[jeff]

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Post by Another71.

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

[Anonymous]

FROM NINJA-MCQ, it says:

For regular tax depreciation, taxpayers may use MACRS for residential rental property with a 27-1/2-year life and the mid-month convention or ADS using the straight-line method with a 40-year life and the mid-month convention. For alternative minimum tax purposes, however, depreciation is limited to the straight-line method over a period of 27-1/2 years and the mid-month convention. The half-year convention applies to personal property. The mid-quarter convention applies if more than 40% of all personal property is placed in service during the last quarter of the taxpayer's year.

I read from somewhere we use 39 years?

[Anonymous]

To calculate AMTI do you add back unreimbursed medical expenses above 7.5% agi or 10% agi or do you use the same rule as for AGI (10% only if the taxpayer is above 65)?

[Anonymous]

Also what is the difference between tax preference items and adjustments when calculating AMTI?

[BEACPA]

Amor D,

I failed to catch the change in the single and blind deduction during my first pass over the Becker Summary of Changes to Reg. Thank you a million. It's strange they didn't change it for married. Then again there doesn't seem to be much if any logic with tax law.

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!

[BEACPA]

Amor D,

Regarding 39 years vs 27.5 years. My Becker book states that residential rental property is 27.5 years straight-line and “nonresidential real property” (e.g., office buildings & warehouses) have a 39 year straight-line. Hope that 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!

[BEACPA]

Sunni,

Becker doesn't make this very clear. You must add back the amount that is between 7.5% and 10% if it was someone like an elderly person who deducted using the 7.5% threshold. For individuals using the 10% threshold, there is no add back because AMT allows you to keep your deduction above the 10% threshold.

If it's 7.5 % then you have to add back the difference. To illustrate, let's say the AGI is $1,000 and the taxpayer qualifies for the 7.5% (i.e., 65 or older) Let's say their total med expenses are $175.

Then $100 would mistakenly be deducted.

Now keeping with our original example, but using 10%, means that any medical costs over $100 can be deducted. So, with med expenses at $175, you can only deduct $75 – not $100 as shown in the first example using 7.5%. Using a 7.5% floor would cause us to deduct $25 more than we should. So in such a case you would add back $25 if the taxpayer qualified for the 7.5% floor. Hope that 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!

[BEACPA]

Sunni,

Tax preference items are “always” added back, whereas adjustments may be added back or subtracted depending on timing differences. Hope this helps somewhat.

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]

Under adjustments, the mnemonic “TIMME” are definitely add-back items to AMTI.

I listed down specific items that are OUTRIGHT additions:

-Miscellaneous Itemized Deductions (Unreimbursed Employee Expenses subject to 2% AGI limitation)

-State, Local, & Foreign Taxes Paid (actual amount paid)

-Investment Interest Expense (subject to 2% AGI limitation)

-Persona Exemptions

-Standard Deduction

State Tax Refunds are OUTRIGHT reduction to AMTI.

[Anonymous]

Four years ago, a self-employed taxpayer purchased office furniture for $30,000. During the current tax year, the taxpayer sold the furniture for $37,000. At the time of the sale, the taxpayer's depreciation deductions totaled $20,700. What part of the gain is taxed as long-term capital gain?

A. $0

B. $7,000 CORRECT

C. $20,700

D. $27,700

Since the facts show that the taxpayer had taken $20,700 in depreciation, the $30,000 in office furniture had been reduced to a basis of $9,300. The sale of the furniture at $37,000 produced a gain of $27,700 ($37,000 – $9,300).

All of the depreciation taken of $20,700 must be recovered as an ordinary gain. This results in a long-term capital gain of $7,000 ($27,700 – $20,700).

30,000 Cost

-20,700 Depr

---

9,300 Basis

37,000 Sale Price

---

27,700 Realized Gain

Broken Down To:

20,700 Ord. Gain /Depreciation

7,000 LT-CG

Is 20,700 S-1245?

Is 7,000 S-1231?

What does recapture gain and unrecaptured gain mean?

[Anonymous]

Yes!

Yes!

I think I got my own questions answered. Thanks to NINJA-MCQs' simple and detailed explanation!

[NJPRU]

Are you guys remembering the different classes of personal property for depreciation purposes? or is this going to be given on the exam?

AUD: DONE
FAR: DONE
BEC: DONE
REG: DONE

IM GOING TO BE A CPA!!!!!

[NJPRU]

Okay – how about this question.. does anyone have any advise about understand 1231, 1245, and 1250 recaptures? I really don't think Becker explains it well and they don't have nearly enough questions to allow me to practice and understand it. 🙁

AUD: DONE
FAR: DONE
BEC: DONE
REG: DONE

IM GOING TO BE A CPA!!!!!

[Anonymous]

@NJ, I read your post earlier and geez, I told myself, I don't know what clauses is this NJPRU is talking about. I thought I was going to post another question to you question but I felt like I was being stupid not to know what property “clauses” means. LOL

I literally had to draw the properties on my note pads so I can visualize what goes to 5,7,..years. I encountered a number of MCQs that requires memorization of what kind of property has this __ number of years of depreciation.

[Gabe]

Reviewing entities now…just wanted to pop in and wish all my Q1 folks good luck with upcoming tests…I believe most of you are sitting at the end of the month!

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

[lauren725]

The 1250/1245 and 1231 is still pretty fuzzy for me too. I think ninja may go more into it than becker does. That question Amor posted is a good example of 1245 depreciation recapture and 1231 gains. The recaptured gain is 1245 and is recaptured because it was taken out of the amount depreciated. The remainder gain is 1231 and is long term capital gain. It is unrecaptured because it is the amount of gain in excess of what was taken for depreciation. In theory it all makes sense but when you get some of these questions it is hard for me to grasp…

NJ,

I have just memorized the differences between 5 yr and 7 yr property so far.

5 year: computers, automobiles, copiers etc

7 year: furniture and fixtures

I have not finished all of R4 SIMS yet but I think some of them have to do with depreciation. I work some with fixed assets at work and this crap is still really confusing for me. I think depreciation is my least favorite part of tax (well I know it is!)

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!

[Author]

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