[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/

[Gugu]

@ CRAD4CPA . I guess you can, as there is only change of ownership as the c corp remains as a legal person. However, if your question is relating to a re-organization, then NOL, Charitable Contributions can be carried forward.

[gguzman]

REG Round 2 in February. I will chill on here until that forum opens up.

Sup everyone!

[asobti]

I have a questions , Under WRAP mnemonic , Personal losses are disallowed. And Capital Assets are personal assets of individual person not used in trade or business and we have deductions like $3000 for it.
Whats the difference between Personal loss and Capital loss since both of these cover personal property.

[56_Moves]

@asobti,

A personal asset is an asset that is not used in a business, and losses incurred from the sale of these assets are not allowed.

Personal property is any tangible property that is not “real property” (land or building). If the personal property is used for business then a loss incurred from its sale can be deducted. The deduction is limited to $3,000 per year in aggregate and any unused loss may be carried forward indefinitely.

-Hope this helps.

[56_Moves]

Taking REG tomorrow, need all the prayers I can get.

[kara]

How doable is the REG before busy season and I am taking a week of vacation to a foreign country end of December. Busy season will start full swing Beginning to Middle of February…. I am using Becker! I do both taxes and audits for my job.

Thanks,

Kara

[Lentilcounter]

Hey all,

I'm using GLEIM as a supplement and want to make sure that the formulas I have written down about formation and shareholder/corporate basis (currently working on a simulation in study unit #11) are correct. Thanks for your help in advance.

recognized gain or loss by the shareholder and the shareholder basis formulas:

1. realized gain = FMV of the property transferred – adjusted basis of the property
2. recognized gain = lessor of realized gain or boot received (cash) (don't use boot from relieved liabilities in this calculation)
3. shareholder basis = adjusted basis of contributed property – boot received in cash – boot in the form of relieved liabilities + gain recognized

corporation basis = generally, the adjusted basis of the contributed property to the shareholder + gain recognized

*Section 351 requires that no gain or loss be recognized if property is transferred to corp. by one or more persons in exchange for the stock in the corp. and immediately after the exchange, such person or persons “control” (80% ownership or more) the corp.

**Stock exchanged for services don't count towards the 80% and any other shareholders involved in the transaction must recognize any gain on the transfer of property

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

[andjela]

I have a question re one of the sims in the AICPA sample REG test

It's the sim about client's travel expenses. Can someone please explain why the client is allowed only $2400 depreciation deduction for year 2? The car was purchased beg Y1 and sold 12/31/Y2, so the client had the car for two full years. Based on the other answers full MACRS depreciation is allowed in Y1 (20K * 20% per MACRS table * 75% business use). Y2 depreciation should be $4800 (MACRS percentage for 5 year property in year 2 is 32% and bus use is still 75%).

[CPADream]

@andjela because “Lina sold the vehicle on December 31, years for $18,000”. Half year convention 🙂

[andjela]

@CPADream – thank you! I just found this in one of the IRS publications too, only 50% of depreciation allowed in the year of disposal, even if its the last day of the year… makes no sense but none of tax code makes sense to me lol

[aimhigher]

Do you have to report personal gains?

For example question 12 (CPA-05902), personal loss is not deductible, but what if the personal television was sold at a gain?

is it reportable as an ordinary gain or capital gain? thanks

2016 - FAR, BEC, REG, AUD
Becker & Ninja Audio

[Anonymous]

@andjela,

The 50% in year of disposal does actually make sense when you consider that under MACRS Half year conventions, the first year's double declining depreciation rate in the MACRS table has been reduced by 50%. Unless you are using the mid-quarter convention depreciable personal property is always treated as put into service halfway through the year.

For example, the first year MACRS Seven year rate is 14.29 %

This is 2/7 * 50% (200 % Double-declining balance formula * 50%)

If you use MACRS for the life of the property, this is made up in year 8 (7 years plus one extra year).

[Lentilcounter]

Abe, Betsy, and Dan decide to form the equal ABD partnership at the beginning of Year One. Abe contributed depreciable assets that he has owned for five years that have a basis of $15,000 and a value of $20,000. Betsy contributed $20,000 cash. Dan contributed $12,000 in cash and land with a basis of $5,000 and a value of $8,000. How much income is allocated to Abe if the partnership sells the assets contributed by Abe for $18,000?

Answer = The realized gain on the sale of the assets is $3,000 ($18,000 – $15,000 basis in assets). Abe's built in gain on the contribution is $5,000. The amount of gain allocated to Abe is the lower of the realized gain or built-in gain, so $3,000 is the allocation.

I thought that built-in gains tax applied to S corps only. Does this apply to partnerships also?

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

[Anonymous]

@lentilcounter ,

It's called pre-contribution gain, and the partner will only recognize the pre-contribution gain if the partnership distributes the asset to another partner. If the partnership sells the asset to someone not in the partnership, then the contributing partner recognizes the pre-contribution gain, and all of the partners (including the contributing partner) recognize the gain above the contribution gain pro-rata.

The BIG tax for an S-corp applies to assets that had appreciated in value for S-Corps when they converted from C-Corps. So if an S-Corp started life as an S-Corp, the BIG tax does not apply. However, if an S-Corp that converted from a C-Corp has assets with built-in gain, and sells them, then it pays tax on the built-in gain only. The rest of the gain is passed through to shareholders who will pay tax on it at their individual rate. The BIG tax for S-Corps is taxed at the highest corporate rate which is 35%.

[Lentilcounter]

@benj2017

Thanks! You seem to have a very good grasp of REG. I'm about a month into my studying and only starting to connect dots.

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

[Author]

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