[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/

[CoachEmUp]

@pharaoh B.

[CoachEmUp]

@pcunniff Think of it this way: REGARDLESS of if the SH wants it or not, any partner or S-Corp SH is going to be taxed on their share of the business income for the year. So they pay tax on the year it is earned, and then they can take a distribution or draw of it “tax free” assuming they have a basis for it (bc they've already paid taxes on it).

[CoachEmUp]

@pcunniff for the TBS you were referring to: We would have to know who the rental property got distributed to. It is likely the June $2,000 payment would go on the estate return, but the property is said to have been distributed on 7/2 so the July payment of $2,000 (which takes place on 7/15) would be income for whomever got the property on her will.

[pcunniff]

Thanks for the helpful explanations. Definitely clears some cloudiness up. Have another question to keep you guys on your toes.

If there is nonrecourse or recourse debt that sits on the K-1 to the shareholders for partnerships and/or pass through entities. Would you increase the basis for partnerships in an S-corp only for recourse debt? I would assume thats what becker means by direct shareholder loans for this concept.

I would also assume this doesnt mean anything for parterships, but i could be wrong. Can someone explain? Happy friday!

[Matt]

@pcunniff, I'm glad you brought that up and would definitely like to see a recourse/non-recourse question (will post one when it comes up).

FAR 74

[pcunniff]

Will do

@pharaoh @coachemup

When the distribution lowers the basis, they will obviously report less income in future years if, say, the s Corp made another 400k. Would he be taxed on the new basis? After lowering it based off the 35k?

[CoachEmUp]

@pcunniff I think you're thinking about this wrong. Let me draw up a quick example for P-ship and S-Corp:

Year 1, Ordinary Business Income is 100k, and Paul owns 50%. Paul will report 50k of income (his initial basis was 20k, so it is now up to 70k).

Year 2, Ordinary Business Income is 200k, Paul receives 100k on his K-1. His basis is now 170k.

Year 3, Ordinary Business Income is 500k, Paul receives 250k on his K-1. His basis is now 420k. This keeps going on and on. As long as the business is making money Paul is going to be paying taxes on it and recording income. He will take any draw or distributions TAX FREE up to his basis amount because he's already paid taxes on that amount.

[j3cpa]

Corbin had an adjusted gross income in 20X4 of $170,000 and taxable income of $145,000. Other information is as follows:

Standard deduction
$6,200
Personal exemption
$3,900
Property and local taxes paid
$5,000
Business expenses subject to the 2% AGI threshold
$10,000

What amount will be added back to taxable income as an adjustment in the calculation of Corbin’s alternative minimum taxable income?

I don't get why the answer in my test bank is $15,5000. Should I add back standard deduction, personal exemption. taxes paid, and business expenses? That should be $25,100? What am i missing.

Thank you

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[CoachEmUp]

@j3cpa Add back personal exemption, taxes paid, and 2% agi deductions, but you have to take 2% of his 170k agi. So it will be:
3900 + 5000 + 6600 [10,000 – (.02 x 170,000)] = 15,500. Std deduction is allowed.

[j3cpa]

@COachEmup: thank you. it sounds so simple now. Thank you

Study Material:
GLEIM
BEC - FEB/2012
AUD - FEB/2012
FAR - JULY/2012
REG - JULY/2012

[pcunniff]

@coachemup: thanks, this helps clear it up a lot. I always assumed the basis is always what you would be paying tax up. Glad you could explain this VERY important task required for the test.

Tip for Capitalization rules (this originally confused me)

So Regular C-Corps, partnerships that have C-corps as partners, tax shelters, and certain farming businesses must use the accrual basis of accounting. However, any corporation (or pship with c-corp as partners) whose annual gross receipts do not exceed 5 million can use cash basis.

For manufacturers and retailers – they must use accrual basis. However, if they are small (10 million or less in preceding 3 years) they can use cash basis.

Keep this in mind so you don't confuse the 5 mil and 10 mil threshold from gross receipts.

[lisa]

Hello, everyone! I am getting ready to sit for the REG portion on November 13th. How is everyone coping? How are you studying?

[pharaoh]

I have a feeling that this question is wrong

Which of the following types of conduct renders a contract voidable?

A.Mutual mistake as to facts forming the basis of the contract

B.Unbreached contract

C.Duress through physical compulsion

Incorrect D.Duress through threats of a civil suit

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[Matt]

@pharaoh I would without a doubt choose C on that one Duress through physical compulsion.

What makes you think D on that one?

FAR 74

[pharaoh]

@Matt because physical compulsion would make it “void” and I was thinking lawsuit threat is less severe than physical threat

FAR 8/2016
AUD 1/2017
REG TBD
BEC TBD

[Author]

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