[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/

[HoldMyBeerCPA]

@passan: Hehe, I think smart may be an overstatement, but thank you 🙂

[pharaoh]

oooh he provided the service AND provided an asset. I misread it, I thought he received an asset from the partnership. Yes @TurboSandwichCPA, that's right

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[kala]

Any idea, which areas of Blaw are most frequently tested? I feel pretty comfortable with tax portion/ethics but not Blaw. Any suggestion of areas that I should for sure know in Blaw. thanks.

[pcunniff]

If a co-surety (a) pays the entire obligation and the other co-surety(b) goes into bankruptcy, (a) cannot recover ANYTHING from (b). There was a skills practice question that said this:

Carlos asked rick and peter to guarantee carlow's debt to Gord Motors. Both rick and peter act as sureties. The contract that all parties signed provides that ricks max liability is 30k, and Peters is 20k. Carlos owes Gord 20k and is in default. Rick pays Gord Motors the entire amount. Rick then discovers Peter has filed for bankruptcy and all debts have been discharged. How much can rick recover from peter?

ANSWER: $0!!!!!

I find this crazy. Couldn't a co-surety involuntarily file for bankruptcy? I would consider doing this if i didn't like the other guy.

[Lamis]

Brand New, Inc., was organized and began active business on January 2, Year 5. Brand New incurred the following expenses in connection with creating the business:

State incorporation fees $ 5,000
Legal fees for drafting the charter 35,000
Printing costs for stock certificates 10,000
Professional fees for issuance of stock 15,000
Broker's commission on sale of stock 25,000
Expense for the temporary directors 20,000
——–
Total $110,000

What is the maximum amount of organization expense that Brand New may deduct on its Year 5 tax return?
$4,000
$5,000
$8,667
$12,000
Guys need ur help in this one

[joonpark1212]

Recognized gain from Like-Kind Exchange…. is it an ordinary gain or a capital gain? The book only illustrates it as a ‘Gain'. I would appreciate if someone could share their knowledge. Thanks.

[blueselp]

Lamis, I am not 100% sure but maybe the answer is $8,667…

State incorporation fees $ 5,000
Legal fees for drafting the charter 35,000
Expense for the temporary directors 20,000

Total expense relating to setting up the company: 60,000
$5,000 is allowed immediately and the rest is allocated over 180 months.

55,000 / 180 = 305.56 x 12 (for year 5) = 3,667 plus 5,000 = 8,667.

[Lamis]

@blueselp no I did the same mistake like u
But it's telling me the correct answer is $4000
There's a phase out for the $5,000 after $50,000 expenses but I don't know how to calculate the phase out

[kala]

Any org cost over 50,000 should be amortized over 180 months. which means, 60,000/180=333*12= 4000 rounded.

For the phase out you will have to reduce the 5,000 with the dollar amount that exceeded 50,000. for example if the org cost are 52,000. then the calculation goes.

(5000-2000)+(52000-3000)/180=3000+49000/180= 3000+272*12=6264.

Please correct if anyone think that's not right.

[Lamis]

@kala I still don't understand , so should I amortize the whole amount directly by 180 months or deduct the phased out 5000 and then amortize the rest over 180 months
I'm so confused , can u explain more?

[kala]

Org cost that do not exceed 50,000 have a initial year deduction of 5,000 and the total expenses are reduced by 5,000 remaining amortized over 180 months.

Phase out begins at 50,000 and ends at 55,000 where 5,000 is completely reduced and anything over 55,000 is directly amortized over 180. for Instance. IF the org cost is 55,000. then the calculation goes.

(5,000-5,000)+ (55,000-0)/180.

5,000 reduced because 55,000-50,000 limit.
0 reduced because you have no deducted anything as a direct expense.

I hope this makes sense and this is from my understanding. if anyone else thinks that's not correct please write, I have my exam in a week . :).

[blueselp]

@Lamis, there is a nice example here: https://www.bizfilings.com/toolkit/research-topics/managing-your-taxes/federal-taxes/startup-costs-and-organizational-expenses-are-deducted-over-180-months

[Anonymous]

@kala , great explanation!

@blueselp, that link is awesome, very good info.

@lamis , this confused me somewhat too, I'm using Gleim and the information in the outline, and in the MCQs, is kinda unclear.

I have another general question relating to this:

Start-up and organizational costs are treated separately correct?

So hypothetically if you started a business, and incorporated it in the same year, and your start-up expenses were exactly $5,000 and your organizational expenses were exactly $5,000 , then you would deduct $10,000 total for start-up and organizational costs?

[Lamis]

@kala that makes sense now thank u for the great explanation and additional info.
these details are not included in Becker's materials !
Hopefully I'll be able to take the exam this testing window too& not be surprised of questions outside Becker's course
@benj2017 I seriously don't know what kind of course guarantees all the info that we need to know for the exam, obviously none of them! We just have to get some info from here and there to cover all what we have to know to pass the exam

[2017cpa]

@lamis thank you for the help you are amazing

So if you purchase an item in the first quarter but don't put it into service until the last quarter then you would use the 1st quarter mid-quarter convention table

That makes so much sense…I really appreciate the help

[Author]

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