[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.

[wmcpa]

@terryharm – I don't have any on top of my head as yet, but I'll keep it in mind as I study – I do recall that the underpayment penalty and interest starts on the day that the taxes are due (i.e. not at extension date). Also, if there is a huge understatement (i think $25K) that IRS happens to find, I believe there's more investigation, liability, etc. involved in addition to extending the statutory years to 6 years from 3 years.

also – were you referring to examples for cpa/tax preparer liability or taxpayer liability?

couple of links that you may find helpful (esp. taxpayer liability):

https://tax.findlaw.com/tax-problems-audits/tax-penalties-quick-reference-guide.html

https://www2.uhv.edu/chiangw/acct4311/HWsolutions/Solutions%20Ch%207.pdf (has solutions/examples from a book)

FAR: 83
REG: 69, 69, retake Q1 2015
AUD: Q2 2015
BEC: Q2 2015

[Anonymous]

Mr. Brown transferred property, which had an adjusted basis to him of $40,000 and a fair market value of $50,000, to Corporation B in exchange for 100% of B’s only class of stock and $15,000 cash. At the time of the transfer, the stock had a fair market value of $35,000. What is the amount of gain to be recognized by Mr. Brown?

A. $15,000

B. $0

C. $25,000

D. $10,000

Anyone who has good notes to share on rules for contribution (formation) and distribution (liquidation) of properties in a corporation?

[Anonymous]

What is the amount of gain to be recognized by Mr. Brown?

D. $10,000

[Anonymous]

* If FMV (Old) > AB, there is a realized gain

---

Realized G/L = FMV (Old) – AB (Old)

OR

Realized G/L = FMV (New) – AB (Old) + Boot Received – Boot Paid

---

Recognized Gain = The lower of Realized Gain OR Boot Received

Deferred G/L = Realized G/L – Recognized G/L

---

Basis (New) = AB (Old) + Recognized G – Boot Received + Boot Paid

OR

Basis (New) = FMV (New) + Deferred L – Deferred G

---

* For Non-Like-Kind Items

Basis = FMV (New) + Boot Received

[Anonymous]

Edited: @Amor Correct answer is D. I missed the part on your notes “Recognized Gain = The lower of Realized Gain OR Boot Received”. Thanks for the notes by the way.

[Anonymous]

I corrected my first answer to have picked out $15,000 as lower of the Realized G/L or Boot Received over $10,000, sort of arithmetic issue due to sleepiness. LOL

[Anonymous]

LOL. I thought I'm loosing my mind. I edited my post because I thought you said A, earlier.

[Anonymous]

My eyes crossed. When can 15k lower than 10k? LOL

I am actually studying R5 now. I had detailed notes from R1-R4, but never had a chance to read through R5-R8 on my first REG test. So my score was justified to be just half a hundred, LOL

I've already forgotten R3 at this time. But with the formulas I laid out from my previous notes, it's just easy to get the answer correct.

[Anonymous]

Mary, an individual shareholder, owns 125 shares of West Corporation. West Corporation has 500 shares of common stock outstanding. If West Corporation redeems 100 shares of common stock from its shareholders, what is the least number of Mary’s shares that will need to be redeemed in order for the redemption to be substantially disproportionate to Mary?

A. 80

B. 10

C. 45

D. 46

[Anonymous]

Feel free to post some questions as well to keep us both awake!

[Anonymous]

Ey CPAby2015, is that question still under REG or FAR? LOL

[Anonymous]

It's REG. I don't remember seeing that question in FAR.

[Anonymous]

C?

[Anonymous]

How much is the civil penalty for each wrongful disclosure and/or wrongful use of tax return information?

[Anonymous]

Significant disproportionate – if interest reduced to “less than” 80% of original % after distribution

Almost. It's D. Orig % was 25% (125/500) so in order to consider disproportionate, her share must fall below 20% (25% x 80%) of the outstanding stock (500-100=400 shares) after redemption. 20% x 400 = 80. 125-80 = 45 is the 80% mark but the rule is “less than” not “less than or equal to”.

[Author]

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