[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

[Anonymous]

@Mashloum ,

The way you posted that is a little confusing. Its a little more clear this way:

Bobby owns 50% of Jingles, Inc., an S corporation filing tax returns on a calendar year. For tax year 2017, the corporation has an operating loss of $15,000 and separately stated tax-exempt income of $10,000. Bobby individually loans the corporation $4,000. His basis on January 1, 2017, is $2,000. What is his basis in the stock at year end 2017?

Answer (C) $0 is correct.
The IRC provides guidelines for adjustments to the basis of a shareholder’s S corporation stock. The increases include items of income (including tax-exempt income) that are passed through to the shareholder, nonseparately stated (ordinary) income, and the excess of deductions for depletion over the basis of the property subject to depletion. A loan made to an S corporation also increases the shareholder’s basis for the amount of the loan. The basis of Bobby’s stock is decreased by the amount of loss allocable to him; however, it cannot reduce his basis below zero.

[Anonymous]

Ok, I can't get the description image to post:

Here is the breakdown:

Stock Basis:
Basis at January 1
$ 2,000
Tax-exempt interest
5,000
Ordinary loss of S corporation
(7,000)
Basis at December 31
0$

Loan Basis:
Loan to corporation
$4,000
Ordinary loss of S corporation
(500)
Basis at December 31
$3,500

[Lentilcounter]

@mashloum
@benj2017

Thanks. Please see below.

Stock Basis:
Basis at January 1
$ 2,000 (given)

Tax-exempt interest
5,000 (50% of total $10K amount)

Ordinary loss of S corporation
(7,000) (the total is $15K but I am guessing this is limited to $7K because of the total stock basis available?)

Basis at December 31
0$

Loan Basis:
Loan to corporation
$4,000

Ordinary loss of S corporation
(500) (Is this $500 leftover from 50% of the $15K loss that couldn't be applied to the stock basis? If so, this is a rule I didn't know about or that I missed)

Basis at December 31
$3,500

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

[Anonymous]

@lentilcounter,

Bobby owns 50% of Jingles, so he is entitled to only 50% of the loss (7500).

Reduce stock basis first. ($7000)

Then reduce loan basis. ($500)

[pcunniff]

2?s listed below if someone wouldnt mind assisting..

1) Heres a made up NOL problem. What is the NOL in year 6? My thought process is you carry back 2 years from year 4 and lose the income in year 1. That being said, 26,000 of losses are carried forward. Would the 26k of loses carried forward and only 14k of losses carried back from year 6 compute the loss for year 6? Further, the full 40k income in year 5 is soaked up. I would think the answer would be (186,000), but let me know.

Yr 1: 5,000
Yr2: 2,000
Yr3: 2,000
Yr4: (30,000)
Yr5: 40,000
Year 6 (CY) = (200,000)

2) If a MERCHANT SELLER delivers goods to a COMMON CARRIER (not just their own truck), if its a shipment contract – would risk of loss still remain with the merchant until the actual receipt of the buyer? This is the only part that confuses me with this because I know in a non carrier case – the risk of loss remains with merchant seller until receipt by the buyer. I just dont know with common carrier cases (shipment/destination contract with UPS for example).

Let me know folks! Have two days to get these down.

[emichelle2321]

@efrainv24 – How much would you say someone should spend on BLaw? I am right now trying to master the tax sections before diving into that. Have about 2 weeks before my test…

[joonpark1212]

Question on Netting Capital Gains and Losses in Gleim.

Q. In 2016, Bell Corporation (its first year of operations) had net short-term capital gains of $3,000 and net long-term capital losses of $8,000. How will the capital loss carryover be treated in Bell’s 2017 income tax return?

A. Long-term capital loss.
Answer (A) is incorrect.
It is treated as a short-term capital loss even if it was a long-term capital loss in the year from which it was carried.

D. Short-term capital loss.
Answer (D) is correct.
A corporation may carry capital losses back to each of the 3 preceding taxable years and forward to each of the 5 succeeding taxable years. The capital loss that is carried back or forward is treated as a short-term capital loss in each such taxable year. Consequently, the capital loss carryover in Bell’s 2017 tax return will be treated as a short-term capital loss and is deductible only against capital gains.

I thought the rules of netting Capital Gains and Losses were the same for Individual and Corporation.

1. Net Short term Gain/Loss and Net Long term Gain/Loss separately
2. Whichever exceeds another the net carries on the character(Short term or Long term)

[Anonymous]

@joonpark1212 ,

The rules for capital gains for individuals and corporations are very different. What you stated above only applies in the current year for corporations.

Some of the big differences:

1. Capital losses can only offset capital gains for corporations.
2. Capital gains are taxed at regular corporate tax rates regardless of being long-term or short-term.
3. Short-term capital losses are carried back 3 years and forward 5 years for corporations.
3. Carry-backs and carry-forwards are always short term capital losses for corporations.

[CPAIn2018]

Can anyone post REG Quarter 4 Exam experience link?

Thx

[C Dubs]

It seems that the same items are treated differently in different simulations and with different CPA prep programs. It also seems as though the placement of some items is completely arbitrary. The simulations often give a general description of an item and the solution will explain the classification of the item by saying, “which we assume…”. Are they serious? I can't win.

[mashloum]

Any one can advise how many questions in Ninja MC?

[CPADream]

Just took my exam and want to say thanks to @pcuniff. you are right. The sim was so brutal. And the order they showed up was very bad to me. Hard –> super hard –> easy (including research at 3rd testlet). I thought I will run out of time with 45 minutes remain for 3rd testlet and ended up finished early. I could use those time for the stupid 2nd testlet.

a tips for the people taking exam in the next 2 weeks, remember practice the exam on AICPA website.

[jeff]

@mashloum – NINJA MCQ has around 1,600 MCQ for REG and 60+ SIMS…plenty to keep you busy 🙂

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

[56_Moves]

Aren't health insurance premiums received in a partnership reported on line 29 of the 1040?

[mashloum]

@jeff @ another71.com

Hi Jeff,

How can I make sure that I solved all the question at least one time correctly?, what is option of question shall I use?

[Author]

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