[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/

[pharaoh]

On New Year’s Eve, Hal sent three bottles of champagne to the three owners of the Day & Night Cleaners to thank them for their business during the year. Each bottle of champagne cost $75. Each of the owners took the champagne home. Earlier in the year, Hal had given a video game to the 10 year old son of one of the owners. The value of the game was $50. To show his appreciation to another customer for his business, Hal took the customer to a football game. The value of the tickets was $100. What is the total amount Hal can deduct as business gifts?
A. $125
B. $375
C. $75
D. $100

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

[Determined]

@pharaoh is it C. $75? $25 max per person per year. The tickets are treated as an entertainment expense, right?

[pharaoh]

correct. I fell in the trap and counted the tickets as a gift. I hate it when I make these mistakes

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

[pcunniff]

C. The owner and common relative count as one. 3 gifts to the owners at $25 a pop. The tickets to the game would be considered entertainment subject to the rules.

Keep in mind there is a charity rule for excess charity that can confuse candidates. I remember seeing a question that said donated tickets to charity (FMV 100) and the basis was 25. Only 75 would be deductible. I think the entertainment portion of problems along with gifts are important to know.

[pharaoh]

anyone heard of precontribution gain in partnership? just came across a question about it and don't remember seeing that in the book

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

[pcunniff]

I haven't heard of it. The first thought that came to mind were built in gains and I haven't reviewed that section yet. Sorry Pharaoh. Let me know what it is when you do.

So I stumbled upon nexus and get that it has to do with taxing property, sales, and payroll. Any contact should be subject to this.

I read
The limitations on a states right to impose are:

1) the only business activity of the person with the state that has to do with personal property (i think of inventory)
2) those orders are send outside the state for acceptance or rejection (this seems way too broad)
3) if those orders are accepted, they are filled by shipment or delivery from a point outside the state

IF the orders are sent out and they are filled in another country, why wouldn't there be a tax based on the use tax or some kind of cross border xfer tax? I would imagine they would test this for the sake of international tax, which happens quite often (just not in north Korea)

[pharaoh]

John and Mary were married on July 1, 2017. During 2017, John gave the following gifts:
02/21/17 – $10,000 worth of ABC Corp. stock to John’s son David
04/20/17 – $30,000 worth of vacant land to John’s daughter Susan
10/31/17 – $100,000 cash to Mary
11/18/17 – $20,000 worth of XYZ Corp. stock to John’s son David
Mary did not make any gifts during 2017. John and Mary agreed to split gifts for 2017. What is the amount of gifts that can be split between John and Mary in 2017?
A. $160,000
B. None of the answers are correct.
C. $60,000
D. $20,000

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

[CoachEmUp]

@pharaoh it's kind of a silly question the way they phrase it. Each person gets 14k to give to a person each year, so they would only pay $2k gift tax to David and $2k to Susan. Gift to wife is unlimited.

So C?

[Tipofga80]

Just for future reference and since I took a lot of time yesterday going through the AICPA SIMS. (Deja vu is that you? lol) The practice DRS is comparable to the exam. I would definitely work through these to save your self some time.

AICPA practice test SIMS Q#1

Lina bought a new vehicle at the beginning of year 1 at a cost of $20k. Lina did not elect to expense the vehicle under sec 178 or take bonus depreciation. The vehicle is not subject to listed property limitations. The depreciable life of this vehicle is 5 yrs, and Lina uses MACRS for depreciation. Lina sold the vehicle on 12/31 yr 2 for $18k. There were no other vehicle purchases in yr 1.

IRS standard mileage rate for business use = 58.5 cents for year 1 & 2.

Travel expenses:
Year 1
Gas – $5000
Insurance $4000
Repairs – $3000
Parking Tickets during bus use $500
Speeding fines during bus use $550

Year 2
Gas – $7000
Insurance – $4000
Repairs – $2000
Parking Tickets during bus use $400
Speeding fines during bus use $650

Mileage:
Year 1
Personal – $5000
Business – $15000
Total – $20000

Year 2
Personal – $8000
Business – $24000
Total – $32000

What is the vehicle expense deduction using standard mileage rate for yr 2?
24000 * 58.5 cents = $14,040

Business vehicle expense using the actual expense method, ignore deprecation for yr 2?
$7000 + 4000 + 2000 = $13000
13000 * 24000/32000 miles allocated to business use = $9750

Depreciation deduction for yr 2?
Using MACRS Half Year convention table for 5 yr property – Yr 1 = 20% & Year 2 = 32%

2nd year – $20000 * 32% = 6400
6400 * 1/2 = 3200
3200 * 24000/32000 business miles = $2400

Remaining basis before sale using the actual expense method since purchase yr 2? Answer is $14,600
I'll venmo you $5 if you can figure this one out for me. :).

Remember you can deduct either the standard mileage rate for business use or the actual expense method for business use depending on whichever gives you the highest deduction.
Guess this is popular in the CPA world due to Uber/Lyft.

REG - 77 (will lose in Jan 2016)

BEC - 67 74, 75

AUD - 56, 70, Will try again 🙁

FAR - ??

Save the beast for last.

[pharaoh]

@coachemup Answer D. They can only share the gifts given after marriage 🙁

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

[Tipofga80]

@pharaoh Totally thought it was C as well. Thats a great question! Which test bank are you using?

REG - 77 (will lose in Jan 2016)

BEC - 67 74, 75

AUD - 56, 70, Will try again 🙁

FAR - ??

Save the beast for last.

[pharaoh]

This is from Gleim. it is way tougher from other test banks

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

[Tipofga80]

I'm almost close to buying the REG test bank from Gleim so I can be done. Their questions are about as sadistic as the real exam

REG - 77 (will lose in Jan 2016)

BEC - 67 74, 75

AUD - 56, 70, Will try again 🙁

FAR - ??

Save the beast for last.

[Earla Riopel (NYCARE)]

As to,
John and Mary were married on July 1, 2017. During 2017, John gave the following gifts:
02/21/17 – $10,000 worth of ABC Corp. stock to John’s son David
04/20/17 – $30,000 worth of vacant land to John’s daughter Susan
10/31/17 – $100,000 cash to Mary
11/18/17 – $20,000 worth of XYZ Corp. stock to John’s son David
Mary did not make any gifts during 2017. John and Mary agreed to split gifts for 2017. What is the amount of gifts that can be split between John and Mary in 2017?
A. $160,000
B. None of the answers are correct.
C. $60,000
D. $20,000

Answer D. They can only share the gifts given after marriage

Totally thought it was C as well. Thats a great question! Which test bank are you using?

LOl! But seriously, I won't be surprised if AICPA will have an actual question, asking:
On January 2017, John gave Maria an engagement ring, a diamond worth $100,000, just before they got married. In March 2017 they got married. During the wedding, John given Maria another diamond ring, worth $150,000, a wedding ring to match with her engagement ring.

Just before Christmas, they were divorced. Ignoring the gift's threshold, what is the total includable gift(s) of John during 2017 tax year?
a) $250,000
b) $100,000
c) $150,000
d) None of the above answers are correct.

[pharaoh]

What a horrible marriage that is 🙂

I would say answer B

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

[Author]

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