[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/

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Tipofga80]

@pcunniff Let me know if I am understanding what you put correctly.

On page 419 of CPA excel, there is a problem that states, “If corporation Mouse distributes property with a FMV of 1000 and a basis of 1200 to shareholder cat and cat assumes a liability attached to the property of 300, E&P is reduced by 900. Say the question states, “what is the corporations gain?
I would think the corp would recognize a gain of 100. Please correct me if i am wrong (1200-300) to get to adj basis of 900 then subtract that from 1000 to get 100.

Corporation gain would be
Basis – FMV = 1200 – 1000 = Would be a loss? Let me know if the numbers are mixed up

Basis – Liability = 1200 -300 = 900 but the liability is not more than FMV of $1000. FMV wins and a loss would be created so no gain.

REG - 77 (will lose in Jan 2016)

BEC - 67 74, 75

AUD - 56, 70, Will try again 🙁

FAR - ??

Save the beast for last.

[pcunniff]

Situation 3
Emerald Corporation’s E&P before the distribution $2,000
FMV of distributed property $12,000
Basis of distributed property $3,000
Liability on property assumed by distributed 0
1) 9000 Correct
2) 2000 -$11k (9+2 add the gain)
3) 12000 correct
4) 11000 (Beg E&P 2+ Gain 9 – 12 FMV – 0 Liability = 0)

Wait, so whats your answer to #2? 2000 to the extent of E&P?

#4) 11000 (Beg E&P 2+ Gain 9 – 12 FMV – 0 Liability = 0) whats the answer for 4? 2+9-12 = -1? E&P cant be negative, so is it 0?

[pcunniff]

@tipofga

On your second question…… I hope these helps:
If a corporation distributes appreciated property, the corporation recognizes a gain to the extent of the greater of the FMV – Basis or Liabilities distributed – Basis. This gain is added to E&P, and taxable dividends are recognized by each shareholder to the extent of E&P….

Can you do a situation where the liability is greater than the FMV? I want to see the gain impact to the corp.

[pharaoh]

When the liability is greater than the FMV, the gain will increase by that amount
FMV=120
Basis=100
Liability=135

The total gain will be 35

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

[pcunniff]

@tipofga

On page 419 of CPA excel, there is a problem that states, “If corporation Mouse distributes …

Wouldn’t the basis be reduced to 900? (1200-300)?

[pcunniff]

Thanks pharaoh. Honestly that was a stupid question on my end. Hopefully I get some good pship questions for you before your test on sat

[pcunniff]

@tipofga

I woke up on a fresh mind and noticed some typos in your answers again (For example, situation 4 isn't correct because the E&P after the distribution, according to your formula, is Beg Earnings and profits of 7000 + gain of 3000 – FMV of 5000 less the liability to get 4). You get 4, but check your numbers… it actually brings you to 0 (10-7+3-5-1). I also can't follow your situation 5 answers.

Can you post the answers this time without typos? 🙂 Its hard to follow your stuff and understand whats going on with these in there. Makes it confusing! Appreciate the effort though! Major help here.

Jeff- a new thread would be great.

[Tipofga80]

The $10,000 in answer 4 came from your response. It's not included in the answer that I posted. :/

REG - 77 (will lose in Jan 2016)

BEC - 67 74, 75

AUD - 56, 70, Will try again 🙁

FAR - ??

Save the beast for last.

[Tipofga80]

And seriously doubt Jeff will make a new thread.

REG - 77 (will lose in Jan 2016)

BEC - 67 74, 75

AUD - 56, 70, Will try again 🙁

FAR - ??

Save the beast for last.

[pcunniff]

@topofga… sorry thE dashes confused me for a minus (-). That’s why a new thread would be useful vs going back and forth for that.

I got all the answers except situation 5. Aren’t you supposed to subtract the fmv (6k) of the asset in order to determine e&p vs basis (2k) like you did with the others? Looks like you are subtracting basis. Promise I’m done asking about this.

[LCros]

@pcunniff

I'm late, but thank you and Pharaoh for your explanations on Monday. @pcunniff do you think working Jeff's simulations are enough or should I actually try download the tax forms and use these in the simulations? I know it wouldn't hurt but if Jeff's is enough, I'll stop there.

Thanks

[pharaoh]

I think someone asked before about DRD special rule, just came across this question.

In 2017, Best Corp., an accrual-basis, calendar-year C corporation, received $100,000 in dividend income from the common stock that it held in an unrelated domestic corporation. The stock was not debt-financed and was held for over a year. Best recorded the following information for 2017:
Loss from Best’s operations$(10,000)
Dividends received 100,000
Taxable income (before dividends-received deduction) $ 90,000
Best’s dividends-received deduction on its 2017 tax return was
A. $70,000
B. $80,000
C. $100,000
D. $63,000

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

[LCros]

@Pharaoh
I believe it is A. I'm being nosey now..Are you an Alpha? I just wondered since you have the Pharaoh name.

[pcunniff]

Since the NOL is in the current year, you can deduct that bad boy. Note that carry backs aren’t allowed for this. The answer is D. Why? Because taxable income before the DRD is lower, so you multiply 90k by 70%.

[pcunniff]

Does anyone have a good video on carry forward or carry back rules before DRD and charitable contributions for corps? I get the concept, but would like to see an example on amending a return to get the money back. A few examples would be greatly appreciated

[Author]

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