[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

[TargetCPA]

The property's FMV is included in decedent's Estate to the extent of the percentage that the decedent contributed toward the purchase.

Since Fred contributed 20% of the land,

So 20% of its $300,000 = $60,000

(+) Ethel's basis of land = $80,000

Total = $140,000

The requirement is to determine Ethel’s basis for the property after the death of the joint tenant (Fred).

When property is held in joint tenancy by other than spouses, the property’s FMV is included in a decedent’s estate to the extent of the percentage that the decedent contributed toward the purchase.

Since Fred furnished 20% of the land’s purchase price, 20% of its $300,000 fair market value, or $60,000 is included in Ethel’s estate.

Thus, Ethel’s basis is $60,000 plus the $80,000 of purchase price that she furnished, a total of $140,000.

[Only Reg Left]

That doesn't make sense to me. Wouldn't it be $240,000?

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

[golfball7773]

^That was my thought too, but I have been getting joint tenancy problems wrong – I plan on looking it up after work.

FAR: 63, 55, 62
REG: 65, 77*
AUD: Fail, 64, 71
BEC: 72, 74, 81

*expired

[TargetCPA]

I am also still weak in Estate & gift tax.

@ Only Reg Left: Can you please explain, how do you come with $240,000?

[Only Reg Left]

I read your explanation and I am just going to use that as the rule. Becker didn't explain this at all, and I'm sure any question on the test would be community property between husband and wife, so I'm not going to worry about it.

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

[TargetCPA]

@ only reg left:

If you don't mind, Could you please use the same numbers with Ethel and Fred MCQ but with community property, husband and wife concept? I don't know how it flows if it is community property.

[TargetCPA]

The rule for community property:

[Include one-half the FMV of community property, and one-half the FMV of property held by spouses in

joint tenancy or tenancy by the entirety]

Example: Fred and Ethel (Husband and Wife), residents of a community property state, own unimproved land that they hold in joint tenancy with rights of survivorship. The land cost $100,000 of which Ethel paid $80,000 and Fred paid $20,000.

Fred died during 2013 when the land was worth $300,000, and $60,000 was included in Fred’s gross estate. What is Ethel’s basis for the property after Fred’s death?

Here $300,000 is FMV of the land. So, [1/2 the FMV of community property + 1/2 the FMV of property held by spouses]

Answer is ??

[Only Reg Left]

$150,000 should be included in Fred's estate. But because their married, they can sell the land and gift the proceeds to the wife so it's essentially tax free.

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

[TargetCPA]

Thanks Only Reg Left!!!

[Anonymous]

I have a quick REG question.

I'm using the WileyCPA Test Bank MCQs and Sims to prepare for the exam. Some of the Sims require me to fill out a various tax form (1040, 1120, 6251 etc.), but only give line numbers in a spreadsheet and not the actual form itself. Does the actual exam give a copy of the form for me to fill in (the AICPA Sample Exam does), or do I need to memorize the forms and various line numbers?

Thanks.

[Anonymous]

Is an S Corp shareholder's initial basis the same as for a C Corp shareholder?

NBV property

+Gain recognized by s/h

-Boot received by s/h

-Liabilities assumed by corporation

I understand that further basis calculation is different, but initially is the the same for both?

[MikeHoncho]

Yes calculating initial basis is same (ie the formula you provided). And like you said the further basis calculation is different for a S- corp shareholder (= Initial basis + stock purchases + tax exempt and taxable income – AAA distributions – deductible and nondeductible expenses).

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

[Anonymous]

Can someone clarify this for me?

A taxpayer holds a 30 percent ownership interest in the Sanghvi Corporation. The investment has an adjusted basis of $13,000. The corporation conveys cash of $4,000 to the taxpayer along with land that had a tax basis to the corporation of $10,000 but a fair value of $17,000. The corporation is not going out of business so this transfer is a nonliquidating distribution. Once the taxpayer receives the cash and the land, what is the tax basis of the land on her personal financial records?

Answer is $17,000. I thought the basis would be the basis of $13,000 less the cash received…so less the $4,000 which would be $9,000. Is that rule for something else? Maybe when it's a liquidating distribution?

[TargetCPA]

@dante042104:

With a nonliquidating distribution, property distributed by a corporation is recorded by the recipient as income based on its “fair value”. The taxpayer received property here worth $17,000 which is how it is now recorded. That becomes its tax basis.

[MikeHoncho]

@dante042104:

You confused me for a second. If this were a partnership (ie not a corporation), I believe your explanation would be correct.

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

[Author]

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