REG Study Group October November 2013 - Page 142

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  • October 15, 2013 at 4:00 am #481357
    Kenada
    Member

    Answer is D

    FAR 05/27/14; 786/110 - Done !

    October 15, 2013 at 4:00 am #481336
    Kenada
    Member

    On December 31, 1990, Homer Corporation issued $2 million of 50-year bonds for $2.6 million. On December 31, 2012, Homer issued new bonds with a face amount of $3 million for which it received $3.4 million. Part of the proceeds received were used to repurchase $2,320,000 of the bonds issued in 1990. No elections were made to adjust the basis of any property. Assume the straight-line method is used for premium amortization. What is the taxable income to Homer on the repurchase of the 1990 bonds?

    A. $264,000

    B. $336,000

    C. $0

    D. $16,000

    FAR 05/27/14; 786/110 - Done !

    October 15, 2013 at 4:00 am #481359
    Kenada
    Member

    On December 31, 1990, Homer Corporation issued $2 million of 50-year bonds for $2.6 million. On December 31, 2012, Homer issued new bonds with a face amount of $3 million for which it received $3.4 million. Part of the proceeds received were used to repurchase $2,320,000 of the bonds issued in 1990. No elections were made to adjust the basis of any property. Assume the straight-line method is used for premium amortization. What is the taxable income to Homer on the repurchase of the 1990 bonds?

    A. $264,000

    B. $336,000

    C. $0

    D. $16,000

    FAR 05/27/14; 786/110 - Done !

    October 15, 2013 at 4:03 am #481338
    Anonymous
    Inactive

    Don Mills, a single TP, had $70,000 in taxable income before personal exemptions in the current year. Mills had no tax pref. His itemized deductions were as follows:

    State/local tax: $5,000

    Home mortgage interest on loan to acquire residence: $6,000

    Misc. deductions exceeding 2% AGI $2,000

    What amount did Mills report as AMT before the AMT exemption?

    answer: $77,000

    home mortgage interest is not added back to Mills' taxable income to calculate AMTI. why not. what is “interest deductions on some home equity loans”?

    October 15, 2013 at 4:03 am #481361
    Anonymous
    Inactive

    Don Mills, a single TP, had $70,000 in taxable income before personal exemptions in the current year. Mills had no tax pref. His itemized deductions were as follows:

    State/local tax: $5,000

    Home mortgage interest on loan to acquire residence: $6,000

    Misc. deductions exceeding 2% AGI $2,000

    What amount did Mills report as AMT before the AMT exemption?

    answer: $77,000

    home mortgage interest is not added back to Mills' taxable income to calculate AMTI. why not. what is “interest deductions on some home equity loans”?

    October 15, 2013 at 4:03 am #481340
    UCMCPA
    Member

    Where are you pulling these questions from? lol. I didn't have a single question like that in my entire REG studying from Becker.

    FAR - 84
    AUD - 94
    REG - 86
    BEC - 86

    October 15, 2013 at 4:03 am #481363
    UCMCPA
    Member

    Where are you pulling these questions from? lol. I didn't have a single question like that in my entire REG studying from Becker.

    FAR - 84
    AUD - 94
    REG - 86
    BEC - 86

    October 15, 2013 at 4:05 am #481342
    UCMCPA
    Member

    @ determined…

    There are two types of home interest loans, those that are acquired for the principal residence, think acquisition indebtedness. This is NOT added back.

    The loans that are taken out against the home for OTHER purposes is added back.

    FAR - 84
    AUD - 94
    REG - 86
    BEC - 86

    October 15, 2013 at 4:05 am #481365
    UCMCPA
    Member

    @ determined…

    There are two types of home interest loans, those that are acquired for the principal residence, think acquisition indebtedness. This is NOT added back.

    The loans that are taken out against the home for OTHER purposes is added back.

    FAR - 84
    AUD - 94
    REG - 86
    BEC - 86

    October 15, 2013 at 4:05 am #481344
    Anonymous
    Inactive

    Also, what does (Becker p R2-14) “not deductible on schedule C” (1/2 s/e tax, s/e health ins, keogh plans) mean?

    Thanks!

    October 15, 2013 at 4:05 am #481367
    Anonymous
    Inactive

    Also, what does (Becker p R2-14) “not deductible on schedule C” (1/2 s/e tax, s/e health ins, keogh plans) mean?

    Thanks!

    October 15, 2013 at 4:08 am #481346
    Kenada
    Member

    LOL – I got this one completely by fluke – It's from Gleim TB. Trying to do as many questions from Gleim today. Tomorrow I switch to WTB.

    Answer (D) is correct.

    If bonds are issued by a corporation and are subsequently repurchased at a price less than the issue price minus any amount of premium already recognized as income, the difference is included in income for the taxable year. Prior to 1987, a corporation could elect to exclude the income and reduce the basis of property, but this election is available in post-1986 years only in cases of bankruptcy or insolvency. The amount of income taxable to Homer is

    Original issue price

    $2,600,000

    Less face amount

    (2,000,000)

    Total premium

    $ 600,000

    Issue price

    $2,600,000

    Less premium already recognized as income

    [($600,000 ÷ 50 years) × 22 years]

    (264,000)

    Issue price less premium already included

    in income

    $2,336,000

    Less repurchase price

    (2,320,000)

    Amount included in 2012 income

    $ 16,000

    FAR 05/27/14; 786/110 - Done !

    October 15, 2013 at 4:08 am #481369
    Kenada
    Member

    LOL – I got this one completely by fluke – It's from Gleim TB. Trying to do as many questions from Gleim today. Tomorrow I switch to WTB.

    Answer (D) is correct.

    If bonds are issued by a corporation and are subsequently repurchased at a price less than the issue price minus any amount of premium already recognized as income, the difference is included in income for the taxable year. Prior to 1987, a corporation could elect to exclude the income and reduce the basis of property, but this election is available in post-1986 years only in cases of bankruptcy or insolvency. The amount of income taxable to Homer is

    Original issue price

    $2,600,000

    Less face amount

    (2,000,000)

    Total premium

    $ 600,000

    Issue price

    $2,600,000

    Less premium already recognized as income

    [($600,000 ÷ 50 years) × 22 years]

    (264,000)

    Issue price less premium already included

    in income

    $2,336,000

    Less repurchase price

    (2,320,000)

    Amount included in 2012 income

    $ 16,000

    FAR 05/27/14; 786/110 - Done !

    October 15, 2013 at 4:08 am #481348
    UCMCPA
    Member

    The 1/2 of self employment tax, self employed health insurance, and the keogh retirment deductions are all adjustments at arriving at AGI, they are not taken against schedule C income on the schedule C. They are down below in the adjustment section, but still on page 1 of the 1040.

    FAR - 84
    AUD - 94
    REG - 86
    BEC - 86

    October 15, 2013 at 4:08 am #481371
    UCMCPA
    Member

    The 1/2 of self employment tax, self employed health insurance, and the keogh retirment deductions are all adjustments at arriving at AGI, they are not taken against schedule C income on the schedule C. They are down below in the adjustment section, but still on page 1 of the 1040.

    FAR - 84
    AUD - 94
    REG - 86
    BEC - 86

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