[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

Post by Another71.

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

[Anonymous]

In the current year Tatum exchanged farmland for an office building. The farmland had a basis of $250,000, a fair market value (FMV) of $400,000, and was encumbered by a $120,000 mortgage. The office building had an FMV of $350,000 and was encumbered by a $70,000 mortgage. Each party assumed the other’s mortgage. What is the amount of Tatum’s recognized gain?

A.

$0

Correct B.

$50,000

C.

$100,000

D.

$150,000

Tatum should recognize a gain of $50,000. Since each party assumed the other’s mortgage, Tatum’s mortgage liability was reduced from $120,000 to $70,000, and thus he benefited or gained by $50,000.

I just encountered this one good example of netting liability assumed and liability passed on.

Solution:

Mortgage (Old Property) Cancelled/Passed On = Boot Received ..$120,000

Mortgage (New Property) Assumed = Boot Paid ………………………. 70,000

---

………………………………………………………………………………………….$50,000 (Net) Boot Received

===========================================================

Step One: Determine realized gain. [FMV(Old) – Basis (Old)] 400,000 – 250,000 = $150,000

Step Two: Determine recognized gain [Lesser of RLG or BR] $150,000 or $50,000?

RCG = $50,000 

[lauren725]

Lane, 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?

A. $0

B. $15,000

C. $25,000

D. $35,000

I chose A. $0 since the AGI > $150,000 and the “mom and pop” rule is phased out, but ninja said it was B. Am I missing something?

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!

[Anonymous]

I think because of the (positive) rental income of $15,000 where you can offset the loss first then since it was disallowed we can carry it forward ($20,000) indefinitely.

[lauren725]

I guess I thought since the S Corp is not active, the loss could not be netted against that $15,000

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!

[BEACPA]

lauren725,

NINJA is correct. The answer is B. You're on the right track. The taxpayer doesn't qualify for the mom & pop exception, because the 25,000 maximum allowance is eliminated after AGI exceeds $150,000. However, this doesn't exclude the taxpayer from deducting passive losses up to the amount of passive income. Which in this case is $15,000. I hope this helps.

FAR - 2/28/14 PASS Praise be to God!
AUD - 7/5/14 PASS Praise be to God!
BEC - 11/29/14PASS Praise be to God!
REG - 2/28/14 PASS Praise be to God!

[Anonymous]

Certain businesses are not eligible for Section 179 deduction, except:

a. Racetrack

b. Hot tub facilities

c. Storage facilities (Distributing Petroleum)

d. Liquor Store

[BEACPA]

Amor D,

I have no clue where you found this question. I'm racking my brain trying to find the answer. I even turned to authoritative tax law. I'm going with C Storage Facilities. I believe these are recognized differently depending on the state.

Good luck on your exam!

FAR - 2/28/14 PASS Praise be to God!
AUD - 7/5/14 PASS Praise be to God!
BEC - 11/29/14PASS Praise be to God!
REG - 2/28/14 PASS Praise be to God!

[Anonymous]

@Beacpa, you are right!

You're very good.

I wrote that question myself based on the information I gathered from IRS.gov, NINJA-MCQ, and many other sources. There are different figures from many websites I saw. And I had no clue really what Section 179 is all about. However, comparing what IRS said and NINJA, I feel a little comfortable now with S.179.

Per IRS:

The properties that qualify are for business use, purchase, and eligible properties, such as:

Tangible, qualified real property, single purpose agricultural (livestock or horticultural structures), off-the-shelf computer software, storage facilities (distributing petroleum)

Per NINJA:

To qualify for either the employment credit or the increased Section 179 deduction, a business must be located in the zone and engaged in an active trade or business within the zone and at least 35% of its employees must live in the zone. Certain businesses are not eligible, including golf courses, country clubs, massage parlors, hot tub facilities, suntan facilities, racetrack, gambling, liquor stores, and farms with owned or leased assets over $500,000.

[PasstheCPA7]

Hi Guys,

Does anyone know a link where I can create mnemonics? Some of these Becker mnemonics are really bad and I want to create my own mnemonics. Is there a website that generates easy mnemonics for you by simply typing in letters? Would really appreciate it!

Thanks

[Anonymous]

https://wordsolver.net/#!

[PasstheCPA7]

Thanks Amor! That really helps!

[thelonewolf527]

For those who use Becker, for the Business Structures part of chapter 8, should I just remember the chart on that first page that lists all the types of structures if I'm limited on time?

AUD - 08/04/14 - 83
FAR - 11/29/14 - 80
REG - 02/26/15 - 89
BEC - 05/30/15 - 86

DONE!

[PasstheCPA7]

Hi guys – currently studying Commercial paper and it's tough! I wanted to ask you guys. What is the difference between just a regular “Holder” and a “Holder in Due Course (HDC)?” I know a holder in due course needs to give value and be in good faith, but, when a holder receives a negotiable instrument, what does he have to be?

Thanks.

[Anonymous]

Sorry I am using a slightly out of date book with updated questions so I am reading things and then the answer will sometimes not be in tune with what I read but you SHOULD take an extra deduction if you are blind right?

[Anonymous]

Yes, additional deduction of $1550 (I think) for 2014 and another $1550 if 65 or over. You can only use either or both when not taking the itemized deductions.

[Author]

Replies