CLFP 2019- CHAPTER 1 LATEST ACTUAL EXAM WITH RATIONALE

CLFP 2019- CHAPTER 1 LATEST ACTUAL EXAM WITH RATIONALE ITC (Investment Tax Credit) - 1960's - ANSWER-Used to stimulate the economy and capital expenditures, it provided a tax credit to purchasers of equipment to offset their tax liability to the government. Initially set at 7%, it became a give & take option with the government. Revenue Procedure 's (TAX LENS) - ANSWER-Laid out the 6 criteria the IRS would use for advanced rulings to determine if the Lessor is the owner for tax purposes. FASB 13 - 1970's (ACCOUNTING LENS) - ANSWER-Provided the accounting definition of a lease. Set forth 4 criteria to classify a lease as either: Capital Lease or Operating Lease and how to treat each on the financial statements of both the Lessor and Lessee. ERTA (Economic Recovery Act of 1981) - ANSWER-Related to the tax treatment of leases and methods of depreciation and Safe Harbor Leasing. Resulted in the government losing tax revenues. TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) - ANSWER-Passed to increase tax revenues lost under ERTA. It also repealed Safe Harbor Leasing and replaced it with "finance leases". DRA (Deficit Reduction Act of 1984) - ANSWER-A means of reducing the deficit & raising tax revenues. It introduced the time value of money as a method for lessors to adjust uneven rental streams for tax purposes. TRAC Leases were recognized as true tax leases. Code of Hammurabi - ANSWER-Ancient record of Babylonian leasing law dating to 1700BC Ancient History - ANSWER-Agricultural leases were found on clay tablets; Leasing was done for ship charters. Middle Ages - ANSWER-Leasing was used for agricultural, industrial, military, and ships Statute of Wales - ANSWER-From the middle ages - Leasing of personal property dating back to 1284AD. It introduced English common law. Industrial Revolution - ANSWER-Leasing was used for horses, buggies, wagons and the railroad.