acct 401 exam 2

only the listed assets and only the liabilities the buyer assumes

what moves in an asset sale

board (owners too if outside the ordinary course)

who approves an asset sale

both entities

what survives an asset sale

ownership interest, the business itself does not

what moves in an equity sale

each owner individually (no entity vote)

who approves an equity sale

both entities

what survives an equity sale

everything

what moves in a merger

board and owners of each

who approves a merger

only the survivor

what surives a merger

nothing, the same entity just changes form

what moves in a conversion

board and owners

who approves a conversion

the same entity in a new form

what survives a conversion

dissenter’s rights

a right to be paid fair value for your shares (not the right to block the deal or undo it)

private nuisance

substantial and unreasonable interference with the use and enjoyment of land, brought by the neighbor

• interference must be unreasonable, the conduct doesn’t need to be

public nuisance

interferes with the health, safety or comfort of the public, and normally only a public official may sue

trespass

an invasion of the right to exclusive possession (possession separates it from nuisance)

NEPA

an impact statement is required when the action is federal, major, and significantly affects the environment

• forces the agency to look before it acts

emit

something in the air

• a stationary source needs a permit issued by the state

discharge or disturb

something into water, or filling a wetland

• a discrete outlet is a point source and is federally permitted

• runoff with no outlet is nonpoint and the states handle it

• filling a wetland needs its own permit

dispose or ship

getting rid of waste

• hazardous waste tracked cradle to grave

• owning the land does not excuse a permit

make or apply

a chemical into the world, or onto a crop

• new chemicals need pre-clearance

• pesticides need registration, and the label is the law

owners and operates by statute

who is liable for environmental harm

current owner is typically first in line and must sue prior owners for reimbursement

• liability follows the land, not the fault

how does liability work for environmental law

environmental

what kind of harm/law does an asset sale not avoid

1. records and a site visit (no sampling)

2. soil borings and sampling

3. remediation

what are the phases for environmental diligence

freehold estates

fee simple = absolute ownership, no time limit

• life estate lasts for a named life

• reversion if returned to the grantor

• remainder if it goes on to somebody else

co-ownership

joint tenancy carries survivorship, survivor takes automatically, outside probate, and nothing passes by will

• tenancy in common does not, each share passes by will or intestacy

tenancy in common

what is the default when a deed is silent

no tenancy by the entirety - marital property with each spouse holding ½ of whatever the title says (aka community property)

how does real estate ownership work for married couples in wisconsin

fixture

personal property that becomes part of the land and sells with the house unless contract says otherwise

real property transfers need a writing (personal property more informal)

• consideration not required

how does writing work for title to property

warranty deed

promises the title is good and the grantee can sue on it

quitclaim

conveys whatever the grantor owns and promises nothing

• if it comes from someone who owns nothing then it conveys nothing

delivery

what makes a deed operative

it’s good against the seller and vulnerable to the world

how does an unrecorded deed work

easement

an interest in land

• recorded, runs with the land, next owner takes subject to it

• survives a sale

license

revocable permission, creating no interest

• does not survive a sale

variance

permission to deviate, for undue hardship

need a public use and fair compensation (you as the sellor cannot refuse, you just argue about the number)

how does eminent domain work

restrictive covenant

runs with the land and binds a later owner who never signed it

• other owners or association enforce it, not the city

adverse possession

when someone has actual, open, hostile, exclusive and continuous possession of someone else’s land for 20 years

• no deed, no payment

7 and 11

which chapters can be forced on a debtor by creditors

automatic stay

takes effect the moment the petition is filed

• stops the creditor from bothering the debtor

• does NOT stop criminal prosecution, domestic support, or certain tax matters

liquidation

chapter 7

reorganizes a business

chapter 11

a repayment plan for an individual with regular income

chapter 13

trustee

a fiduciary whose job is to maximize the value of the estate for the creditors (not the debtor)

• nonexempt property at filing, & what the trustee can claw back

• exempt property stays with debtor

• trustee takes the rights of a lien creditor, which beats an unperfected security interest

what is in the estate

secured only to the extent of the value of the collateral

• the rest is an unsecured claim and goes to back of the line in priority

secured vs unsecured

preference: payment on an existing debt, while insolvent, letting that creditor do better than it would in liquidation

defenses: ordinary course, new value

what can the trustee undo

1. secured creditors first, out of their collateral

2. support, administrative expenses, wages, benefits, consumer deposits, taxes

3. everyone else pro rata

order of payment in bankruptcy

relieves the debtor of any further obligation to pay

• debt is not paid but is gone

• ex: credit cards, medical bills

what does a discharge do

1. does not remove a lien (secured creditor can still take the collateral)

2. does not reach a co-signer or guarantor

3. a corporation gets no discharge in chapter 7 at all

what are the 3 things discharge does not do

alimony and child support, certain taxes including withheld employment taxes, fines/penalties, student loans

what are the debts that survive discharge

says who gets what, names a guardian for minor children, names who runs the estate, governs the probate estate

what does a will do

in writing, signed by the testator, signed by 2 witnesses

• notarization does not make it valid and does not replace witnesses

formalities of a will

undue influence, fraud, duress, non-capacity

a will has no effect if it is the product of _____

each child gets their proportionate share, if one child is dead their kids split the child’s portion (grandkids get nothing unless their parent is dead)

per stirpes

each living relative gets the same proportionate share

per capita

1. settlor - creates and funds it

2. trustee - holds and manages the property

3. beneficiary - receives the benefit

• one person can have more than one role

who are the 3 parties in a trust

signing the instrument creates the trust

• funding = retitling each asset into the trustee’s name

• unfunded trusts controls nothing, everything else goes through probate

how to create a trust

beneficiary designations, survivorship property, transfer on death documents

• the form controls and beats the will

• revocable trust avoids probate and keeps terms private, does not save tax

what happens outside the will

• inherited at death: basis = fmv (step-up)

• gifted during life: basis carries to new owner

• revocable trust = grantor trust, income goes on settlor’s own 1041

how does taxation work for trusts

environmental, product liability and employment claims

what comes along regardless in an asset sale