REG Study Group Q1 2015 - Page 46

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  • January 10, 2015 at 2:23 am #651720
    The_AmYam
    Member

    Correct Answer: C

    A corporation is exempt from the AMT for its first tax year. After the first year, a corporation is exempt from the AMT for each year that it passes a gross receipts test. A corporation is exempt for its second year if its gross receipts for the first year did not exceed $5 million. For all subsequent years, a corporation is exempt if its average annual gross receipts for the testing period do not exceed $7.5 million. Exemption from the AMT is not based on asset size nor number of shareholders.

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:24 am #651721
    The_AmYam
    Member

    What would be the alternative minimum tax liability for a corporation that is not exempt from the alternative minimum tax and whose tax return reflects the following for 2014?

    Alternative minimum taxable income (after exemption) $110,000

    AMT foreign tax credit 5,000

    Regular federal income tax (net of foreign tax credit) 4,500

    a) 9,000

    b) 12,500

    c) 17,000

    d) 17,500

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:25 am #651722
    The_AmYam
    Member

    Correct Answer: B

    The corporation’s tentative minimum tax ($110,000 × 20%) = $22,000 would be reduced by the $5,000 AMT foreign tax credit and $4,500 of regular federal income tax, resulting in an alternative minimum tax (AMT) liability of $12,500.

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:31 am #651723
    NJPRU
    Member

    @Yammy <— your new nickname, lol! What is your method of remember AMT? Do you use the mnemonic in the book?

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

    IM GOING TO BE A CPA!!!!!

    January 10, 2015 at 2:33 am #651724
    The_AmYam
    Member

    Boone Corporation, which is not exempt from the alternative minimum tax, reported adjusted current earnings (ACE) of $500,000 for 2014. Its alternative minimum taxable income (before the alternative minimum tax NOL deduction and ACE adjustment) was $200,000. Boone Corporation’s alternative minimum taxable income (after exemption) for 2014 was

    a) 237,500

    b) 372,500

    c) 425,000

    d) 500,000

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:33 am #651725
    The_AmYam
    Member

    C

    Boone’s pre-ACE AMTI of $200,000 would be increased by an ACE adjustment of [($500,000 − $200,000) × 75%] = $225,000, resulting in an alternative minimum taxable income of $425,000. No AMT exemption would be available because Boone’s $40,000 exemption would be reduced (to zero) by 25% of AMTI in excess of $150,000.

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:36 am #651726
    The_AmYam
    Member

    hahaha yammy works… my name is Amy and my last name starts with YAM… so that's fun in real life. haha

    I literally just drill, drill, drill, drill. I write and re-write the long calculation that is at the beginning of the individual and corp AMT sections. the mnemonics DO help a lot though.

    the ACE calc is always hard for me to remember in the corp section so I've been practicing that, also.

    For Individual AMT exemptions, I have them on index cards and keep them at the top of my stack so I look at them every time I review.

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:43 am #651727
    The_AmYam
    Member

    Alright… I'm done for now with those. I'm taking tonight off from studying since I'll be at it most of the day tomorrow. Covering Corp, Individual, and AMT. and property. and various sims.

    I think the questions above are a good way to see how you stand on corp AMT for starters.

    Good night, and good luck. haha 😛

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:45 am #651728
    The_AmYam
    Member

    futureCPA22:

    calc:

    basis

    (cash)

    (FMV property)

    6,500

    -2,000

    =4,500

    -10,500 FMV property basis

    =6,000 gain

    or

    10,500 property FMV

    less remaining basis of 4,500

    =6,000 gain

    REG - 81
    FAR - 79
    AUD - 94
    BEC - OCT 15

    January 10, 2015 at 2:46 am #651729
    NJPRU
    Member

    LOL goodnight Yammy. 🙂

    Starting Partnership questions at 10pm = not so much fun!

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

    IM GOING TO BE A CPA!!!!!

    January 10, 2015 at 3:04 am #651730
    omalloy
    Member

    I need an example of a capital gain property, that is not used as a capital gain property by a partnership after its initial contribution. (????)

    FAR 65, 70, 78
    REG 64, 76
    BEC 70, 80
    AUD 81

    Ethics 96

    Péter un plomb

    January 10, 2015 at 3:10 am #651731
    omalloy
    Member

    Can a partnership that has inventory ever use cash method of accounting?

    FAR 65, 70, 78
    REG 64, 76
    BEC 70, 80
    AUD 81

    Ethics 96

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    January 10, 2015 at 3:33 am #651732
    futureCPA
    Member

    Thanks @ the_amyam and NJPRU.

    I'm not understanding why you would add 20k back to 410k when it states that the 20k is “included” in that amount. I understand that c corps can deduct charitable contributions up to 10% of TI after adding back DRD. Any help would be appreciated.

    In Year 2, Garland Corp. contributed $40,000 to a qualified charitable organization. Garland's Year 2 taxable income before the deduction for charitable contributions was $410,000. Included in that amount is a $20,000 dividends received deduction. Garland also had carryover contributions of $5,000 from the prior year. In Year 2, what amount can Garland deduct as charitable contributions?

    a. $43,000

    b. $40,000

    c. $41,000

    d. $45,000

    Explanation

    Choice “a” is correct. The charitable contribution deduction is limited to 10% of taxable income before the dividends received deduction and the charitable contribution deduction. 10% ($410,000 + $20,000) = $43,000. The deduction consists of $40,000 from the current year and $3,000 from the prior year contribution carryover. That leaves a $2,000 carryover from Year 1 to Year 3.

    REG - 70, 72, retake at end of Nov.
    BEC - PASS
    FAR - 10/20/2015
    AUD - PASS

    January 10, 2015 at 3:50 am #651734
    NJPRU
    Member

    @future:

    When you calculate the 10% to figure out the contributions allowed to be deducted, you must do it without consideration of the DRD. In this problem, the DRD is included in the 410 taxable income, which means you have to add the 20k DRD back which equals 430k. this 430k taxable income number is the number the 10% is calculated upon.

    410k tax inc + add back of 20k DRD = 430k

    430k x 10% = 43k

    total contributions for the year = 40k + 5k carryover; however, you can only deduct up to the 43k. the rest is carried forward to future years.

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

    IM GOING TO BE A CPA!!!!!

    January 10, 2015 at 4:33 am #651735
    Mika
    Participant

    @ The_AmYam, why need to deduct regular federal income tax (net of foreign tax credit)? I am confuse with this part

    REG - 80 (02/13/2015) Roger + Ninja Flash Card + Ninja MCQ + Becker's Note
    FAR - 84 (05/29/2015) Roger + Ninja MCQ + Some Wiley book questions
    BEC - 77 (08/27/2015) Roger + Ninja MCQ + Half Wiley book questions
    AUD - 87 (08/28/2015) Roger + Ninja MCQ + Half Wiley book questions

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