REG Study Group – Q1 2018 - Page 27

<whine> I am just so over all of this. It's been 28 weeks and I have another 11 weeks and 2 exams to go (and then another 8 weeks to Q2 score release…) I can't wait to get my life back and never watch another Becker video again. I am also definitely over Business Law, even though it's interesting, because it has zero to do with my job and also I feel like 2 weeks is a lot to spend on something tested so lightly. (To be fair, none of REG really has to do with my job, but at least I can see the utility of wanting CPA's to know how to prepare a tax return…) </whine>

Good luck to everyone testing this weekend 🙂

Hello, all. Just had a quick question hoping someone can answer. I took my REG exam on Feb 17. I've certainly taken my share of exams, so I know how it all works. However, for the first time, the site still says “NTSISSUED.” I took it 2 weeks ago as of tomorrow. I know prometric usually sends the exam info over within 24 hours or so. I also looked this up & saw some older questions about this, but I was wondering if anyone else recently has ran into this issue. I see the scores are released March 8th for those taken/received before Feb 28 & mine was certainly taken before this date but hasn't been updated online yet. Any information or experience on the situation would be appreciated, thanks!

Having a hard time figuring out how to use my final few days of studying. At this point ive done endless amounts of MCQs (Becker) and i do them in sets of 38 questions. I usually get about 88 and above but i am afraid that it is because ive seen them so many times. Any suggestions on how to use these days for REG? I did the same for AUD and BEC and that actually worked out but i am afraid REG will just be a different animal!!!

@jmac645 thanks alot man…i will def follow that advice since it seems to be the small things with REG. Best of luck on your results!

I would recommend Roger with Ninja . That is a good combination. I don't have tax experience but Roger's videos helped ma lot to understand the rules. Also note that I am an international candidate.So was not aware of any taxation rules before I watched Roger videos.

@Reema – Thank you!

1-Ron and Willie form the equal RW Partnership. Ron contributes cash of $50,000 and Willie contributes land with a fair market value of $50,000 and adjusted basis of $35,000. How much gain or loss does Willie recognize on this formation and what is her basis in her partnership interest?
Gain/Loss Basis

$ 0 $50,000

$15,000 $50,000

$ 0 $35,000

$15,000 $35,000

2- Ron and Willie form the equal RW Partnership. Ron contributes land that he owned as an investment for 2 years with a fair market value of $50,000 and adjusted basis of $60,000. Willie contributes a truck that she owned as inventory for 6 months with a fair market value of $50,000 and adjusted basis of $35,000. Immediately after the transaction, what holding period does Willie have in her partnership interest and does RW have in the truck?
Willie RW

None 6 months

6 months None

6 months 6 months

None None
3- The FAD partnership is an equal partnership. F and D are father and daughter and F sells a business asset, with an adjusted basis of $12,000, to the FAD partnership for $8,000. FAD later sells the asset to an unrelated third-party for $10,000? How much gain or loss is recognized by D and by FAD on these sales?
D FAD

$ 0 $ 0

$ 0 $2,000

$ 0 ($2,000)

($4,000) $2,000

4- Angel Corporation, a C corporation, has accumulated earnings and profits at the beginning of Year 6 of $100,000. Current earnings and profits for Year 6 is a deficit of ($40,000). During Year 6 Angel distributed cash to its shareholders of $70,000. The shareholders have $100,000 basis in their stock collectively. Which of the following statements is true?

The shareholders have taxable income of $70,000.

The shareholders reduce the basis in their stock by $10,000.

The shareholders have taxable income of $100,000.

The shareholders reduce the basis in their stock by $60,000.

5- Hope Corporation, a C corporation, distributes land to its sole shareholder, Charlie, with a fair market value of $40,000 and an adjusted basis $25,000. Hope has total earnings and profits of $500,000. Which of the following statements is false?

Hope will recognize a gain of $15,000.

Charlie will have dividend income of $40,000.

Hope will reduce its earnings and profits by $25,000.

Charlie will have a basis in the land of $40,000.

6- Lamont is a 20% shareholder in ACE Corporation. He has a basis in his stock of $25,000. During the current year he received a distribution from ACE of $90,000. His share of ACE's accumulated earnings and profits is $38,000 and of current earnings and profits is $22,000. Which of the following statements is true?

Lamont has dividend income of $90,000.

ACE Corporation must recognize a gain of $30,000.

Lamont's basis in his stock is $25,000 after the distribution.

Lamont has a capital gain of $5,000.

7- Food Corporation, a C corporation, has the following tax information for the current year:
Taxable income $120,000
Municipal interest income 6,000
Federal income tax 24,000
Nondeductible penalties 2,000
Domestic production activities deduction 15,000
What is Food's current earnings and profits?

$ 85,000.

$115,000.

$117,000.

$163,000.

8- Bath Corporation, a C corporation, distributed land to its sole shareholder, Denise, this year. The land had a fair market value of $70,000 and adjusted basis of $52,000. There was a mortgage of $30,000 attached to the land which Denise assumed. Assume that Bath has substantial earnings and profits. Which of the following statements is false?

Denise has dividend income of $70,000.

Denise has dividend income of $40,000.

Denise has a basis in the land of $70,000.

Bath reduces earnings and profits by $40,000.

9- Barbara is a 40% shareholder of ABC Corporation. She sells 50 shares of his stock to ABC for $100,000. Her basis in the shares sold was $65,000. After the sale she owns 30% of ABC. How much income does Barbara recognize?

$ 35,000 dividend income.

$100,000 dividend income.

$ 35,000 capital gain.

$100,000 capital gain.

10- The following individuals own stock in Risk Corporation which has 1,000 shares outstanding:
Ted 600
Ted's wife 100
Ted's son 50
Ted's brother 100
Ted's father 150
How many shares is Ted deemed to own constructively for purposes of the stock redemption rules?

600.

850.

900.

1,000.

11- Lila owns 60% of King Corporation. Lila also owns 80 shares in Queen Corporation. King Corporation owns directly 30 shares in Queen Corporation. Which of the following statements is true for purposes of determining constructive ownership for the stock redemption rules?

King owns 110 shares of Queen, directly and indirectly.

King owns 98 shares of Queen, directly and indirectly.

Lila owns 80 shares of Queen, directly and indirectly.

Lila owns 110 shares of Queen, directly and indirectly.

12- Which of the following statements is true with regard to a partial liquidation?

The business that is terminated must have been owned and operated by the liquidating corporation for at least 12 months.

The business that is terminated must have been owned and operated by the liquidating corporation for less than five years.

The not essentially equivalent to a dividend test is applied at the shareholder level.

The not essentially equivalent to a dividend test is applied at the corporate level.

13- Corporation Bottom was a wholly-owned subsidiary of Top Corporation. Both corporations were domestic C corporations. Top received a liquidating distribution of property (worth $400 and a basis of $280) from Bottom in cancellation of all its stock. What amount of gain will Top recognize if Top had a basis of $100 in the Bottom stock before the receipt of the property?

$ 0.

$120.

$300.

$400.

14- Auto Corporation distributes all of its property in complete liquidation. One of Auto&s shareholders, Lee, receives land having a fair market value of $14,000 and basis to Auto of $10,000. Lee has a basis in her stock of $15,000. How much gain or loss does Auto recognize from this liquidation?

$ 0.

$ 4,000 gain.

$10,000 gain.

$ 1,000 loss.

15- Auto Corporation distributes all of its property in complete liquidation. One of Auto&s shareholders, Lee, receives land having a fair market value of $14,000 and basis to Auto of $10,000. Lee has a basis in her stock of $15,000. How much gain or loss does Lee recognize from this liquidation?

$ 0.

$ 4,000 gain.

$10,000 gain.

$ 1,000 loss.

16- The stock in Brown Corporation is owned 60% by Joan and 40% by Becky. Joan and Becky are not related. Becky and Joan transferred a parcel of land that they owned to Brown in Year 2, and 18 months later, in year 3, Brown liquidated and transferred all of the land to Joan. At the time of contribution in year 2 the land had a fair market value of $100,000 and adjusted basis of $140,000. In year 3, at the time of liquidation, the value of the land had declined to $70,000. How much loss can Brown Corporation recognize on the distribution?

$ 0.

$40,000.

$42,000.

$70,000.

17- Jan exchanges stock that she owns in Rocky Corporation with a value of $21,500 for stock in Lucy Corporation. The stock that she received from Lucy had a value of $20,000 when received. In addition, she receives land with a fair market value of $1,500 and adjusted basis of $900 from Lucy Corporation. This exchange is pursuant to a qualified “A” tax-free reorganization. Jan had bought her stock in Rocky five years ago for $8,000. How much gain or loss does Jan recognize on this transaction?

$ 0.

$ 1,500.

$13,500.

$20,000.

18- Jan exchanges stock that she owns in Rocky Corporation with a value of $21,500 for stock in Lucy Corporation. The stock that she received from Lucy had a value of $20,000 when received. In addition, she receives land with a fair market value of $1,500 and adjusted basis of $900 from Lucy Corporation. This exchange is pursuant to a qualified “A” tax-free reorganization. Jan had bought her stock in Rocky five years ago for $8,000. How much gain or loss does Lucy Corporation recognize on this transaction?

$ 0.

$ 600.

$ 1,500.

$20,000.

19- Which of the following statements is false assuming that HCA Corporation acquires Dollar Corporation in a stock for stock reorganization?

The continuity of interest test requires that the shareholders of Dollar acquire stock in HCA that has a value of at least 50% of the value of Dollar stock before the transaction.

If this is a Type A reorganization, then Dollar Corporation must dissolve.

If this is a Type C reorganization then, HCA Corporation can transfer both voting and nonvoting stock to Dollar's shareholders.

Shareholders of Dollar must recognize gains to the extent they receive boot.

20- Upper Corporation owns 200 shares of Lower Corporation. Lower Corporation has 2,000 shares of stock outstanding. Upper wants to acquire more shares of Lower in a tax-free Type B reorganization. Which of the following statements is true?

Upper Corporation must obtain at least 1,600 additional shares of Lower's voting stock.

Upper Corporation must obtain at least 1,000 additional shares of Lower's voting stock.

Upper Corporation can transfer assets to Lower's shareholders in addition to voting stock.

Upper must give Lower's shareholders only voting stock in Upper Corporation.

21- Which of the following statements is false with regard to the federal income taxation of partnerships?

A limited partner cannot actively manage the business of the partnership.

Under the check-the-box regulations, limited liability companies generally are “disregarded” if they have one owner.

Under the check-the-box regulations, entities that are incorporated may elect to be taxed as a partnership.

Limited liability company owners are referred to as members.

22- Ron and Willie form the equal RW Partnership. Ron contributes cash of $50,000 and Willie contributes land with a fair market value of $70,000 and adjusted basis of $35,000. The land has a $20,000 recourse mortgage attached to it that is assumed by RW Partnership. What basis does Ron and Willie have in their partnership interests?
Ron Willie

$50,000 $45,000

$60,000 $45,000

$50,000 $25,000

$60,000 $25,000

23- Ramona is an accountant who provided services to help organize a partnership in the current tax year. Ramona received a 5% interest in the partnership in return for these services that has a fair market value of $5,000. Her regular charge for similar services is $4,500. How much income should Ramona recognize for the receipt of this interest?

$ 0.

$4,500 ordinary income.

$4,500 capital gain.

$5,000 ordinary income.

24- The Sports Barn Partnership had the following tax information for the current tax year:
Revenue $80,000
Interest income 2,000
Salaries 10,000
Section 1245 depreciation expense 3,000
Section 1231 gain 5,000
Charitable contributions 1,000
What is the ordinary business income (loss) for Sports Barn?

$66,000.

$67,000.

$70,000.

$73,000.

25- The Sports Barn Partnership had the following tax information for the current tax year. Sports Barn has two partners, Jeff and Greg. Jeff is allocated 60% of gains and losses and Greg is allocated 40%.
Revenue $80,000
Interest income 2,000
Salaries 10,000
Section 1245 depreciation expense 3,000
Section 1231 gain 5,000
Charitable contributions 1,000
Jeff's basis in his partnership interest is $20,000 at the beginning of the year. What is Jeff's basis at the end of the tax year?

$63,800.

$43,800.

$56,500.

$60,200.

26- Kaitlin has a basis of $30,000 in her partnership interest at the beginning of the tax year. Her share of the certain partnership items is as follows:
At-risk amount $20,000
Passive loss $25,000
She also has passive income of $10,000 from other sources. How much of the partnership loss may she deduct on her individual tax return for the current tax year?

$ 0.

$10,000.

$20,000.

$25,000.

27- The BDO partnership provides that D will receive a guaranteed salary of $30,000 each year for her services as an accountant. She will also receive one-third of the taxable income or loss. For the current year the partnership has ordinary income of $18,000 before the salary payment, a Section 1231 gain of $9,000, and short-term capital gain of $3,000. All taxpayers are cash method and have a calendar year end. The $30,000 salary is paid to D evenly throughout the year. What is BDO's ordinary income or loss?

$18,000.

($12,000).

$ 8,000.

$ 0.

28- Rocky contributes land to a partnership in return for a 40% interest in the partnership. The land has an adjusted basis of $12,000 and fair market value of $20,000. Three years later the partnership sells the land for $30,000. How much of the gain from this sale is allocated to Rocky?

$ 0.

$ 4,000.

$ 7,200.

$12,000.

29- South Corporation distributes land as a property dividend to its shareholders. The land has a fair market value of $50,000 and adjusted basis of $40,000. The land is subject to a $65,000 liability that is assumed by the shareholders. How much gain does South recognize because of this distribution?

$ 0.

$10,000.

$15,000.

$25,000.

30- Which of the following items is not a separately stated item for computing partnership income?

Dividend income.

Special allocation of depreciation expense to one partner.

Section 1250 depreciation recapture.

Long-term capital gain.