@Teal: I think they mention that there are no separately stated items in order to keep the example simple, as any separately stated items would likely modify the total income reported by the shareholder and they are trying to just show the difference in when taxable income is recognized to the shareholder in a C corp vs S corp. The main flow of earnings should always be non-separately stated, and then items that will depend on each individual taxpayer (like Section 179 expense) will be separately stated and handled differently case-by-case.
Good luck on the rematch on 4/1! Only a few days. I look forward to hearing how the new format is.
Hello everyone, trying to wrap my head around S corps and how its taxed and how the information flows to K-1. just wanted to ensure if i have this correct. Please let me know if i am missing something.
Any distributions made by S corp to the shareholders won't be taxed at the shareholder level. The reason being that when the S corp reported income (assuming revenues exceeded expenses), the shareholders got their pro-rata share and paid taxes on it at that time regardless whether it was distributed or not (it can just stay in RE). Thus, income is taxed only once and this is the big advantage over the C corp which is subject to double taxation.
I am reviewing my new Becker book for REG and was comparing it to the old book (pre-new exam) and there seems to be a LOT of topics that were removed. Was this supposed to happen? I assume it is because Becker saw that those topics will no longer be on the exam?
I am working through the NINJA MCQs and am running into a lot of questions that I don't see covered on the detailed REG blueprints including the following:
– Environmental regulations (Clean Air Act, Clean Water Act, CERCLA, etc)
– Commercial paper, negotiable instruments, etc.
Does anyone know or have confirmation from somewhere whether or not these areas will be tested on the new version?
@rachoconnor22: Negotiable instruments appears to not be on the exam. I'm not 100% sure about the environmental regulations, but it looks to be gone as well according to the CPAExcel material.
During 2015, Jay charged $5,000 on his credit card for his dependent daughter's medical expenses. Payment to the credit card company had not been made by the time Jay filed his income tax return for 2016. However, in 2016, Jay paid a physician $3,200 for the medical expenses of his wife, who died in 2015. Disregarding the adjusted gross income percentage threshold, what amount could Jay claim in his 2016 income tax return for medical expenses?
$0
x $3,200
$5,000
$8,200
You Answered Incorrectly.
This answer is incorrect. The $5,000 credit card charge is deductible for 2015.
How would you include the $5000 on the 2016 return if it was charged in 2015, which is when it's considered paid? Is this an error in the question? It would make sense if they were asking if it was deductible for the 2015 return even though the credit card bill was paid in 2016.
I honestly do not know. I got the same answer as you with the same exact rationale. If he charged the expenses in 2015, that is when they should be deductible and since he paid 3200 in expenses in 2016 for his wife who passed away in 2016, they should be deductible in 2016, when we paid them. I am not sure why the 5000 is deductible in 2015 unless I am getting something wrong.
Sorry I couldn't be of any help but I wanted to let you know that I have the same thinking as you. Maybe someone else knows why the answer is 5000.
@afrieband16: I get the sense that they were intending on simply illustrating the difference between when the credit card was charged and when it was paid, as well as the fact that the timing of the wife's death is irrelevant to when the bill was paid. If you change it to “During 2016,” the question and answer make sense. I think it's an error. Thanks for your response.
I'm taking this tomorrow morning at 8:00 a.m. Since this is the first 8:00 a.m. and Saturday I have ever taken a CPA exam, AND it is the new test, I am choosing to take this as good luck! Will let you all know how it goes!
FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd
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