[jeff]

Welcome to the Q4 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/

[pcunniff]

Thanks Pharaoh makes sense.

[pcunniff]

Have a question with the following. Why cant you include all costs as a deduction? What specifies that only medical expenses can be used as a deduction on their current year 1040?

Mr. and Mrs. Sloan incurred the following expenses during the current year, when they adopted a child:

Child's medical expenses $5,000
Legal expenses 9,000
Agency fee 4,000

Before consideration of any “floor” or other limitation on deductibility, what amount of the above expenses may the Sloans deduct on their current year joint income tax return?

$18,000

$14,000

$13,000

$ 5,000
You Answered Incorrectly.
A taxpayer can deduct the medical expenses paid for a child at the time of adoption if the child qualifies as the taxpayer's dependent when the medical expenses are paid. Additionally, if a taxpayer pays an adoption agency for medical expenses the adoption agency already paid, the taxpayer is treated as having paid those expenses. Here, the Sloans can deduct the child's medical expenses of $5,000 that they paid. On the other hand, the legal expenses of $9,000 and agency fee of $4,000 incurred in connection with the adoption are treated as nondeductible personal expenses. However, the Sloans will qualify to claim a nonrefundable tax credit of up to $13,570 (for 2017) for these qualified adoption expenses.

[rincpa]

Hi everyone,
I failed REG 🙁 and planning to retake in OCT last week. I am using Wiley CPA review course. I am week in SIM. So anyone please help me how to improve it.

Thanks,
RIN

[falizadeh]

Hi All,
This is my first time posting here, Its kinda heartwarming to see im not the only one failed Reg with close score73, I am retaking it end of Oct, any suggestion on how to re study? also this is my last section and if i don't pass this time i will loose my FAR score.

Emma

FAR 73 85
AUD 74 76
BEC 76
REG 73 ??

[falizadeh]

QUESTION, can someone explain how to calculate both shareholder and c-corp Basis in the property distributed to shareholder at distribution(liquidating and non liquidating)

Thanks,
Emma

[Determined]

@ falizadeh I'm in the same boat. REG is my last exam and I have to pass it this quarter or I'll loose my FAR score. Anyways, I'm going over my notes and doing all the mcq in becker, then I'll go over some simulations. and I'm planning on participating in this forum as much as can. So, I'll try to answer your question about C-corp Basis in the property distributed.

If it's a liquidating distribution –I think as if the relationship is over. So, there is a gain or loss on distribution of property as if it was sold at FMV.
-Corp recognize gain on appreciated property distributed (FMV – Adj Basis)
-Shareholder will recognize a gain to the extent that FMV of the property is more than Shareholder basis.
Note: I don't need to care for E+P in liquidating distributions.

If it's a Non-liquidating distribution — I think about E+P. I made a table that helps me to classify the distribution and write down the info given in the problem. It looks something like this
Taxable —————— Current E+P
——————- accumulated E+P
Tax Free(decrease Basis)– Stock basis
Capital gains ———— any excess amount
I am careful if the property distributed has a Liability because the shareholder will have to report a gain (taxable). However it doesn't affect the basis.

I hope this helps

[hanyun]

@pharaoh and @pcunniff – Thanks for all the help!

[pcunniff]

@determined ..

Be careful though. Liabilities are only gains to the extent it EXCEEDS the basis upon liquidation. Say you have a basis of 5000 and a building is distributed for 2,000 with a 6,000 Mortgage. In this case you would recognize a gain.

[Determined]

@ pcunniff, good point.Thanks!

[HooiserCPA]

Took REG this morning. It wasn't difficult but i wouldn't say it was a walk in the park. Best advice from my experience would study basis.

[Anonymous]

Taking REG this Thursday morning; does anyone know where to find detailed answers to the AICPA sample SIMS questions?

[CoachEmUp]

Smith and James were partners in S and J Partnership. The partnership agreement stated that all profits and losses were allocated 60% to Smith and 40% to James. The partners decided to terminate and wind up the partnership. The following was the balance sheet for S and J on the day of the windup:

Cash $40,000
Accounts receivable 12,000
Property and equipment 38,000
Total assets $90,000
Accounts payable $24,000
Smith, capital 30,000
James, capital 36,000
Total liabilities and capital $90,000

Of the total accounts receivable, $10,000 was collected and the remainder was written off as bad debt. All liabilities of S and J were paid by the partnership. The property and equipment are sold for $32,000. Under the Uniform Partnership Act, what amount of cash was distributed to Smith?

A $25,200
B $26,000
C $30,000
D $34,800

Anyone want to explain this one to me? Wiley said it was A, taking the capital account and deducting the losses. Wouldn't Smith get 60% of the cash leftover in the business?

[Anonymous]

Hello everyone,

I just started studying for REG yesterday and I didn’t really understand the substantial understatement rule. I am not sure if they would go into more details later on in the chapter but it was just very confusing since it was talked about so briefly. Can someone please explain it to me.

Thanks. 😊

[Matt]

@CoachEmUp

The Receivables are sold for 2000 less. 12,000-10,000= 2000
The P&E are sold for 6000 less. 38,000-32,000=6000

The partnership was terminated at an 8,000 loss
For smith 60% of the loss is allocated i.e. 4,800

30,000 of smiths capital less the 4,800 = 25,200

FAR 74

[pcunniff]

I agree with Matt. However, I get confused with why he would only take the loss minus his basis. What about all the cash and everything else (receivables/property)? I assumed these have been either added or gained from the p-ship over time. I factored these in and couldnt get the correct answer. Maybe the key is understanding that you can only receive cash to the amount of basis + gains and – any losses?

[Author]

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