Explain the creation and working of guaranty contracts
What will be an ideal response?
A guaranty contract occurs when one person agrees to answer for the debts or duties of another person. Guaranty contracts are required to be in writing under the Statute of Frauds. In a guaranty situation, there are at least three parties and two contracts. The first contract, which is known as the original contract, or primary contract, is between the debtor and the creditor. It does not have to be in writing (unless another provision of the Statute of Frauds requires it to be). The second contract, called the guaranty contract, is between the person who agrees to pay the debt if the primary debtor does not (i.e., the guarantor) and the original creditor. The guarantor's liability is secondary because it does not arise unless the party primarily liable fails to perform.
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For 2016, Val and Pat White, both age 30, filed a joint return. Val earned $45,000 in wages and was covered by his employer's qualified pension plan. Pat was unemployed and received $6,000 in alimony payments for the first 4 months of the year before remarrying. The couple had no other income. Each contributed $5,500 to an IRA account. The allowable IRA deduction on their 2016 joint tax return is
a) $5,750 b) $5,500 c) $11,000 d) $0
Which of the following costs is usually on the estimated purchaser's cost worksheet?
A. Purchase price B. Accrued interest on lean assumed. C. Survey. D. Hazard insurance escrow