oral advice does not constitute authority.

A corporation's board of directors owes duties of care and loyalty; the business judgment rule protects informed decisions made in good faith.

Securities Act of 1933 requires registration of public offerings; Rule 10b-5 under the 1934 Act prohibits fraud in connection with securities transactions.

Antitrust: Section 1 of the Sherman Act prohibits contracts in restraint of trade; Section 2 addresses monopolization.

The Clayton Act prohibits price discrimination, tying arrangements, and mergers that substantially lessen competition.

Bankruptcy discharge is denied for fraud, willful injury, certain taxes, and student loans absent undue hardship.

Automatic stay under Section 362 halts collection actions upon bankruptcy filing; relief may be granted by the court.

Partnership law: general partners have unlimited liability; limited partners have limited liability but lose it if they participate in control.

LLC members generally have limited liability; a charging order is the exclusive remedy of a judgment creditor in many states.

Employment discrimination under Title VII prohibits discrimination based on race, color, religion, sex, or national origin; EEOC exhaustion of administrative remedies is required.