REG Study Group Q1 2015 - Page 122

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  • February 17, 2015 at 5:42 pm #652864
    Gabe
    Participant

    Thanks for the replies everybody!

    More questions 🙂 I believe…NJPRU talked about setting up scrap paper by showing calc for basis on left and G/L on right. Anyway you could show that here? I am having a difficult time with what reduces basis vs. what constitutes a gain/loss.

    Thanks all.

    Happy studying!

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

    February 17, 2015 at 5:44 pm #652865
    Anonymous
    Inactive

    Passive Activity Losses [PAL] and Net Operating Losses [NOL]:

    When do we add and deduct them from AMT?

    Are current year's PALs & NOLs +Adjustments?

    Are prior year's or carry-over PALs & NOLs -Adjustments?

    Or it's the other way around.

    Can anyone get this straight?

    Thanks!

    February 17, 2015 at 5:50 pm #652866
    BEACPA
    Participant

    imgonnabacpa,

    I agree with Gabe. With only 8 days, I would listen very carefully to both lectures for R5 & R8 and then knock out the MCQs. Next, begin with the SIMs in Tax first. If you're finding it challenging and time consuming – then by all means do the SIMS. You'll be glad you did, because it will put you at ease when you get to that portion of the CPA exam. Next, if you have been marking MCQs using Becker, then redo all of the ones that you marked.

    Best of luck!

    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!

    February 17, 2015 at 6:11 pm #652867
    BEACPA
    Participant

    Gabe,

    I hope this helps your understanding of basis, gain, ect.

    Raw Facts:

    Taxpayers original cost for car is $35,000 and he has taken 18,000 in depreciation. Thus, his adjusted basis is 17,000.

    He wants to exchange it for a new car worth 17,500, so the other party agrees to give this taxpayer $2,500 in cash (Boot Rec'd). Now, there's a four step process as shown below.

    Step 1. Gain/Loss “Realized” = 17,500 + Boot Rec'd of 2,500 – basis in old car of 17,000 = $3,000 “Realized” Gain

    Step 2. Gain/Loss “Recognize” = 2,500 (lesser of “realized gain” of 3,000 or “boot rec'd” of 2,500)

    Step 3. Gain/Loss “Deferred” = $500 ($3,000 gain “realized” – 2,500 gain “recognized)

    Step 4. Basis of new property = 17,000 (FMV of property rec'd – Deferred Gain + Deferred Loss)

    Please let me know if this helped.

    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!

    February 17, 2015 at 6:15 pm #652868
    NJPRU
    Member

    @BEA!! So proud of you!!!

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

    IM GOING TO BE A CPA!!!!!

    February 17, 2015 at 6:45 pm #652869
    BEACPA
    Participant

    NJPRU,

    Thank you! Couldn't have done it without your help.

    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!

    February 17, 2015 at 7:02 pm #652870
    Gabe
    Participant

    @NJ and BEACPA Thanks so much! Wrote all of it out and am going to go through some MCQs and SIMs.

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

    February 17, 2015 at 7:47 pm #652871
    Anonymous
    Inactive

    could somebody please explain this? Why would reimbursed expenses be deducted?

    Robert Francis O’Connor, a single taxpayer age 30, had adjusted gross income of $23,000 in 2014. Upon examining his records, he listed the following deductions for the year:

    Medical expenses

    $3,000

    Charitable contributions

    2,300

    State income taxes paid

    1,160

    Business expenses reimbursed by

    employer but not substantiated

    1,500

    The amount of his allowable itemized deductions for 2014 is

    A. $4,160

    B. $5,200

    Answer (B) is correct.

    Qualifying medical expenses in excess of 10% of AGI may be deducted. State income taxes and qualifying charitable contributions also may be deducted. An employee’s reimbursed business expenses must be substantiated to be excluded from income. Otherwise, they are included in the employee’s income and are a miscellaneous itemized deduction subject to the 2%-of-AGI floor.

    Medical expenses

    $ 3,000

    Less: 10% of AGI

    (2,300)

    $ 700

    Charitable contributions

    2,300

    State income taxes paid

    1,160

    Business expenses

    $ 1,500

    Less: 2% of AGI

    (460)

    1,040

    $5,200

    C. $7,500

    D. $2,900

    February 17, 2015 at 7:53 pm #652872
    Anonymous
    Inactive

    Because the expenses were REIMBURSED by the employer.

    Had it NOT BEEN REIMBURSED (otherwise termed as ‘”UNREIMBURSED”) by employer, the expenses qualify under itemized deductions. Thus you add them as unreimbursed employee expense.

    That's how I understand it. Anyone can clarify. Thanks.

    February 17, 2015 at 7:55 pm #652873
    Anonymous
    Inactive

    Hooray Bea!

    Do you want some more lottery test?

    February 17, 2015 at 7:56 pm #652874
    Anonymous
    Inactive

    They are deducted because they were reimbursed? I also says they were not substantiated => will be added to income and also deducted on sch A (-2% AGI). What is the logic here? I don't get it. Couldn't find anything on irs website

    February 17, 2015 at 8:10 pm #652875
    NJPRU
    Member

    According to the IRS website, “If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense.”

    Check publication 463.5.

    See Lauren's response. I like hers better. 🙂

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

    IM GOING TO BE A CPA!!!!!

    February 17, 2015 at 8:14 pm #652876
    lauren725
    Member

    “An employee’s reimbursed business expenses must be substantiated to be excluded from income. Otherwise, they are included in the employee’s income and are a miscellaneous itemized deduction subject to the 2%-of-AGI floor”

    This is tricky. It looks like since they are not substantiated, the amount is added back to income but allowable under the 2% miscellaneous itemized deduction limitation.

    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 17, 2015 at 8:16 pm #652877
    Anonymous
    Inactive

    2% punishment for not substantiating expenses i guess

    February 17, 2015 at 8:16 pm #652878
    lauren725
    Member

    Has anyone mastered employee stock options? I kind of forgot about that section since it is so small. It was pretty challenging for me and haven't really looked at it much since.

    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!

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