[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/

[mashloum]

Gleim SIM
Charlene contributed land with a $15,000 basis and an $18,000 FMV to the REG Partnership in 2016. In 2017, the land was distributed to Jackie, another partner in the partnership. At the time of the distribution, the land had a $20,000 fair market value, and Jackie had a $30,000 basis for her partnership interest.
For each scenario, enter the amount of the contributing partner’s basis in the partnership interest in the shaded cells below.
Partner’s Basis
$18,000. For property contributed to a partnership after June 8, 1997, that had a deferred precontribution gain or loss, the contributing partner (Charlene) must recognize the precontribution gain ($3,000 = $18,000 FMV – $15,000 basis) or loss when the property is distributed to any other partner within 7 years of its contribution. The precontribution gain or loss that is recognized equals the remaining precontribution gain or loss that would have been allocated to the contributing partner if the property had instead been sold for its fair market value on the contribution date ($3,000 = $18,000 FMV – $15,000 basis). The recognized gain is added to the contributing partner’s (Charlene’s) basis in the partnership interest ($3,000 gain + $15,000 basis).
Shouldn't we consider the the other portion of share for the difference between $20k – $18k ($2k) and add it to Charlene’s) basis ($15k +$35k=50k and then 15/50 x $2k = $0.6k) by total $18.6k ?!

[Anonymous]

@LCROS

Thank you so much for your help – I understand that part but here's my confusion – IF we started out with 150,000 and ended with 100,000 then the decrease in liabilities is 50,0000. If we use 100,000 then we are decreasing the basis twice (some from last year and some from this year). No?

[56_Moves]

@drzflow4

At the beginning of the year Paul's basis included 25% of the $150,000 liability, or $37,500.
At the end of the year Paul's basis includes only 20% of the $100,000 liability, or $20,000.
As stated by @LCros, the basis is lowered by $17,500.

This is not being counted twice since the decrease in the liability is never recorded as a decrease in basis on the books. We only examine it to calculate basis for tax purposes to see if we are allowed to take a loss.

Hope this helps.

[56_Moves]

@mashloum
Property distribution made to a partner are generally nontaxable, and therefore, the property is received at net book value and no adjustment would be made outside of Charlene have to recognize the built-in gain of $3,000.

[mashloum]

John, a single taxpayer, died on March 3, 2017. Based on the following information, determine the value of John’s gross estate.
FMV at
Date of Death
Life insurance on John’s life
(payable to John’s estate)
$1,250,000
John’s revocable grantor trust
1,700,000
Stock given to John’s son
in 2017 (no gift tax was paid)
50,000
Submit $1,700,000
Correct Submit $2,950,000
This answer is correct.
A decedent’s gross estate includes the FMV of all property (real or personal, tangible or intangible, wherever situated) to the extent the decedent owned a beneficial interest at the time of death. John’s gross estate includes the life insurance proceeds and his revocable trust. The stock given to his son is not included in John’s gross estate because gifts made within 3 years of death are not included in the gross estate of a decedent. However, the gross estate does include gift taxes paid on gifts within 3 years before death, but in this situation, no gift taxes were paid.
Graded Submit $3,000,000
Submit $1,250,000
Reading the explaination make more confuse!
Any clear explanations other than this?

[LCros]

mashloum:

I think you are asking why the $1,250,000 is included. As Roger explains it: the Gross Estate (Form) 706 is like a personal balance sheet. To get to the taxable estate you include:

All assets (+IRD (Income in Respect to the decedent)
+Life insurance proceeds
+Revocable Trust
+1/2 of property with spouse
=Gross Estate
-Charity
-Marital Deduction
-Liabilities/Expenses-(Medical/Mortgages), Admin Expenses, Funeral Expenses
=Taxable Estate

[Anonymous]

Hi,

I just bought the NINJA Scout package. In the NINJA notes under deductions for AGI, Tuition and Fees are still listed as a deduction. I believe these have been eliminated for 2017 and my Gleim material confirms this.

Anyone have any input?

[mashloum]

Ture, it shows in my Gleim update
“June 02, 2017, 10:30 AM 6: Adjustments and Deductions from AGI
Expiring provisions (e.g., 7.5% AGI threshold for medical deduction of taxpayers 65 or older, above-the-line tuition and fees deduction, qualified mortgage insurance deduction) were eliminated. Ordinary income treatment of IRA distributions was clarified. Inflation adjusted amounts were updated and years were changed accordingly. “

[mashloum]

Also in Gleim
Last Updated Study Unit
June 02, 2017, 10:08 AM 1: Ethics and Professional Responsibilities
Outdated coverage of AICPA Standards was removed from Core Concepts.
– 2: Securities Law and Liability of CPAs
No changelogs found for this Study Unit
June 02, 2017, 10:30 AM 3: Federal Tax Authority, Procedures, Planning, and Individual Taxation
Inflation adjusted amounts were updated and years were changed accordingly. Unnecessary statements and examples about some IRC sections not having final Treasury Regulations were removed. A clarifying example for the $1,000 threshold exception to the withholding penalty was added. C corporation return due/extension dates table was updated to correspond with the applicable Form Instructions. A clarifying example for the 25% Gross Income test for the extension of the statute of limitations from 3 to 6 years was added.
June 02, 2017, 10:30 AM 4: Accounting Methods and Gross Income
Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 5: Self-Employment and Farming
Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 6: Adjustments and Deductions from AGI
Expiring provisions (e.g., 7.5% AGI threshold for medical deduction of taxpayers 65 or older, above-the-line tuition and fees deduction, qualified mortgage insurance deduction) were eliminated. Ordinary income treatment of IRA distributions was clarified. Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 7: Credits, AMT, and Losses
Coverage of general business credit was adjusted. Expiring provisions (e.g., 7.5% AGI threshold for those 65 or older) were eliminated. Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 8: Property Transactions
Inflation adjusted amounts were updated and years were changed accordingly. Minor edits to 3-year recovery class material were made.
June 02, 2017, 10:30 AM 9: Corporate Taxable Income
C corporation return due/extension dates were updated to match the instructions of Form 1120.
June 02, 2017, 10:30 AM 10: Corporate Tax Computations
Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 11: Corporate Tax Special Topics
Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 12: S Corporations and Exempt Organizations
Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 13: Partnerships
Example for Partner's Capital Accounts was added to enhance coverage. Inflation adjusted amounts were updated and years were changed accordingly.
June 02, 2017, 10:30 AM 14: Estates, Trusts, and Wealth Transfer Taxes
Inflation adjusted amounts were updated and years were changed accordingly. Statement concerning gift tax marital deduction for noncitizen spouses was added. Expired filing due date information was eliminated.
– 15: Noncorporate Business Entities
No changelogs found for this Study Unit
– 16: Corporations
No changelogs found for this Study Unit
– 17: Contracts
No changelogs found for this Study Unit
– 18: Agency and Regulation
No changelogs found for this Study Unit
– 19: Sales and Secured Transactions
No changelogs found for this Study Unit
– 20: Debtor-Creditor Relationships
No changelogs found for this Study Unit

[mashloum]

Help plz

How much of Corporation A’s Year 1 net operating loss of $100,000 may be deducted in Year 2 based on the following information pertaining to A’s Year 2 return?
Taxable income before the net operating loss deduction $81,000
Charitable contribution deduction 9,000
Total charitable contributions for Year 2 12,000
a. $93,000
b. Correct $81,000

This answer is correct.
The amount of Year 1 NOL carryover that may be deducted on the Year 2 return is the Year 2 taxable income as adjusted under Sec. 172. In the absence of a NOL, the charitable contribution limitation is $9,000 [($81,000 + $9,000) × 10%], and a $3,000 contribution carryover to Year 3 would occur. Taking into account the NOL carryover, the corporation is allowed no charitable contributions deduction, taxable income is zero, a NOL carryover of $10,000 is available, and a contribution carryover of $12,000 is available. Under Reg. 1.170A-11(c)(2), the NOL carryover to Year 3 is determined by claiming $9,000 of charitable contribution deduction and $81,000 of NOL carryover. Thus, a $19,000 NOL ($100,000 – $81,000) to Year 3 remains. In addition, a $3,000 ($12,000 – $9,000) charitable contribution carryover to Year 3 remains.
c.$90,000
d.$69,000
Should not we exclude CC from the TI to consider NOL deduction? I am confused why the answer is $81k not $90k and CC by $9k was not added back

[Anonymous]

@Mashloum ,

I remember this question from Gleim, it confused me too. I'll have to take a look at it more in depth, I think I just ignored it on the first go. Some of the Gleim questions are best put aside until you have really mastered the basic concepts.

Just an FYI, there are two more updates available for the Gleim REG Textbook, from August, and October. There are in the updates section and downloadable in PDF form.

However, I think if you are looking at the electronic PDFs in the study unit, those are fully up to date.

[taxfreak]

Can someone please confirm this simple concept:

contribute cash into a partnership or S corp = increase basis
received cash from partnership or S corp through liquidation and nonliquidation = decrease basis

Thank you!

[Lentilcounter]

@benj2017

The tuition/fees deduction expired 12/31/2016. I guess we can still get tested on it this year and should know it?
I was also surprised by the # of business law questions in the REG Ninja MCQ test bank.

BEC = 72 (6/08/16)
FAR = ?
REG = ?
AUD = ?

[curlyhare]

Took the REG exam today…mixed feelings, just need that 75! Know partnerships ladies and gents! Know them, love them, marry them. They well test it every which way. Wash-sales, like-kind exchanges, property tax transactions, oh my!

Hope everyone one else does phenomenally on their upcoming exams!

On the BEC, test 12/4.

[kikee_07]

ane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?

The answer is $15,000.

Solution:
Individuals may offset up to $25,000 ($50,000 if married filing jointly) of ordinary income with rental real estate activities. This deductible loss is reduced (but not below zero) by 50% of the amount by which the modified adjusted gross income of the taxpayer for the year exceeds $100,000.

First, the passive activities were netted $15,000 from the S corporation – $35,000 from the rental = $(20,000).
Second, the salary of $160,000 is decreased by the net $20,000 passive activity loss for a modified AGI before limitation of $140,000.
Third, the amount of $140,000 that exceeds $100,000 is multiplied by 50%, equaling $20,000.
Fourth, the rental loss of $35,000 is decreased by the $20,000 limitation, leaving an allowable deduction of $15,000.

Why??? I don't get it. My answer was zero. Why do we deduct 20k from 160? then use it again to decrease the $35k?

[Author]

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