[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/

[CPATY]

@McGboye sent! 🙂

[pcunniff]

Able and Baker are equal members in Apple, an LLC. Apple has elected not to be treated as a corporation. Able contributes $7,000 cash and Baker contributes a machine with a basis of $5,000 and a fair market value of $10,000, subject to a liability of $3,000. What is Apple's basis for the machine?
$ 2,000
$ 5,000
$ 8,000
$ 10,000

Upon a partnership formation the partnership's basis in the assets received from the contributing partners is the basis in the hands of the partner. Thus, Apple's basis is $5,000.

Why isnt the liability of 3k included in the basis? I know increased liabilities increases your basis unless you are providing to partnership in which they assume the liability. Can someone help?

[Radez]

pcunniff, I think the 5k includes the 3k liability. Baker's basis in the LLC, I think, is 2k (5k -3k because he's giving up the liability.) Since the LLC is assuming the liability, there'd be no additional adjustment to the LLC's basis. If I'm wrong on this, someone please correct me. This isn't my strong suit.

[EastCoastGirl22]

Hey guys – any experiences with Becker Final Review program for REG? One week out from exam hoping those topics are what I need to focus on…..struggling with sims but feeling like I should rewrite notes to solidify my understanding – any advice?!!!! Afraid to take the final exam too much anxiety – also supplemented ninja MCQ scoring around 78% on those average across all topics….

[cpApex Predator]

@maj1028, Very good. One caveat to keep in mind:

If the liability assumed by the corporation exceeds the total adjusted basis of the property transferred by the shareholder, then gain must be recognized: gain recognized= liabilities assumed minus basis of properties transferred.

[Matt]

Hey guys are the ninja multiple choice test banks updated for the CPA changes.

FAR 74

[Fee FIFO Fum]

Can I buy just the MCQ? I always thought that was the case but my MCQ expires 10 days before my test and I can't find anything to purchase that isn't a bundle. Did they stop doing the $47 MCQ?

[pcunniff]

@cpapexpredator

Thanks for the clarification. The gain is recognized to the shareholders and corp, correct?

[CC]

Anyone have any ideas on how they get to the correct answer of 10k for this one?

An individual is a 50% partner who materially participates in Stone Partnership. The individual’s adjusted basis at the beginning of the year was $0. Stone had a $70,000 loss from its business. Stone borrowed $30,000 from a bank of which $20,000 remained unpaid at year end. What amount of loss is the individual allowed in the current year from Stone?

A. $35,000
B. $15,000
C. $10,000
D. $0

Much obliged if you can point me in the correct direction.

[McGboye]

I think it's because a partner's basis cannot be less than 0. So his share of loss will be limited to the adjusted basis at year end. Since a loan normally increases the partner's basis, the basis of that partner would be limited to 50% of the balance of that loan since it was obtained during the year. $10,000. The $35,000 share of loss will therefore be limited to $10,000, which will bring his basis at the end of the year to 0.
That is how I would explain it.

[kala]

losses for Partners in a partnership are allowed to the extent they are at risk. Here the partner's basis is 0+10,000-35,000=0 (cannot go below zero). so out of the total losses they are allocated they are only allowed up to their positive basis. here it is 10,000.

Basis can go zero for any of the below reasons and the tax treatment is different.

Any losses in excess of basis are not deductible and are suspended losses.
Any distributions in excess of basis should be recognized as gain.
Any liability in excess of basis should be recognized as gain.

[Lamis]

@caleb the partners basis increase by partnership liabilities 30k and then decrease by 10k = basis at year end (remained unpaid) 20k

Individual's share =50% of 20= 10k

[samantha09]

Can anyone explain the concept of AAA to me? For some reason it makes 0 sense to me as to what it even really is and how it's different from basis. Becker and Ninja notes only have a small section towards it and I'm not understanding 🙁

[McGboye]

What is AAA?

[samantha09]

Accumulated Adjustment Account I think it's for S Corps and Partnerships

[Author]

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