[jeff]

REG Resources:

Free REG Notes & Audio – https://www.another71.com/cpa-exam-study-plan

REG 10 Point Combo: https://www.another71.com/products-page/ten-point-combo

REG Score Release: https://www.another71.com/cpa-exam-scores-results-release

[MrsBing]

Just changed my test date again, pushed it to August 31st. I didn't study at all during the 4 day weekend. Didn't really do much but sleep and read. I've been so tired all the time. I really need to put more effort in studying beginning this week if I want to pass the first time. I can't wait til this year is over.

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[MrsBing]

Just changed my test date again, pushed it to August 31st. I didn't study at all during the 4 day weekend. Didn't really do much but sleep and read. I've been so tired all the time. I really need to put more effort in studying beginning this week if I want to pass the first time. I can't wait til this year is over.

Becker, Wiley Test Bank, and Ninja 10 Point Combo!

FAR: 89
REG: 87
AUD: 92
BEC: 75
Ethics: 90

Licensed Arizona CPA

[icanhazcpa]

@mrsbing I'm right there with you. I went all weekend almost without doing anything. On my schedule, that is NOT ok. I've been studying and taking tests for three months straight at this point and getting burned out. Gotta find our fire again!

BEC - 83
FAR - 83
REG - 74, 78
AUD - 76

Becker Self Study

[icanhazcpa]

@mrsbing I'm right there with you. I went all weekend almost without doing anything. On my schedule, that is NOT ok. I've been studying and taking tests for three months straight at this point and getting burned out. Gotta find our fire again!

BEC - 83
FAR - 83
REG - 74, 78
AUD - 76

Becker Self Study

[icanhazcpa]

I have a question regarding depreciation. When I was in school, my professor gave us an easy way to figure depreciation for anything, but I can't remember it all! Do you guys remember anything similar to the following:

Cost(1/life)(method)(convention)

So like if it was half year and DDB it would be like

1,000(1/3)(2)(1/2)

I know that that's right for year 1, but you subtract somethin out for year 2 and I can't remember it! Does anyone remember doing this in school? If not you have got to do it the tables are garbage.

BEC - 83
FAR - 83
REG - 74, 78
AUD - 76

Becker Self Study

[icanhazcpa]

I have a question regarding depreciation. When I was in school, my professor gave us an easy way to figure depreciation for anything, but I can't remember it all! Do you guys remember anything similar to the following:

Cost(1/life)(method)(convention)

So like if it was half year and DDB it would be like

1,000(1/3)(2)(1/2)

I know that that's right for year 1, but you subtract somethin out for year 2 and I can't remember it! Does anyone remember doing this in school? If not you have got to do it the tables are garbage.

BEC - 83
FAR - 83
REG - 74, 78
AUD - 76

Becker Self Study

[Heidi-O]

@icanhazcpa I have a real easy way to remember depreciation for tax – its on a table, and it depends on the type of asset and when/what amount was acquired as to which convention you use!!! (I know, smart a$$ response – I'm getting punchy and nervous). Get GAAP out of your head!!! You are trying to do a calculation using either Double Declining Balance, or Sum of the Years – The IRS Don't Play that Game!!!

An asset is classified based on what it is and then you use the MACRS table. MACRS Property other than Real Estate has a class of 3, 5, 7 & 10 years – which is depreciated at 200% (you don't need to know the 200% – I am just trying to give you the information) and 15yr and 20yr property class that is depreciated at 150%.

On the Exam, you will get a table that shows you the depreciation schedule (if you get that as a question) – or at least, that is how it has been on the practice exams.

MACRS 3, 5, 7, & 10yr Uses the Half Year convention (essentially machinery and equipment, desks, computers) and the salvage value is ignored.

IF MORE than 40% of the depreciable property is placed in service in the LAST QUARTER of the year – then it changes to the mid quarter convention. (different table). In that case, you have to look at each piece of property, determine when it was put in service (1st qrtr) and use the percentage on the table that applies to it for depreciation.

If it is Real Estate – Its the Mid Month Convention (always). You deduct the cost of the land (can't depreciate land, its still there, even after a hurricane, even after a sink hole, even after a fire) and use the Building cost without a salvage value. Real Estate uses the Mid-Month Convention – Straight line.

Residential Real Property – MACRS 27.5 yr straight line mid month

Non Residential Real Property – MACRS 39 year straight line mid month

Be careful when they put the property in place – they will try to trick you on that one!!

This is why the section 179 is such a “Hot Topic” on the board. If you put 200,000 worth of computer equipment in place during the year and you fit the requirements (not more than 2,000,000 in purchases, etc.) then you have MACRS 5 yr property that gets Fully Depreciated (providing it doesn't create a loss) in that year!!!

Is that what you were looking for? :}

FAR Aug 2012 79
AUD Oct 2012 84
REG Aug 2013 87
BEC Jan 2013 80

[Heidi-O]

@icanhazcpa I have a real easy way to remember depreciation for tax – its on a table, and it depends on the type of asset and when/what amount was acquired as to which convention you use!!! (I know, smart a$$ response – I'm getting punchy and nervous). Get GAAP out of your head!!! You are trying to do a calculation using either Double Declining Balance, or Sum of the Years – The IRS Don't Play that Game!!!

An asset is classified based on what it is and then you use the MACRS table. MACRS Property other than Real Estate has a class of 3, 5, 7 & 10 years – which is depreciated at 200% (you don't need to know the 200% – I am just trying to give you the information) and 15yr and 20yr property class that is depreciated at 150%.

On the Exam, you will get a table that shows you the depreciation schedule (if you get that as a question) – or at least, that is how it has been on the practice exams.

MACRS 3, 5, 7, & 10yr Uses the Half Year convention (essentially machinery and equipment, desks, computers) and the salvage value is ignored.

IF MORE than 40% of the depreciable property is placed in service in the LAST QUARTER of the year – then it changes to the mid quarter convention. (different table). In that case, you have to look at each piece of property, determine when it was put in service (1st qrtr) and use the percentage on the table that applies to it for depreciation.

If it is Real Estate – Its the Mid Month Convention (always). You deduct the cost of the land (can't depreciate land, its still there, even after a hurricane, even after a sink hole, even after a fire) and use the Building cost without a salvage value. Real Estate uses the Mid-Month Convention – Straight line.

Residential Real Property – MACRS 27.5 yr straight line mid month

Non Residential Real Property – MACRS 39 year straight line mid month

Be careful when they put the property in place – they will try to trick you on that one!!

This is why the section 179 is such a “Hot Topic” on the board. If you put 200,000 worth of computer equipment in place during the year and you fit the requirements (not more than 2,000,000 in purchases, etc.) then you have MACRS 5 yr property that gets Fully Depreciated (providing it doesn't create a loss) in that year!!!

Is that what you were looking for? :}

FAR Aug 2012 79
AUD Oct 2012 84
REG Aug 2013 87
BEC Jan 2013 80

[Heidi-O]

@DJN NO 2% Items Are Allowed in AMT – Add it back. Can't have it. Nope, no way!!

With regards to the Personal Exemption – you get a different exemption. On the Itemized Deductions – you have to adjust them. On a 1040, you calculate out your AGI then you either itemize or use the standard deductions. Then you subtotal and then deduct your exemptions (look at the form 1040 line 38 and follow it down a few lines).

In most of my homework questions, what they have been asking about the AMT is to either take the AGI and asks you what adjustments and preferences are allowed to get to AMTI. OR I have seen the questions tell you the AGI – 1040 Itemized Deductions and you have to add back or make slight adjustments to get to the AMTI.

Ultimately, you are trying to get to the AMTI.

Next, you use the Alternative Minimum Taxable Exemption Formula. Which is, if you are married the 2013 the phase out threshold is 153,900. Assuming your AMTI is 250,000:

AMTI 250,000

Allowable Threshold (2013) (153,900)

Excess = 96,100

% Forfeited From Exemption x .25 (Note: Same % Regardless of Single, Married, HOH etc.)

Forfeiture Amount = 24,025

Joint Exemption for Married 2013 80,800 (AMT 2013 Married Joint Exemption Amount)

Forfeited Amount (from Above) (24,025)

Exemption Amount 56,775

Next, you plug in the Exemption to determine the Alternative Minimum Tax Base

AMTI 250,000

AMT Exemption (56,775) Caculated above

Alt Min Tax Base 193,225

and the calculations continue.

Now, I am hoping that this detail means that something will “click” in your head. One is that the Forfeited Exemption is always 25% – so if you get asked that in a question, you know it. Second: The AMT has its own Calculated Exemption from the normal 1040 exemption. If you notice, there are a few numbers in this calculation (the Allowable Threshold and the Exemption allowed) that change every year because they are indexed for inflation. I am not certain that the CPA exam is going to test you on those amounts. But you DO need to know that there are Two Different Exemptions when calculating taxes – the normal 1040 exemption and the AMT exemption.

Also, the question may start with AGI and ask you what can be deducted/added in adjustments and added in preferences to get to AMTI

OR

It may start with an amount that is the AGI minus the Itemized Deductions and then YOU have to know what needs to be adjusted back in (that may have been taken out – like the 2% misc Items) and the preferences that you add back in TO GET To the AMTI.

Becker tells me to Know the Adjustments (can be added or deducted), Tax Preference Items (always Add Back), Credit for Prior Year Min. Tax (AMT Credit) offsets regular tax and the AMT Credits.

Is this ok, or too much??

FAR Aug 2012 79
AUD Oct 2012 84
REG Aug 2013 87
BEC Jan 2013 80

[Heidi-O]

@DJN NO 2% Items Are Allowed in AMT – Add it back. Can't have it. Nope, no way!!

With regards to the Personal Exemption – you get a different exemption. On the Itemized Deductions – you have to adjust them. On a 1040, you calculate out your AGI then you either itemize or use the standard deductions. Then you subtotal and then deduct your exemptions (look at the form 1040 line 38 and follow it down a few lines).

In most of my homework questions, what they have been asking about the AMT is to either take the AGI and asks you what adjustments and preferences are allowed to get to AMTI. OR I have seen the questions tell you the AGI – 1040 Itemized Deductions and you have to add back or make slight adjustments to get to the AMTI.

Ultimately, you are trying to get to the AMTI.

Next, you use the Alternative Minimum Taxable Exemption Formula. Which is, if you are married the 2013 the phase out threshold is 153,900. Assuming your AMTI is 250,000:

AMTI 250,000

Allowable Threshold (2013) (153,900)

Excess = 96,100

% Forfeited From Exemption x .25 (Note: Same % Regardless of Single, Married, HOH etc.)

Forfeiture Amount = 24,025

Joint Exemption for Married 2013 80,800 (AMT 2013 Married Joint Exemption Amount)

Forfeited Amount (from Above) (24,025)

Exemption Amount 56,775

Next, you plug in the Exemption to determine the Alternative Minimum Tax Base

AMTI 250,000

AMT Exemption (56,775) Caculated above

Alt Min Tax Base 193,225

and the calculations continue.

Now, I am hoping that this detail means that something will “click” in your head. One is that the Forfeited Exemption is always 25% – so if you get asked that in a question, you know it. Second: The AMT has its own Calculated Exemption from the normal 1040 exemption. If you notice, there are a few numbers in this calculation (the Allowable Threshold and the Exemption allowed) that change every year because they are indexed for inflation. I am not certain that the CPA exam is going to test you on those amounts. But you DO need to know that there are Two Different Exemptions when calculating taxes – the normal 1040 exemption and the AMT exemption.

Also, the question may start with AGI and ask you what can be deducted/added in adjustments and added in preferences to get to AMTI

OR

It may start with an amount that is the AGI minus the Itemized Deductions and then YOU have to know what needs to be adjusted back in (that may have been taken out – like the 2% misc Items) and the preferences that you add back in TO GET To the AMTI.

Becker tells me to Know the Adjustments (can be added or deducted), Tax Preference Items (always Add Back), Credit for Prior Year Min. Tax (AMT Credit) offsets regular tax and the AMT Credits.

Is this ok, or too much??

FAR Aug 2012 79
AUD Oct 2012 84
REG Aug 2013 87
BEC Jan 2013 80

[Heidi-O]

@Dsteele The answer to your previous question is B: 88,750.

First, the question states that the income BEFORE exemptions is 82,000. This tells me that they already taken the itemized deductions out. So it is essentially AGI – Itemized Deductions = 82,000. It also states that there are NO preferences, so there is nothing additional that I need to add in for preference items.

The calculation is as follows:

AGI – Itemized Deductions: 82,000

Taxes Not Allowed to Deduct + 3,000

Non-Qual Mortg Interest + 3,000

2% Misc Not Allowed + 250

Med Exp Added Back + 500

AMTI B 88,750

You said that the excess medical expenses were 500 using 7.5% of AGI. Since I don't know what the total medical expense amount were, I can't calculate backwards to the AGI (AGI * .075 = ??). So, what I did was add back what I knew! I started with the 82,000 and added both mortg interest and the taxes – that got me to 97,000. Since AMT allows 10% medical Deduction I first calculated 7.5% med Floor, which got me to 7,275 and then I added the 500 in excess which got me to 7,775. Then I took the 97,000 and multiplied it by 10% and got 9,700 – which means that the medical expenses weren't enough to reach the 10% floor. So I added back in the 500.

In all honesty, I probably could have just used the 82,000 and calculated 10% of it (8,200) compared to 7.5% of it (6,150) – which tells me that the 500 wouldn't make it to the floor. And this would have worked because anything that I add to the 82,000 just increases the 2.5% gap between the 7.5% floor and 10% floor.

Was B the correct answer?

FAR Aug 2012 79
AUD Oct 2012 84
REG Aug 2013 87
BEC Jan 2013 80

[Heidi-O]

@Dsteele The answer to your previous question is B: 88,750.

First, the question states that the income BEFORE exemptions is 82,000. This tells me that they already taken the itemized deductions out. So it is essentially AGI – Itemized Deductions = 82,000. It also states that there are NO preferences, so there is nothing additional that I need to add in for preference items.

The calculation is as follows:

AGI – Itemized Deductions: 82,000

Taxes Not Allowed to Deduct + 3,000

Non-Qual Mortg Interest + 3,000

2% Misc Not Allowed + 250

Med Exp Added Back + 500

AMTI B 88,750

You said that the excess medical expenses were 500 using 7.5% of AGI. Since I don't know what the total medical expense amount were, I can't calculate backwards to the AGI (AGI * .075 = ??). So, what I did was add back what I knew! I started with the 82,000 and added both mortg interest and the taxes – that got me to 97,000. Since AMT allows 10% medical Deduction I first calculated 7.5% med Floor, which got me to 7,275 and then I added the 500 in excess which got me to 7,775. Then I took the 97,000 and multiplied it by 10% and got 9,700 – which means that the medical expenses weren't enough to reach the 10% floor. So I added back in the 500.

In all honesty, I probably could have just used the 82,000 and calculated 10% of it (8,200) compared to 7.5% of it (6,150) – which tells me that the 500 wouldn't make it to the floor. And this would have worked because anything that I add to the 82,000 just increases the 2.5% gap between the 7.5% floor and 10% floor.

Was B the correct answer?

FAR Aug 2012 79
AUD Oct 2012 84
REG Aug 2013 87
BEC Jan 2013 80

[Anonymous]

@Heidi-O – Thank you SO much!!!

[Anonymous]

@Heidi-O – Thank you SO much!!!

[Anonymous]

Hey i was suppose to take my last test on july 18 before the end of the first test score release wave .. but family situation came up and haven't been able to study so now i need to push it off.. was wondering when the last day I could take it to be included in the second wave of test score release.. would it be aug 5th?

[Author]

Replies