[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/

[passantsalama]

does anyone find the sims in wiley cpa excel a little bit competitive and asks about details?

[pcunniff]

@jookpark1212

Yes, capital gains are passed through to the K-1 of shareholders.

[pcunniff]

Investment income includes interest, dividends, rents, royalties, and annuities if not derived from a trade/business, a passive activity, or a real estate activity for which there is active participation.

So how is rents considered investment income? Active participation is looked at as an RE agent. Ok fine.

The statement above mentions \”not derived from a passive activity\”

A passive activity is income derived in which the t-payer does not materially participate (sit back and collect rent but do nothing)

How is rents included? Don't passive activity or RE for which these is active participation and \”rents\” contradict?

[joonpark1212]

@pcunniff thanks for the input. But then does Built-in Gains tax need to be paid directly from SCorp?

[Lamis]

Patty cake owned real estate that was condemned by the state. Patty had purchased the property for $30,000 and received $50,000 from the state as a result of the condemnation. Patty purchased replacement real estate for $52,000. Patty'basis in the new real estate is:
A-$30,000
B-$32,000
C-$50,000
D-$52,000

[pcunniff]

@joonpark – The built in tax is before the S corp was established. Say a corporation is a C corp for 5 months during the year and wants to elect S corp status in the following year (remember you need to elect by April 15th for an S Corp election). The built in tax during those 5 months relates to that C-corp gain.

When you say “built in tax paid” I guess Im not sure what you mean. Any capital gain flows through on the K-1 (to partnerships, S corps, trusts and estates) and is on Schedule D. I hope this helps.

[pcunniff]

@Lamis

Im glad you brought this question up because I had to look it up. This helps me!

Anyway, I like these questions because it enables the candidate to figure out

What is the realized gain? 20,000 (50k-30k)
Recognized gain is from the new basis (52000-50000) 0r 2000
Gain not recognized =18000

Cost of new building 52000
Less gain not recognized (18000)
New Basis = 34000

[Omar]

@Lamis, I think (A) $30,000.
If the amount received used to buy\acquire new home, no gain or loss recognized and the basis for the new asset = basis of old asset.

FAR: 73, 85
BEC: 79
REG: TBA
AUD: TBA

[Lamis]

@omar no the answer is $34,000 as @pcunniff explained .
I forgot to subtract the deferred gain from the new FMV of the new asset so this is the equation:
FMV of new property- Deferred gain+ Deferred loss

[Lamis]

@omar no the answer is $34,000 as @pcunniff explained .
I forgot to subtract the deferred gain from the new FMV of the new asset so this is the equation:
FMV of new property- Deferred gain+ Deferred loss

[In it to earn it]

How can the answer be 34,000 when that is not an option? Here is a previous thread https://www.another71.com/cpa-exam-forum/topic/involuntary-conversion-question/ . The answer is 32,000. The gain not recognized is 20,000, not 18,000. 52,000 minus 20,000 is 32,000.

[Lamis]

@in it to earn it you're correct , there's NO $34,000 already in the choices.. it's $32,000 the correct answer.
Amount realized=50,000-30,000=20,000
Recognized gain= zero
Deferred gain=20,000-0=20,0000
New basis=52,000-20,0000=32,000


@pcunniff u confused me man

[Omar]

@Lamis, are you sure this rule apply to involuntary transactions?

FAR: 73, 85
BEC: 79
REG: TBA
AUD: TBA

[pcunniff]

@lamis, I like to work out the question before looking at the answers. Glad someone could clear that up.

AUD – 77
BEC – 79
FAR – 78
REG – 9/10

[pcunniff]

Can someone answer this question?

Investment income includes interest, dividends, rents, royalties, and annuities if not derived from a trade/business, a passive activity, or a real estate activity for which there is active participation.

So how is rents considered investment income? Active participation is looked at as an RE agent. Ok fine.

The statement above mentions \”not derived from a passive activity\”

A passive activity is income derived in which the t-payer does not materially participate (sit back and collect rent but do nothing)

How is rents included? Don't passive activity or RE for which these is active participation and \”rents\” contradict?

[Author]

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