[jeff]

I’ve had a few requests for April/May Study Groups…March will be here before you know it.

In order to take an early April exam, you should begin studying…now. 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Lml]

And going back to the question asked by dante042104 on page 3 regarding preferred stock: generally common stock dividends are a non taxable event.

EXCEPTION: The fair market value of stock dividend is taxable when

1) you have the OPTION of receiving cash or stock, or

2) some owners are given common stock and some are given preferred stock

It might have been answered already, but this will help me remember key points. 🙂

AUD - 86
BEC - 76
FAR - 77
REG - 86

[TargetCPA]

@ Lml,

You are right in 91days calculation. I am also do the same math but the answer shows 90days.

The answer is:

(90/366)*$311,100 = $76,500

I got confused with this simple math and posted this question here. So can we conclude with rounded number like 90 instead of 91?

[Tasia]

Is it 91 days because its last day as an S-corp was April 1, not March 31? I calculated using 90 days as well because I went through March 31, but I'm thinking I should have gone through April 1. Is this correct?

BEC - 78 (8/30/13)
REG - 73 (1/31/14) - 76 (4/7/14)
***GETTING MARRIED 7/19/14***
FAR - after the wedding
AUD - also after the wedding

"For I know the plans I have for you,” declares the LORD, “plans to prosper you and not to harm you, plans to give you hope and a future." - Jeremiah 29:11

[Lml]

It seems like they didn't take into account the 29 days in February since 2012 was a leap year. The important thing here is that we know how to calculate income for an s-corp due to the short year. So yay for us! Feel free to correct me if I'm wrong.

AUD - 86
BEC - 76
FAR - 77
REG - 86

[TargetCPA]

I think for 90days calculation, we should not take it as 29 days for February in 2012 unless question mention about February is 29days.

If the question mention about February days are 29days, then it will be 91days. If not, then 90days to consider for the calc.

[TargetCPA]

One more S-corp question but this is little tricky.

Beck Corp. has been a calendar-year S corporation since its inception on January 2, 2007. On January 1, 2012, Lazur and Lyle each owned 50% of the Beck stock, in which their respective tax bases were $12,000 and $9,000. For the year ended December 31, 2012, Beck had $81,000 in ordinary business income and $10,000 in tax-exempt income. Beck made a $51,000 cash distribution to each shareholder on December 31, 2012. What was Lazur’s tax basis in Beck after the distribution?

a. $ 1,500

b. $ 6,500

c. $52,500

d. $57,500

[Lml]

I'm getting

B. $6,500 calculated as such :

Beg. Basis of $12,000

Add: 50% of income including tax exempt income. $45,500.

Subtract: distribution of <$51,000>

Equals $6,500.

AUD - 86
BEC - 76
FAR - 77
REG - 86

[TargetCPA]

@ Lml,

You are right.

Answer: b

The requirement is to determine Lazur’s tax basis for the Beck Corp. stock after the distribution. A shareholder’s basis for stock of an S corporation is increased by the pass-through of all income items (including tax-exempt income) and is decreased by distributions that are excluded from the shareholder’s gross income. Here, Lazur’s beginning basis of $12,000 is increased by his 50% share of Beck’s ordinary business income ($40,500) and tax-exempt income ($5,000) and is decreased by the $51,000 cash distribution excluded from his gross income, resulting in a stock basis of $6,500.

[TargetCPA]

Simple S-Corp MCQ:

Graphite Corp. has been a calendar-year S corporation since its inception on January 2, 2007. On January 1, 2012, Smith and Tyler each owned 50% of the Graphite stock, in which their respective bases were $12,000 and $9,000. For the year ended December 31, 2012, Graphite had $80,000 in ordinary business income and $6,000 in tax-exempt income. Graphite made a $53,000 cash distribution to each shareholder on December 31, 2012.

1. What total amount of income from Graphite is includible in Smith’s 2012 adjusted gross income?

2. What was Tyler's tax basis in Graphite after the distribution? (Test your knowledge without any answer options)

a. $96,000

b. $93,000

c. $43,000

d. $40,000

[Only Reg Left]

1) D – only the 40,000 (that would be reported on Line 1 of the K-1) would be included in AGI (Sch E)

2) His basis is now reduced to zero. Of course before this return is complete, the S-Corp might do $2,000 transfer of deductions to the partnership so Tyler won't have to pay tax on that extra 1,000. (Assuming of course there is an LP in place to channel income which would enable the taxpayers to report these earnings as ordinary and reduce their SE tax). There is no accumulated E&P because it states it has been an S since inception.

Edit: These guys would be dumb to not have an LP on the side. You would absolutely want to report all the income there. They can even get away with paying themselves a lower salary.

AUD - 68, 77
REG - 84* (Expired)
FAR - 83
BEC - 74, 74, 72, 72, 84

[TargetCPA]

@ Only Reg Left,

You are right!!! Your explanation is awesome!! Are you a tax person?

When are you going to take REG exam?

GL for your REG

[TargetCPA]

@ Finishorgiveup,

Where are you? There are no updates from you in last 2 days.

What about your Corp MCQs?

[TargetCPA]

As of January 1, 2012, Kane owned all the 100 issued shares of Manning Corp., a calendar-year S corporation. On the 40th day of 2012, Kane sold twenty-five of the Manning shares to Rodgers. For the year ended December 31, 2012 (a 366-day calendar year), Manning had $73,200 in non-separately stated income and made no distributions to its shareholders. What amount of non-separately stated income from Manning should be reported on Kane’s 2012 tax return?

a. $56,900

b. $56,750

c. $54,750

d. $48,750

[MikeHoncho]

Answer A?

(40/366) x (100/100) x (73200) = 8000

(326/366) x (75/100) x (73200) = 48900

8000 + 48900 = 56900

Done: 5/22/14

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut."
- Ernest Hemingway

[PorterAJ1]

@MikeHoncho – I got A as well

Question for the group – going through MCQs after going through videos, notes, re-writing notes, what has been more helpful in remembering the material- Doing MCQs and looking up the correct if you are unsure of the answer OR trying to come up with the answer on your own and if it is wrong, writing down the explanation?

I normally take the second approach, but didn't really pay off on my first attempt at REG.

FAR - 77 (10/31/13)
BEC - 75 (12/4/13)
AUD - 85 (1/16/14)
REG - 68 (2/28/14); 69 (4/10/2014); 81 (7/15/14) DONE!!!!

[Author]

Replies