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so1913.
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September 9, 2013 at 2:07 pm #180294jeffKeymaster
REG Resources:
Free REG Notes & Audio – https://www.another71.com/cpa-exam-study-plan
REG 10 Point Combo: https://www.another71.com/products-page/ten-point-combo
REG Score Release: https://www.another71.com/cpa-exam-scores-results-release
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December 2, 2013 at 9:03 pm #482468so1913Participant
NM
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 4:46 pm #482467so1913ParticipantHey guys, I'm a little stumped on this WTB Qualified Small Business Stock Question and could used some help understanding. I posted a separate thread about this, but am re-posting it here as well:)
Danielson invested $2,000,000 in DEC, a qualified small business corporation. Six years later, Danielson sold all of the DEC stock for $16,000,000 and purchased an office building with the proceeds. Danielson had not previously excluded any gain on the sale of small business stock. What is Danielson’s taxable gain after the exclusion if he sold the stock in 2013?
$6,000,000
$0
$7,000,000
$9,000,000
Answer: $0
The requirement is to determine Danielson’s taxable gain after exclusion on the sale of qualified small business stock held for six years. A noncorporate taxpayer can generally exclude 50% (100% for 2012 and 2013) of the capital gain resulting from the sale of qualified small business stock held more than five years. The amount of excludible gain is subject to a cumulative limit of the greater of $10 million, or 10 times the investor’s stock basis. Here, the sale for $16,000,000 of qualified stock that was acquired for $2,000,000 results in a gain of $14,000,000. Since the $14,000,000 gain does not exceed 10 times Danielson’s stock basis, 100% of the gain can be excluded, resulting in a taxable gain after exclusion of zero.
My confusion is in the use of 100% exclusion. According to both Wiley and Becker literature “A noncorporate taxpayer can exclude 50% of capital gains resulting from the sale of qualified small business stock (QSBS) held for more than five years. The exclusion is increased to 75% if the QSBS was acquired after February 17, 2009, and before September 28, 2010, and 100% for QSBS acquired after September 27, 2010, and before January 1, 2014.”
The questions states that the stock was held for 6 years and sold in 2013. Wouldn't that have made the stock originally acquired in 2007??? Wouldn't that have meant a 50% exclusion? I'm missing something important here and hope someone can help me make the connection as to why 100% is used for a sale in 2013 vs an exclusion based on the acquisition date of the QSBS.
Thanks!!
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 4:46 pm #482470so1913ParticipantHey guys, I'm a little stumped on this WTB Qualified Small Business Stock Question and could used some help understanding. I posted a separate thread about this, but am re-posting it here as well:)
Danielson invested $2,000,000 in DEC, a qualified small business corporation. Six years later, Danielson sold all of the DEC stock for $16,000,000 and purchased an office building with the proceeds. Danielson had not previously excluded any gain on the sale of small business stock. What is Danielson’s taxable gain after the exclusion if he sold the stock in 2013?
$6,000,000
$0
$7,000,000
$9,000,000
Answer: $0
The requirement is to determine Danielson’s taxable gain after exclusion on the sale of qualified small business stock held for six years. A noncorporate taxpayer can generally exclude 50% (100% for 2012 and 2013) of the capital gain resulting from the sale of qualified small business stock held more than five years. The amount of excludible gain is subject to a cumulative limit of the greater of $10 million, or 10 times the investor’s stock basis. Here, the sale for $16,000,000 of qualified stock that was acquired for $2,000,000 results in a gain of $14,000,000. Since the $14,000,000 gain does not exceed 10 times Danielson’s stock basis, 100% of the gain can be excluded, resulting in a taxable gain after exclusion of zero.
My confusion is in the use of 100% exclusion. According to both Wiley and Becker literature “A noncorporate taxpayer can exclude 50% of capital gains resulting from the sale of qualified small business stock (QSBS) held for more than five years. The exclusion is increased to 75% if the QSBS was acquired after February 17, 2009, and before September 28, 2010, and 100% for QSBS acquired after September 27, 2010, and before January 1, 2014.”
The questions states that the stock was held for 6 years and sold in 2013. Wouldn't that have made the stock originally acquired in 2007??? Wouldn't that have meant a 50% exclusion? I'm missing something important here and hope someone can help me make the connection as to why 100% is used for a sale in 2013 vs an exclusion based on the acquisition date of the QSBS.
Thanks!!
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 5:39 pm #482469teeteenounoucheMemberI looked into this, could it be because the rule says “Sec. 1202 excludes from gross income AT LEAST 50% of the gain” and the questions is trying to highlight the exclusion limit and not the purchase date…not sure, but just guessing
The gain eligible to be taken into account for purposes of this exclusion is limited to the greater of $10 million or 10 times the taxpayer’s basis in the stock (Sec. 1202(b)(1)). The limitation is computed on a per-issuer basis, with lower limits applying to married individuals filing separately. In the case of married individuals filing joint returns, gain excluded under this provision is allocated equally between the spouses in applying the exclusion in later years. Gain excluded under this provision is not used in computing the taxpayer’s long-term capital gain or loss, and it is not investment income for purposes of the investment interest limitation. For purposes of the modifications to income for computing a noncorporate taxpayer’s net operating loss deduction, the partial exclusion is not allowed (Sec. 172(d)(2)(B)).
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 5:39 pm #482472teeteenounoucheMemberI looked into this, could it be because the rule says “Sec. 1202 excludes from gross income AT LEAST 50% of the gain” and the questions is trying to highlight the exclusion limit and not the purchase date…not sure, but just guessing
The gain eligible to be taken into account for purposes of this exclusion is limited to the greater of $10 million or 10 times the taxpayer’s basis in the stock (Sec. 1202(b)(1)). The limitation is computed on a per-issuer basis, with lower limits applying to married individuals filing separately. In the case of married individuals filing joint returns, gain excluded under this provision is allocated equally between the spouses in applying the exclusion in later years. Gain excluded under this provision is not used in computing the taxpayer’s long-term capital gain or loss, and it is not investment income for purposes of the investment interest limitation. For purposes of the modifications to income for computing a noncorporate taxpayer’s net operating loss deduction, the partial exclusion is not allowed (Sec. 172(d)(2)(B)).
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 7:13 pm #482471so1913ParticipantHmmm thanks @teeteenounouche for replying!…still not sure I get it though 🙁
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 7:13 pm #482474so1913ParticipantHmmm thanks @teeteenounouche for replying!…still not sure I get it though 🙁
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 7:31 pm #482473teeteenounoucheMemberNot sure I do either, but for what it's worth…I did not see Sec 1202 in any of my studies for REG…I guess just know it enough to be able to guess correctly if you get a question on it during the exam…
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 7:31 pm #482476teeteenounoucheMemberNot sure I do either, but for what it's worth…I did not see Sec 1202 in any of my studies for REG…I guess just know it enough to be able to guess correctly if you get a question on it during the exam…
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 7:38 pm #482475teeteenounoucheMemberJust remembered….Can you go back to the question in WTB and click on the Notebook button? There should be additional information there on the topic…
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 7:38 pm #482478teeteenounoucheMemberJust remembered….Can you go back to the question in WTB and click on the Notebook button? There should be additional information there on the topic…
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 7:43 pm #482477so1913Participantyeah, I got the part with the 50% 75% and 100% that I copied and pasted by clicking on the notebook, which matched what my Becker text said. If what is in the text link and solution are supposed to be saying the same thing, its completely over my head 🙁
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 7:43 pm #482480so1913Participantyeah, I got the part with the 50% 75% and 100% that I copied and pasted by clicking on the notebook, which matched what my Becker text said. If what is in the text link and solution are supposed to be saying the same thing, its completely over my head 🙁
AUD - 90 Pass
REG - 70,61,81 Pass DONE DONE DOOOOONNEEE!!!!!!!!
BEC - 79 - Pass
FAR - 70,82 - PassDecember 3, 2013 at 7:48 pm #482479teeteenounoucheMemberOK, cross your fingers that you don't get a random question on this!!
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
December 3, 2013 at 7:48 pm #482482teeteenounoucheMemberOK, cross your fingers that you don't get a random question on this!!
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree
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