[jeff]

Welcome to the Q3 2017 CPA Exam Study Group for REG. 🙂

Introduce yourselves and let your fellow NINJAs know when you plan to take your REG exam.

The Five Steps (NINJA Framework): https://www.another71.com/pass-the-cpa-exam/

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

[gguzman]

Sometimes when I answer blaw questions, I catch myself saying alrighty like Olinto. almost as if I am initiating blaw mode, or because he says it almost every single time he does an explanation. lol

[Holly]

@gguzman that made me laugh. I sometimes hear them in my head when I'm thinking about a question.

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

I'm taking Becker's mock exam right now for the first time. Are these different questions than than those that were in each module?

BEC - 79
REG - 85
AUD - 5/27/16

[gguzman]

@holly

Have not done one yet. Going to do one next weekend. Let me know how it goes.

When are you planning on doing the other one? Trying to get some ideas for myself.

[dave]

@anthony & @ jguy621, thanks! question tho:

When Gibson purchased the stock at a price less than the adj basis from his adult child, doesn't that count as a related party transaction? the loss would have been disallowed for his adult child and when Gibson sold it to an unrelated party he can apply the disallowed loss to his tax return?

Best,

[jeff]

New Video:

Video: Recommended CPA Exam Study Hours

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

[Holly]

@gguzman I'm going to work on finishing the first one asap. I have to stop so I only included those answered in this – 51/66=77.

BEC - 79
REG - 85
AUD - 5/27/16

[jguy621]

@iwantmylifeback2 Yes, when Gibson purchased the stock from his child for 12K, it was considered a related party transaction. However, losses are not deductible in a related party transaction so the child couldn't report the loss of 4K (16K basis-12K sold). Gibson then sales it for 18K to an unrelated party and therefore reports a gain of 2K (18K selling price-16K basis). Gibson never had a loss to begin with and his child's loss doesn't transfer that I know of. I think! 🙂

[BBHYX]

Hey guys, I think my question has been asked before but I still haven't been able to find a good answer:

An individual taxpayer reports the following information:

U.S. Treasury bond income $100
Municipal bond income $200
Rental income$500
Investment interest expense $1,000

What amount of investment interest can the taxpayer deduct in the current year?

I understand inv interest exp can only be deducted to the extent of net investment income. However, I do not get why rental income is not considered net investment income in the answer. The prep book seems to state that net investment income includes rent income and royalties…. I am so confused!

[jguy621]

@xyz107 I think the reason rental income/expenses are not used to calculate this piece of an itemized deduction is because this is reported on Schedule E and is used to get to AGI. The net investment interest deduction is part of itemized deductions and is taken from AGI to get to taxable income. You actually want to use it in Schedule E and write-off all expenses to get to AGI b/c it will save you more in the end.

[dave]

hey @xyz107,

Investment Expenses are deductible BUT they are limited to Net Investment Income (not including investment interest)

So Net Investment Income (NII) in your question is: $100. Rental income is included UNLESS it's passive rental income, which I'm going to assume it is.

Hope that helps, and I agree that the question should specify if the taxpayer actively participates in the rental property or not.

Best,

[jtvande]

Does anyone know if we are supposed to use the 7.5% threshold for taxpayers older than 65 for the new exam? NINJA notes says that it has changed to 10% for everyone for the new exam. Roger MCQ still applies the 7.5% threshold.

Just took the Becker practice exam. TP is 65 years old and the answer says that the percentage threshold is 10%.

Could someone please verify. BTW made a 68% on the practice exam. Test in two weeks Not feeling to confident haha

[BBHYX]

@jtvande I believe it is 10% for all ages now. That means no AMT adjustment needed as well. Someone please correct me if I'm wrong! Also, with the old exams, scores in the 60s on becker finals have lead to passing scores haha no idea with the new exam but it's not a bad sign!

@iwantmylifeback2 thank you for the clarification! did not realize it was only active income in net investment income

[JB]

@jtvande

I took the practice exam and had the same question. I sent Becker an email, but they haven't responded yet.
I looked it up on the IRS website and it says “Beginning Jan. 1, 2017, the 10 percent threshold will apply to all taxpayers, including those over 65.”

[jeff]

It's 10% for all…effective 2017 if I remember correctly…either way – definitely 10% now.

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

[Author]

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