REG Study Group Q1 2015 - Page 109

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  • February 11, 2015 at 3:55 pm #652669
    s2sylvir
    Member

    @Cracked &



    @NJPRU     I incidentally refreshed the page as I was typing my response and it looks like you beat me to it…

    But since I already typed it up, might as well post it XD Here:

    Look in R3-56.

    Distribution: $19,000

    * First layer: Always apply against AAA first. Distributions to the extent of AAA is not subject to tax by the shareholder, but reduces the shareholder's basis instead – $8,000

    Second layer: Then apply distributions to AEP. Distributions to the extent of AEP are taxable as dividend income, but does not reduce the shareholder's basis – $10,000

    * Third layer: Then apply remaining distributions to the shareholder's own basis. The remaining distribution of $1,000 ($19 – 8 – 10) is once again not subject to tax by the shareholder, but reduces the shareholder's basis.

    * The first and third layer reduces basis.

    So the 20k – 8k – 1k = 11k ending shareholder basis

    BEC - PASS (79)
    AUD - PASS (63, 71, 74, 74, 83)
    REG - PASS (88)
    FAR - PASS (58, 89)

    Becker for all + FAR 10 Point Combo

    February 11, 2015 at 3:59 pm #652670
    Anonymous
    Inactive

    Thank you both! Makes sense.

    February 11, 2015 at 4:14 pm #652671
    Anonymous
    Inactive

    I need to know if I see nonrecourse liability amount in any MCQ, should I add it or deduct it from the beginning basis?

    About nonseparately stated income/deductions, what other items can you add with my list below?

    +Revenues

    -Salaries

    -Guaranteed Payments

    -Rent Expense

    -Depreciation Expense.

    “Nonseparately stated items” means we “do not separate them”, or in simple English “INCLUDE” them both in F1065/F1120S and Schedule K-1 or Schedule K?

    February 11, 2015 at 4:29 pm #652672
    Anonymous
    Inactive

    Carson owned 40% of the outstanding stock of a C corporation. During a tax year, the corporation reported $400,000 in taxable income and distributed a total of $70,000 in cash dividends to its shareholders. Carson accurately reported $28,000 in gross income on Carson's individual tax return. If the corporation had been an S corporation and the distributions to the owners had been proportionate, how much income would Carson have reported on Carson's individual return?

    A.

    $28,000

    B.

    $132,000

    C.

    $160,000

    D.

    $188,000

    The answer is C. I chose D, coz I added the distribution of $70000 to the income of $400000 and multiplied that by 40%. My question is, why shouldn't the $70000 be included in the calculation. Isn't the distribution a separately stated item?

    February 11, 2015 at 4:33 pm #652673
    lauren725
    Member

    S Corps are distributed based on taxable income and so in that case there would be no dividend payout (no E&P in that case).

    AUD - 73,91
    FAR - 79 - Thank you God!
    BEC - 73,79!!!!
    REG - 92 whatttt??!

    I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

    Done! Praise God!

    February 11, 2015 at 4:37 pm #652674
    Anonymous
    Inactive

    @lauren – can you please clarify. Isn't the 400000 income? Sorry, I am confused 🙁

    February 11, 2015 at 4:45 pm #652675
    s2sylvir
    Member

    @Amor D

    I'm not ignoring your question, I just never understood what non-separately stated items were since Becker did not explain it. Since Becker did not explain it, I never bothered learning it, even though there were like 2 practice MCQs on it.

    @Cracked

    Once again, S Corporation:

    There has to be E&P in order for the dividend/cash distribution to be taxed [second layer in my previous explanation] (and this is only if it was once a C Corporation now converted the S Corporation) OR if the shareholder runs out of basis then the distribution is taxed as LTCG [“layer four”]. Otherwise, it usually decreases stock basis.

    Read R3-56…

    The only confusing part is that the question did not address whether Carson had enough basis for the distribution to not be fully taxable as LTCG nor did it tell you if the S Corporation had AAA or AEP.

    BEC - PASS (79)
    AUD - PASS (63, 71, 74, 74, 83)
    REG - PASS (88)
    FAR - PASS (58, 89)

    Becker for all + FAR 10 Point Combo

    February 11, 2015 at 4:45 pm #652676
    lauren725
    Member

    Sorry. My take on it is the taxable income is $400,000 (if it were an S Corp) and all of this would be distributed to each owner by % ownership, so 40% of that is $160,000 taxable income to Carson.

    AUD - 73,91
    FAR - 79 - Thank you God!
    BEC - 73,79!!!!
    REG - 92 whatttt??!

    I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

    Done! Praise God!

    February 11, 2015 at 6:22 pm #652677
    lauren725
    Member

    The rule limiting the allowability of passive activity losses and credits applies to:

    a. Widely held C Corporations

    b. Partnerships

    c. S Corps

    d. Personal service corporations

    AUD - 73,91
    FAR - 79 - Thank you God!
    BEC - 73,79!!!!
    REG - 92 whatttt??!

    I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

    Done! Praise God!

    February 11, 2015 at 6:37 pm #652678
    Gabe
    Participant

    D

    https://www.irs.gov/publications/p925/ar02.html#en_US_2013_publink1000300686

    CPA, CFE
    CISA- Experience will be completed by August 2016

    February 11, 2015 at 6:49 pm #652679
    Mamabear
    Member

    Hey Gabe–I was really sorry to read about your REG results. Come back with a vengeance and kill it in April! I am rooting for you.

    Cracked and Amor D–How are your studies going? When is your retake?

    CPA Exam - Finally DONE (November 2014)
    BEC (08/10/13) 80
    AUD (08/24/13) 65 (11/13/13) 85
    FAR (04/12/14) 81
    REG (07/19/14) 69 (11/29/14) 87!!

    February 11, 2015 at 6:51 pm #652680
    s2sylvir
    Member

    ^Yep! Gabe is correct,

    I was actually going to pick A, but PAL apply to CLOSELY held C Corps, not WIDELY held.

    BEC - PASS (79)
    AUD - PASS (63, 71, 74, 74, 83)
    REG - PASS (88)
    FAR - PASS (58, 89)

    Becker for all + FAR 10 Point Combo

    February 11, 2015 at 6:53 pm #652681
    Anonymous
    Inactive

    @Mama – my retake is tomorrow. Continuing to do MCQ's and then plan on reviewing notes before I call it a day. I am really nervous 🙁

    February 11, 2015 at 7:24 pm #652682
    Gabe
    Participant

    You got it @Cracked!

    Thanks @Mamabear! Studying now 🙂 Plan on an early re-take in April while the material is still fresh.

    CPA, CFE
    CISA- Experience will be completed by August 2016

    February 11, 2015 at 7:26 pm #652683
    Ninja Juice
    Participant

    anyone have a comprehensive list of filing dates and extensions?

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