[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

[Melans]

@KLS – I have those and will check it out.

@Topsya – I only have the WTB and not the book. But will check out the Ninja notes- been focusing mostly on Becker review.

@Target – So overall, you would have to know in advance what you will be paying in alimony. And only take the income or deduction per your formula above? Does this only apply when there are three years of alimony or in the last 3 years of payment?

AUD 7/30/12 73; 12/2/13 85
BEC 7/19/13 81
REG 8/2/14 83
FAR - Jan 2015

[Melans]

Another group gave me this – works well with TargetCPA's explanation – think I might understand the concept now.

https://www.cpaexamclub.com/group/reg-study-group/forum/topics/corporate-taxation-reg

AUD 7/30/12 73; 12/2/13 85
BEC 7/19/13 81
REG 8/2/14 83
FAR - Jan 2015

[Anonymous]

Hello AMT experts,

First of all, how you guys understand/practice AMT related questions for REG? I have hard time understanding this concept. Please help.

here is the question taken from Becker,

Robert had current-year adjusted gross income of $100,000 and potential itemized deductions as follows:

Medical expenses (before percentage limitations) 12,000

State income taxes 4,000

Real estate taxes 3,500

Qualified housing and residence mortgage interest 10,000

Home equity mortgage interest (used to consolidate personal debts) 4,500

Charitable contributions (cash) 5,000

What are Robert's itemized deductions for alternative minimum tax?

a. $17,000

b. $19,500

c. $25,500

d. $21,500

Explanation

Choice “a” is correct. Robert's itemized deductions for alternative minimum tax purposes are calculated as follows:

Medical expenses (exceeding 10% of AGI) 2,000

State income taxes (not allowed) −

Real estate taxes (not allowed) −

Qualified housing and residence interest 10,000

Home equity mortgage interest (not used to buy, build, or improve the home-not allowed) −

Charitable contributions (no difference) 5,000

Alternative Minimum Itemized deductions 17,000

---

My question is , as per my understanding the real estate tax, state taxes, home equity mortgage interest for other purpose are added back and qualified mortgage interest for home was ok. But here those state, real estate taxes are excluded and qualified mortgage interest interest is included , why?

How you guys practice/ understand AMT anyway?

[Kls238]

@cpa2012 I cant explain that problem cause I'm shaky on the topic. But I made note cards to remember the mnemonics. I keep that second of my book/notes handy when I do those problems to see if I really understand the concept.

Passed all sections.

[Melans]

@CPA2012 – I think for questions like these- you just have to memorize what is and isn't an AMT adjustment. There is the PANICTIMME mnemonic.

p – passive active losses

a – accelerated depreciation

n – Net operating loss of the individual tax payer

i – Installment income of a dealer

c – Contract = % of completion vs. completed contract

t – Tax deductions – (ie real estate, state taxes, etc)

i – Interest deductions on some home equity loans (used to improve home vs not)

m – Medical deductions limited to excess of over 10% AGI

m – miscellaneous deductions not allowed

e – Exemptions (personal) and standard deduction

AUD 7/30/12 73; 12/2/13 85
BEC 7/19/13 81
REG 8/2/14 83
FAR - Jan 2015

[Melans]

Am I understanding the child credit correctly: If you have 1 kid and $3,000 of expenses, you can tax a credit of $1,050? And if you had 2 kid and $6,000 of expenses you can take a credit of $2,100? (assuming income limits are not met)

AUD 7/30/12 73; 12/2/13 85
BEC 7/19/13 81
REG 8/2/14 83
FAR - Jan 2015

[MikeHoncho]

@Melons

The Child Credit is:

$1,000 for each qualifying child under 17

The Child Care Credit is:

Between 20% and 35% of qualified expenses (qualified expenses- are limited to the lower of a) earned income, or b) like you said $3,000 one qualified individual ($6,000 two or more qualified individuals)).

So assuming the taxpayer in your example has AGI of $15,000 or less then you would be correct. For example, lets say the taxpayer has one qualified individual, AGI of $14,000, and qualifying expenses totaling $3,900. Then the credit equals $1,050 ($3,000 max. of qualified expenses for one qualified individual multiplied by 35%).

Now same scenario as before except now the taxpayer has three qualified individuals and qualifying expenses of $8,050. Then the taxpayer would have a credit of $2,100 ($6,000 max. of qualified expenses for two or more qualified individuals multiplied by 35%).

*Now if AGI is greater than $15,000 then the 30% maximum rate is reduced by one percentage point for each $2,000, or portion thereof, above $15,000. This rate is never reduced below 20% (ie floor of 20%).

** Keep in mind a qualified individual is a child under the age of 13 or incapacitated AND has the same home as the taxpayer for more than half the year.

Hope this helps, let me know if you're still a little shaky on it. Keep in mind the child credit and child care credit are two different things.

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]

I need help…I was looking up a question I didn't understand and I see two conflicting answers. Which is correct?

On their joint tax return, Sam and Joann had adjusted gross income (AGI) of $150,000 and claimed

the following itemized deductions:

Interest of $15,000 on a $100,000 home equity loan to purchase a motor

home

Real estate tax and state income taxes of $18,000

Unreimbursed medical expenses of $15,000 (prior to AGI limitation)

Miscellaneous itemized deductions of

$5,000 (prior to AGI limitation)

Based on these deductions, what would be the am

ount of AMT add-back adjustment in computing

alternative minimum taxable income?

a. $21,750

b. $23,750

c. $35,000

d. $38,750

My cpaexel says it is C.

The following amounts are added back to taxable income to compute AMT income:

Interest because proceeds were not used for principal residence $15,000

Taxes 18,000

Medical expenses (no adjustment since 10% of AGI threshold applies for regular tax also) -0-

2% miscellaneous itemized deductions (deducted $5,000 – (2% x $150,000) for regular tax) 2,000

Total add-back $35,000

Other sources say it is D because they add back the difference between 10% and 7.5% for the medical expenses so that would bring it to 38,750. Is that based on old rules? Is 10% always used now? I keep getting confused with this

[MikeHoncho]

@dante

Yes, answer D is based on the old rules. 10% is the new AGI threshold, however, it is not always used. If the problem specified that the taxpayer was 65 or older, you would add back the medical expenses in excess of 7.5% of agi.

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]

ah ok, thanks. I keep forgetting this.

[Anonymous]

Thought I would throw this out there – if you're using Becker and taking REG by the end of this window, make sure you click not to update on your desktop program today. The new rates take effect for the July Window, and Becker updates today.

[Anonymous]

I'm testing at the end of the month…I'm using cpaexcel (updated) and Wiley book from 2013. are there any specific rate changes I might get caught up on? Is the 10% AGI medical deduction what I should be using or is this not going to be tested until the last half of the year?

[Topsya]

This is a questions from Wiley Book:

Mesa Corporation is planning on issuing some debt securities. Which of the following statements is true?

a. The holders of debt securities are owners of the corporation.

b. A bond is an instrument for long-term secured debt.

c. A debenture is an instrument for long-term secured debt.

d. None of the above is true

The correct answer is “b”

(b) A bond represents long-term secured debt.

Im really confused now…. aren't there short-term bonds as well? Or is the bond ONLY a long-term instrument??

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[Anonymous]

dante042104 – The 10% rate is being tested. Most of the other rates shouldn't matter from the 2013 book to the 2014 updates.

Topsya – While there are short-term bonds, they're considered money market. Most bonds are only long-term debts.

[Topsya]

@akayw0718

ohhhh

Thanks!!!

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[Author]

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