What does straight debt mean on the CPA exam?
Straight debt. A written unconditional promise to pay a sum certain whose interest is not contingent on profits, which is not convertible into stock, and whose creditor is an individual other than a nonresident alien, an estate, qualifying trust, or regular lender. It is not a second class of stock.
Defined against Sec. 1361(c)(5).
Which CPA exam sections use straight debt?
Straight debt appears in the REG section of the CPA exam.
Related terms
- small business corporation: The eligibility test for an S election: a domestic corporation, not an ineligible corporation, with no more than 100 shareholders, no shareholder other than an individual, estate, qualifying trust, or qualifying exempt organization, no nonresident alien shareholder, and one class of stock.
- nonresident alien: An individual who is neither a United States citizen nor a resident under the green card or substantial presence tests.
- grantor trust: A trust whose income is taxed to the person who created it, because they kept too much control.
- Safeguards Rule: The FTC rule requiring financial institutions to maintain a written information security program with a named qualified individual responsible for it.
- debt basis: An S corporation shareholder's basis in loans they personally made to the corporation.
- S corporation: A corporation that elects to be taxed like a partnership, so profit is taxed once in the shareholders' hands.