[jeff]

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[MelonTea]

@CH89, The question came from the Surgent CPA review. I like to so far, but that question threw me into loop.

[Tncincy]

I was gonna go for the 11th but I guess I can do a few days before. My son graduates with his masters in computer science from University of Arkansas-Pine Bluff. Yes, I am very proud. I went through so much with the registering and re-registering stuff. I got my NTS and it's on.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[74phoenix]

@Tncincy Congratulations to your family!

I am having trouble understanding “Basis of New Property” in Like Kind Exchanges.

One of the formulas I see is:

Adjusted basis of property given up
+ Gain recognized
– boot rec'd
+ boot paid

I understand Adj Basis of property given up + Gain recognized, but cannot wrap my head around why the boot received would be subtracted, and the boot paid added. Can someone explain?

Graduated 05/2016.
NY CPA Candidate.
Public accounting.
FAR COMING UP 07/07/2016 !! GOD HELP ME.

[74phoenix]

Also thought this is a weird rule in property transactions:

Related parties (mother and son) – the son can sell the stock his mom sold him and using the original basis in the recognized gain calculation because he sold at an amount higher than both his cost basis and mom's basis?

Graduated 05/2016.
NY CPA Candidate.
Public accounting.
FAR COMING UP 07/07/2016 !! GOD HELP ME.

[Tncincy]

@74phoenix, I think the boot received or given is used in calculating the new basis of the property exchanged. Boot (cash or unlike property given or received).

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Fen]

Can anybody explain “holder in due course”? I just do not understand it. Thanks.

[74phoenix]

@Fen A holder in due course is someone who receives a check or negotiable instrument either directly from the payor or from the payee who passes it along to the holder in due course. I think it helps to think about a purchase of a home situation. The buyer of the home gives a check to the seller of the home, who then gives it to the bank. The bank is the holder in due course (holding the check). If anything is wrong with the check, the bank (holder in due course) has rights against the buyer, as long as the bank (holder) took the check for value, in good faith, without notice that anything is wrong with it

Graduated 05/2016.
NY CPA Candidate.
Public accounting.
FAR COMING UP 07/07/2016 !! GOD HELP ME.

[asdf]

In 2018, Jeff Sippy won $6,000 in a state lottery. Also in 2018, Jeff spent $1,400 for the purchase of lottery tickets. Jeff elected to take the standard deduction on his 2018 income tax return. The amount of lottery winnings that should be included in Jeff’s 2018 taxable income is?
——————————————————————
The answer is $6,000 which I got wrong. I thought $0
I know it should be included in GROSS INCOME, but the question is asking TAXABLE INCOME.
so, I was confused.. I mean, if they are asking taxable income which is supposed to come after adjustments and standard deduction ($12,000)
there is no taxable income, that was why i chose 0.. please help my understanding if i'm missing something here!
Thank you

[CH89]

It is asking the amount of lottery winnings that should be included, and the question does not specify what AGI is for 2018 for Jeff. I understand your confusion since it is asking taxable income, which can be read differently leading to a different answer. I believe this question is simply testing your knowledge and understanding of gambling winnings and losses, NOT how to arrive at taxable income. Hope this helps clarify.

[Tncincy]

The winning amount is $6,000 included in taxable income. The winnings against the losses would be valid if he was itemizing. But the question says he chose the standard deduction. I think you are over thinking this matter. AGI has nothing to do with the question unless it asked to calculate more.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[CH89]

Yes, but what Asdf is referring to is calculating taxable income. Looking at Form 1040, the winnings would be included in income to arrive at AGI, then reduced by the standard deduction resulting in taxable income of 0. Of course, this is assuming that there is no other form of income.

[Tncincy]

@CH89 I agree that the question is testing calculating winnings and losses. I understand, but does asdf have a better understanding of the correct answer to the question.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[asdf]

@Tncincy
@CH89

thank you for your helps here!
I know that entire winning amount should be included in gross income and it will be deducted up to the lottery loss by itemized deduction if s/he uses sch A but this person used std deduction which will lead to $0 of Taxable Income on lottery at the end.
Right, It seems I was over-thinking this question 🙂
I just thought that the wording of the question using TAXABLE INCOME is just not right..

[asdf]

I mean “the loss will be deducted only up to the lottery winning” 😉

[Tncincy]

Oh Lord, I am having trouble finding a date. I might be able to get 3/15/2019 This only leaves 45 days of study. Panic attack in progress.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Author]

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