[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/

[Holly]

@drunstick of course! I studied if I felt like it. Junk hours aren't good anywhere in life.

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

[Tncincy]

What am I doing wrong? I have downloaded the ninja audio from my desktop and phone, when I go to open it, I get the link page to the audio or a blank page. I tried downloading to dropbox and get the same thing.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[LCros]

@ Drumstick, you gotta get going again… I don't feel like studying either, but my motivation is being done with this whole experience :).

[CPAIn2018]

@Drumstick
Same here. Could not move on from first module of chapter 2. Never opened it for almost a week. I am out of breath and time.
Miracle should happen to pass this section.
Got to go the short cut….and I would highly appreciate exam day experience posts and exam techniques foe this exam.

Thx

[Jsn3004]

On January 2, 2013, Bates Corp. purchases and places into service seven-year MACRS tangible property costing $100,000. On December 31, 2017, Bates sells the property for $102,000, after having taken $47,525 in MACRS depreciation deductions.
What amount of the gain should Bates recapture as ordinary income?
A: $0
B: $2,000
C: $47,525
D: $49,525

Answer: C

Can someone please give a brief explanation of the Recapture Rules, especially For the 25% Recapture Rule for Corporations. I see that under 1245, gains are treated as ordinary income to the extent of depreciation on the property. Since 47,525 is the depreciation on the property, the most 47,525 can be ordinary income. The rest would be 1231 gains?

The corporation had a gain of $49,525 (102,000 Selling Price-52,475 Book Value)

47,525 is Ordinary Income
2,000 is Section 1231 Gain?

[Jsn3004]

Here is an example of a Section 1250 problem with the 25% Recapture rate.

Jared purchases an apartment building on January 1, 2005, for $500,000. The building is depreciated using Modified Accelerated Cost-Recovery System (MACRS) straight-line depreciation. The apartment building is sold on December 31, 2017, for $620,000, when its adjusted tax basis is $320,000 (assume that $180,000 of depreciation has been claimed). How much gain from the sale of the building is subject to the 25% rate?
A: $0
B: $180,000
C: $300,000
D: $320,000

Answer: B. Last post I stated that I was getting the hang of 1245 but I have problems with anything Section 1250 related, especially when it comes to the 25% recapture rate. If someone is able to explain how the answer is 180,000 in a simplified way, i'd really appreciate it.

[Julia]

@jsn3004 the deductions for depreciation are taxed as ordinary income. Its my understanding it is because the benefit was already obtained.
Sole prop do the same thing.
Does this help ?

[Julia]

Im confused: in previous corp distribution questions it said if appreciated prop was distributed the gain was added to Earnings & Profit. So the gain is added to e/p and basis is not reduced if not enough to cover FMV of distribution. My answer was 200,000 and it was wrong. Clarification please?

Kent Corp. is a calendar-year, accrual-basis, C corporation. In the current year, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder. The following information pertains to Kent:

Reed's basis in Kent stock at January 1 $500,000
Accumulated earnings and profits at
January 1 125,000
Current earnings and profits, including
the effects of this distribution 60,000

What was taxable as dividend income to Reed for the current year? ________________________________________

When a corporation makes a nonliquidating distribution of property to a sole shareholder, it is considered a dividend.

Accumulated earnings and profits at January 1 $125,000
Plus the current earnings and profits 60,000
Total earnings and profits and maximum taxable dividend $185,000
========

[jgibs]

I am scheduled for July 19th.

[Julia]

Dahl Corp. was organized and commenced operations in Year 0. At December 31, Year 5, Dahl had accumulated earnings and profits of $9,000 before dividend declaration and distribution. On Decem­ber 31, Year 5, Dahl distributed cash of $9,000 and a vacant parcel of land to Green, Dahl’s only stockholder. At the date of distribution, the land had a basis of $5,000 and a fair market value of $40,000. What was Green’s taxable dividend income in Year 5 from these distributions?

You answered A. The correct answer is C.
When a corporation distributes both cash and property dividends, the corporation must recognize a gain on the appreciated property distributed as a dividend. The recognized gain comes from treating the property “as if” it were sold at fair market value. In this problem, the recognized gain will be $35,000, which is the fair market value (amount realized) of $40,000 less the adjusted basis of $5,000.

The corporation’s earnings and profits are increased by the recognized gain on the property dividend. So, now the earnings and profits for Dahl Corporation will be $44,000, which is the $9,000 plus the recognized gain of $35,000.

The shareholder, Green, will have maximum dividend income from the cash received of $9,000 plus the fair market value of the property received of $40,000. However, the dividend income that is taxable to Green cannot exceed the earnings and profits of Dahl Corporation, which is $44,000.

[Julia]

@jsn3004 this should help :

Go to Next QuestionGuess and Mark WrongOpen CalculatorPrint QuestionEnd Session
A taxpayer sold for $200,000 equipment that had an adjusted basis of $180,000. Through the date of the sale, the taxpayer had deducted $30,000 of depreciation. Of this amount, $17,000 was in excess of straight-line depreciation. What amount of gain would be recaptured under Section 1245 (“Gain from Dispositions of Certain Depreciable Property”)?

Answer:20,000

Because the taxpayer sold equipment for $200,000 that had an adjusted basis of $180,000, the taxpayer has a gain of $20,000.

The taxpayer had taken $30,000 in depreciation on the equipment. IRC Section 1245 requires that a gain on the sale of equipment will be treated as ordinary income to the extent of all depreciation. Although a maximum of $30,000 could have been recaptured, the total gain in the sale was $20,000, limiting the depreciation recapture to $20,000.

[CPAIn2018]

@Holly and the rest of the room.

Why is Beckers CPA – 6410 and CPA – 6411 questions consider the given up trailer worth $ 3,500 as boot? As per Tim Greaty, boot is CASH or ASSUMPTION OF LIABILITY, right?

Your help highly appreciated

[mardybum13]

So if your employer gives you tickets to a concert or a voucher for a free meal at a random restaurant.. thats included in your tax return, right? They have nothing to do with convenience.

[Holly]

@Tulip Look at pg R3-18, 2.4.3. It says cash, relief of liabilities, or nonqualifying property.

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

[Holly]

@mardybum13 I think the convenience thing is limited to being on the employer's premises for their convenience. A concert wouldn't qualify.

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

[Author]

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