REG 2021 Released Questions – please help!

  • Creator
  • #3303745 Reply

    From the most recent testlet, the question says…

    Which of the following is true about taxation of a partner in a partnership?
    a. Partners must include their share of partnership capital gains as ordinary income on their personal income tax returns.
    b. If a partner’s loss is limited on one tax year because of the at-risk rules, it may be carried forward to a later year, subject to that year’s at-risk

    The answer is b but can please someone explain why the answer is not a?

Viewing 3 replies - 1 through 3 (of 3 total)
  • Author
  • #3303748 Reply

    From the most recent 2021 RQ,

    A C corporation incurred $438,000 capital loss in year 4 and has the following tax information. What amount of capital loss is available for
    carryover to future tax years?
    Y1 Y2 Y3 Y4
    Capital gain(loss) 0 $21,000 $11,000 ($438,000)
    Taxable gain(loss) 25000 17000 31000 750,000

    —> The answer is $410,000. Can someone please explain why 410,000 is a carryforward capital loss?

    #3303754 Reply

    Its because capital gains is part of separately stated items; thus it should be treated differently from ordinary income.

    AUD - 78
    BEC - 76
    FAR - 80
    REG - 77
    FAR 57,61,57,56,68, 80

    REG 53,49,69,66, 79*,77

    AUD 39,66,72,73,66,70,78!!Final

    BEC 64,60,50,70,67,71,76

    "Theres no limit unless you allow it"


    #3303757 Reply

    Because a partner treats income as characterized on the k-1. If the k-1 says it is capital gain then that is how the partner treats it on their individual return. Can you think of any instance where cap gain is treated as ordinary income? Reread the question and see if that helps.

    AUD - 93
    BEC - 82
    FAR - 76
    REG - 88
    How have you been?
    Ninja book and MCQs and the forum, all first try! 2016
    Licensed State of Montana April Fool’s Day 2020
    State of Colorado June 2020 - AICPA Ethics 93
    Experience was the worst part of the journey for me. You?
    If you want things to change you have to do something different.
Viewing 3 replies - 1 through 3 (of 3 total)
Reply To: Reply #3303754 in REG 2021 Released Questions – please help!
Your information:

Return to Forum Home