[msmeyer]

Going into REG for the third time I’ve learned to look under every stone. For the past month and a half I’ve dedicated myself to doing Wiley MCQ’s, listening to Ninja Audio, and reading Ninja Notes. I have Becker too and utilized that review for the first two attempts with very little luck (61 and then 73).

These are some topics that make me uneasy and I can’t really find much info about them:

1. Unrelated Business Income – any info helps, what I got is that if it is volunteer work or something for the convenience of the organization’s members (cafeteria), that it is not UBI. Anything else? What about a situation in which the organization provides certain services to members and is also open to the public? I am guessing those would not be UBI because they are services already related to the purpose of the organization.

2. Like Kind exchange with Mortgage– if you net the two mortgages and have a net mortgage paid (means you are assuming more of a mortgage than you are giving up), you ignore mortgage for calculating gain. So if you are giving up property with:

FMV – $100,000; Basis – $80,000; Mortgage – $60,000

Getting property with

FMV – $150,000, Mortgage – $90,000

Since netting the mortgages makes it a mortgage paid because you are assuming a higher mortgage of $90k (60,000 – 90,000= -30,000), the calculation for gain should only be: $150,000 – $80,000 = $70,000 (so a $70k realized gain). Since realized gain is higher than the boot received (mortgage given to other person) of $60,000, you recognize the $60,000 gain. Correct?

Then for basis calculations, per the NINJA notes, would be: $80,000 old basis + 90,000 boot paid – 60,000 gain recognized – 60,000 boot received = $50,000 new basis? I know this shouldn’t be this complicated anyone out there can provide some help? I just need peace of mind clearing this one topic. I, unfortunately, did not clearly understand the Ninja notes and Becker does not even talk about mortgages in like-kind exchanges.

Thank you!!!!

BEC - 86
FAR - 76
AUD - 73, 86
REG - 61, 73, 82

DONE!!

CPA, CIA, CRMA

[Lisa]

msmeyer:

I work the like-kind exchange problems a bit differently from Becker. I found a sample problem in the 2012 REG WIley text page 552 and a MC problem in REG Gleim 2013 pg 252 # 29. The 2 mortgages make the exchange a bit more complex. In your example, the gain realized is $70,000 as you stated, however the gain recognized is zero, because the

mortgage relied is $60,000 and mortgage accepted is $90,000 ($60,000 – $90,000) is negative, therefore gain recognized is zero. New basis is $150,000 – $70,000 = $80,000……

Here are the numbers in the Wiley example and how I compute this:

A & B each own properties that they exchange (like-kind). Details:

A Owns property, he exchanges, subject to a mortgage:

AB $50

FMV $70

Mort $15

AND

B Owns property, he exchanges, subject to a mortgage:

AB $60

FMV $65

Mort $10

So For A:

1. FMV of Prop rec'd $65

2. Plus boot received $15

3. = Amt Realized $80

4. Less AB (old) ($60) which is $50 + $10 Mort accepted)

5. = Gain Realized $20

6. Normally take the lesser of item 2 vs 5 expect in circumstances of 2 mortgages. With two mortgages, take item 2 mortgage less item 4 mortgage. So in this case ($15- 10 = $5)

Gain Recognized is $5

7. Fmv of Prop received $65

8. Less item 5-6 (note if negative then add) ($15) calculation was $20 – 5 = 15

9. (New) Basis of property received in like kind exchange= $50

AND for B: (this is how I abbreviate it, this method is from a financial planning background)

1. F $70

2. P $10

3. =A $80

4. L ($75) $60 + $15

5. =G $5

6. normally its the lesser of 2 vs 5, but with two mortgages you net $10 – $15 = negative number, so Zero

Gain Recognized = 0

7. F $70

8. Less(5-6) ($5) $5 – 0

9. New Basis = $65

If my method works for you,my memory aid is “FPALG 2 vs 5, F less (5-6) N” with the exception noted above.

Good luck, I'm taking this exam too and I'm nervous about it.

.

AUD 8/04/11: 78
BEC 1/9/12: 73, 4/04/12: 80
FAR 10/25/12: 80
REG 02/25/13: 79
Ethics 100%
VA License Issued 3/2013

[msmeyer]

@Lisa

Thank you so much–this will definitely help!!!! I have to make sure I memorize it.

BEC - 86
FAR - 76
AUD - 73, 86
REG - 61, 73, 82

DONE!!

CPA, CIA, CRMA

[Author]

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