@lcros quite honestly the sims on the exam are TOUGH. I would not take them for granted at all. To answer your ? – I think downloading the forms (SE tax form/1040/schedule d/form 2555, etc) are a very good idea to print out and work through
Cooma corps book income before income taxes for the year ended dec 31,2017 was 260,000. The company begin business during March 2017 and org costs of 130,500 were expensed and incurred during 2017 for fin statement purposes. For tax purposes, these costs were written off over the min allowable period. For the year ended dec 31, 2017 commas Taxable income is?
I believe it is C. You can't take the $5K because you loose it over 50K of org. expenses $ for $. So, add it back to book income. Then amortize the $130,500 for 180 months.
You are able to deduct up to $5,000 of your qualifying start-up costs, although the first-year deduction starts to phase-out when your expenses reach $50,000.
If your start-up efforts end in the creation of an active trade or business, then on your tax return for the year the business commences, the amount of expenses that you can deduct will be the lesser of:
1) your actual expenses with respect to the new business; or
2) $5,000, reduced by the amount by which the start-up expenditures with respect to the active trade or business exceed $50,000.
The remainder of your start-up expenditures is deducted ratably over the 180-month period beginning with the month in which the active trade or business begins.
I also seem to get tripped up on the phase out rule. I kept taking the difference between 130,500-50000= 80500. Id take that and divide by 180 to get 447x (10 months MARCH-DEC) to get $4,472. I would take the lesser and did not get the answer until I included the entire 130,500/180X10 = 7250..
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I just started studying for REG. This will be my first section. No date set yet.
I have a question about rental activity income/losses for individuals.
Let's say I have $120,000 in wages, a $20,000 loss from rental activities, and no other income or losses. For the purposes of determining how much of the loss may be excluded, do I use an AGI of $120,000? Or $100,000? My confusion comes from the fact that you use AGI to determine the exclusion amount, but it seems to me that the rental activity income or loss should be part of the AGI as it is “above the line” on the 1040.
Am I overthinking this? Should I just use AGI excluding rental activity to determine the amount of rental loss that may be excluded?
Hi @chitown87, per Becker review, “The $25,000 allowance is reduced by 50% of the excess of the taxpayer's AGI (without consideration of the loss deduction) over $100,000.” So the $120,000 is used and $5,000 of the loss would be deferred.
Does anyone have tips on mastering the DRS sims? Obviously you need to know the information at hand first, but it takes me a VERY long time to work the problems and i find myself getting roughly 2/5 correct. I don't know if someone has any tips besides reading them in full, but I find myself struggling through this and I am 100% sure you will get at least 1, if not 2 of these on your actual exam. This is definitely not something to ignore or gloss over.
For those willing and wanting to pass – let me know how you mastered this. Thanks!
@pcunniff,
If you haven't done yet, visit AICPA website, and practice with their DRS Sims.
Or check these DRS video links:
As you notice on the above videos:
– They want you to read the questions first.
– They want you to sort the documents.
– Just the real life scenario, you have to sort documents and entered them onto the F/S, Tax forms, worksheets or schedule.
– If they give you a worksheet or schedule, to fill or troubleshoot, or even just investigating (sort of like FS analysis in auditing), making sure one of the given answers is correct, which you need to choose.
– Also, you have to know the topics conceptually, meaning you know the materials front to back cover.
So, basically, it's a scenario in the real word, a day in a life of an accountant, such as preparing of tax returns, preparing financial statements, auditing FS & running a business which require a lot of areas to run it smoothly.
As to my own 2017 Q4 strategy,
– visit AICPA website,
– watch the videos above,
– familiarize with the tax forms,
– read my book & notes (taken from many sources)
– Do a lot of SIMs and MCQs until the day of my actual exams.
– Make an imaginative scenario of daily activities of tax preparer, business law lawyer, bookkeeper/accountant & business owner/manager.
– Things that happened in for-profit, governmental and NPOs. From IT (computer system) requirement, raising capital, purchase/sales/marketing strategy and so on. I have to be imaginative, since my experience is limited working for these organizations.
– You can use your experience being the users of the above entities, and likely it will make sense, and you'll have a pretty good idea of what these people do within the organization, either for profit, governmental or NPOs scenario.
Good luck.
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