- This topic has 596 replies, 108 voices, and was last updated 7 years, 1 month ago by Anonymous.
-
CreatorTopic
-
September 4, 2017 at 12:33 pm #1620148jeffKeymaster
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/
-
AuthorReplies
-
November 12, 2017 at 6:11 pm #1661461PINKFLAMINGO11Participant
Help! I need to extend access to Becker for REG for 10 days after expiration (3 month extension is not an option).
Is anyone willing to share their login for 10 days? willing to pay.Thanks!
November 12, 2017 at 7:20 pm #166148256_MovesMember@mashloum
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 $81,000This 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 backThe exclusion of charitable deductions is for figuring a current year's NOL to be used in the future, but in this question we are applying a prior year NOL to the current year's return. As a result, we are allowed to use the charitable contributions.
I hope this helps.
November 13, 2017 at 12:20 pm #1661701AnonymousInactiveThe way that question is explained is confusing. You are allowed to deduct $15,000 of the rental loss against the S Corp passive income.
You cannot deduct the other $20,000 because the excess of MAGI over $100,000 is $65,000.
50% of $65,000 is $32,500 which reduces the allowable $25,000 Rental real state activity to $0
However you can still deduct the $15,000 against the S Corp passive income, hence the answer.
**My takeaway from this is that as long as the question gives you the MAGI (as opposed to AGI) you don't have to worry about calculating the MAGI for the Rental real state activity**
November 13, 2017 at 2:39 pm #166180656_MovesMember@kikee_07
The question is not only confusing, but inaccurate. However the answer is correct.
Two issues with the question:
1. Taxpayers may offset up to $25,000 in rental. This available loss does not double to $50,000 for those filing MFJ. The total allowable loss is limited to $25,000 for single or MFJ.
2. The calculation for the loss is figured before including the loss in AGI. So in calculating it there is a net passive loss of $20,000 ($15,000 S Corp income – $35,000 Rental loss). The AGI before including this loss is $160,000, and therefore, no additional loss is allowed (rental loss is not allowed on income over $150,000). Only $15,000 of the rental loss is included in the return as it is absorbed by the S Corp income. The remaining $20,000 will be carried forward.November 13, 2017 at 2:50 pm #1661815AnonymousInactive@56_Moves ,
I agree on everything you posted except that the 160,000 is listed as salary not AGI. The Real Estate Activity deduction is calculated on Modified Adjusted Gross Income (MAGI), which is AGI without regard to PALs, SS benefits, and qualified retirement contributions. Anyone with MAGI over 150,000 is not eligible to take the deduction, as the $25,000 will be reduced to zero once MAGi hits $150,000.
Since the problem gives you MAGI of $165,000, you don't need to do any calculations with regards to the PAL and salary. At least thats the way I see it, and the way it is explained in the Gleim MCQ.
Here is the Gleim explanation:
The amount of a loss attributable to a person’s passive activities is allowable as a deduction or credit only against, and to the extent of, gross income or tax attributable to those passive activities. All rental activity is passive, but a person who actively participates in a rental real estate activity is entitled to deduct up to $25,000 of losses from the passive activity from other than passive income. However, this exception of the general passive activity loss limitation rule is completely phased out when the taxpayer has modified adjusted gross income of at least $150,000. Although Lane actively participated in the rental real estate activity, Lane’s modified adjusted gross income exceeded $150,000, so she can only deduct passive activity losses against passive activity income. Lane had passive activity income from an S corporation of $15,000 and can therefore only deduct $15,000 of the real estate rental activity loss.
November 14, 2017 at 1:00 am #1662047hopingtogetFARParticipantHey everyone!
I'm currently reviewing reg, and in the becker review, it mentions that tuition and fees deduction expired 12/31/2016, so is there any point in studying it? Has anyone ran across similar instances of this for previous tests?
November 14, 2017 at 1:09 pm #1662191Andria – Another71KeymasterNovember 14, 2017 at 8:20 pm #166239556_MovesMember@benj2017,
You are correct, I didn't notice that it gave the MAGI to us.
Thanks for the correction.
November 14, 2017 at 9:50 pm #1662427pcunniffParticipantkikee_07 I think you are confusing the rules.
1) When you are not a material participant, but are actively participating (10% ownership test) you get the mom and pop exception up to 25k
2) the question states that 15,000 is passive income (does not participate) and there is a 35000 passive loss. The passive loss is limited to passive income.Nothing in the question has anything about active participation (mom and pop exception in which the AGI is a distractor). The answer is 15000 due to passive losses being limited to passive income.
November 14, 2017 at 9:56 pm #1662428pcunniffParticipantFirst off the problem is saying you took the charitable deduction in which you will need to add it back in order to calculate the eligible loss.
Second – your sim question is very confusing and incorrect. If you contribute property to a PARTNERSHIP, not at any point do you recognize a gain. You may want to go back and study that material.
think about it – say you and I formed a partnership and I contributed my car with a basis of 15k and fmv of 20k. Why on earth would I have to recognize a gain on that and be ultimately taxed on that capital gain? I would never form a partnership in the first place haha. I would keep the car in my hands and avoid the tax. The benefit of the pship is to avoid these gains (like a corp would recognize unless you are an 80% owner/not receiving boot which is cash or property).
November 16, 2017 at 12:21 am #1662823kikee_07ParticipantThanks all for the help! very helpful
November 16, 2017 at 1:41 am #1662841pcunniffParticipantDoes anyone know how heavily tested the Affordable Care ACT is and how much time you should be allocating to this section? I find in CPA excel that they want you to cover probably 1-2 hours and I find that to be a long time to possibly be 1-2 questions MAX.
November 16, 2017 at 3:14 pm #1663096November 17, 2017 at 12:17 pm #1663553mashloumParticipantConfused between these two questions, plz help!
Q1
On October 1, Baker, a wholesaler, sent Clark, a retailer, a written, signed offer to sell 200 pinking shears at $9 each. The terms were FOB Baker’s warehouse, net 30, late payment subject to a 15% per annum interest charge. The offer indicated that it must be accepted no later than October 10, that acceptance would be effective upon receipt, and that the terms were not to be varied by the offeree. Clark sent a telegram, which arrived on October 6, and accepted the offer expressly subject to a change of the payment terms to 2/10, net/30. Baker phoned Clark on October 7 to reject the change of payment terms. On the phone, Clark then indicated it would accept the October 1 offer in all respects and expected delivery within 10 days. Baker did not accept Clark’s oral acceptance of the original offer. Which of the following is true?
Baker’s original offer is a firm offer, hence irrevocable.
Correct There is no contract. Clark’s modifications effectively rejected the October 1 offer, and Baker never accepted either of Clark’s proposals.This answer is correct.
Because the purported acceptance by telegram was expressly conditional upon assent to the different payment terms, it was not effective as an acceptance. It operated as a rejection of the offer and a counteroffer. The effect of the counteroffer was to terminate the original offer. Thus, Clark’s subsequent unconditional acceptance on October 7 of the original offer was ineffective. The rejection and counteroffer had previously been communicated to the offeror.
The statute of frauds would preclude the formation of a contract in any event.
Graded Clark actually created a contract on October 6. The modifications were merely proposals and did not preclude acceptance.Q2
Almovar Electronics sent a letter on March 8 to Conduit Sales & Service Company offering an entire lot of electronic parts at a substantial reduction in price. The offer indicated that it was for “immediate acceptance.” The terms were “cash, pick up by your carrier at our loading dock and not later than March 15.” It also indicated that the terms of the offer were not subject to variance. The letter did not arrive until March 10, and Conduit’s letter accepting the offer was not mailed until March 12. The letter of acceptance indicated that Conduit would take the entire lot, would pay in accordance with the usual terms (2/10, net/30), and would pick up the goods on March 16. Which of the following best describes the legal relationship of the parties?
Because both parties were merchants and the changes in the acceptance were not material, there is a valid contract based on the different terms.
The acceptance was not timely; hence, no contract was formed.
Correct The different terms of the acceptance are to be construed as proposals for changes in the contract.This answer is correct.
Conduit’s letter was a definite, reasonable, and unconditional acceptance and thus formed a contract. Ordinarily, additional or different terms are considered proposals for addition to or changes in the contract. However, between merchants, the additional or different terms become part of the contract unless (1) the offer expressly limits acceptance to its terms (which it did), (2) the additional or different terms materially alter the offer, or (3) the offeror objects within a reasonable time. Because the offer expressly limited acceptance to its terms, Conduit’s letter was an acceptance of the original offer with proposals for changes.
Graded The different terms of the acceptance constituted a rejection of the offer.November 17, 2017 at 6:56 pm #1663754kikee_07ParticipantWhich of the following individuals are eligible for the earned income credit?
I. Tom and Jane Smith, both age 55, are a married couple and are filing a joint return. Their modified adjusted gross income for the year is below the threshold amount to be eligible for the earned income credit. Their only source of income for the year is their retirement pension.
II. Mike and Ann Jones, both age 50, are a married couple and are filing a joint return. Their modified adjusted gross income for the year is below the threshold amount to be eligible for the earned income credit. Mike and Ann's sources of income for the year are wages for both and $10,000 of tax-exempt interest.The correct answer is Neither I nor II.
Tom and Jane are not eligible for the earned income credit since their only source of income is their retirement pension. A pension is not considered to be “earned income.” An individual must have at least some “earned income” in order to be eligible for the earned income credit.
Mike and Ann are not eligible for the earned income credit. Tax-exempt interest is considered “disqualified income” under IRC Section 32(a). Disqualified income in post-1995 tax years includes an individual's capital gain net income and net passive income in addition to interest, dividends, tax-exempt interest, and nonbusiness rents or royalties.
***Why is II not eligible when it stated that source of income are WAGES FOR BOTH and the 10K tax exempt. interest? I understand that the tax-exempt interest is disqualified, but what about the “WAGES”? Does having tax-exempt interest disqualify you from EIC even if you have earned income and your MAGI is below the threshold? The solution doesn't say.
-
AuthorReplies
- The topic ‘REG Study Group October November 2017 - Page 30’ is closed to new replies.