[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for REG.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

[Pandarama]

Claudia- because it was considered a passive activity in year2, so we need passive activity income to offset any losses. If the items were capital losses, an individual taxpayer would've been able to deduct $3000.

I hope I said everything correctly.

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[Pandarama]

@another- if you think about it, it does take the $5k in to account. It would just be worded differently. The question asks how much you can deduct for the INTEREST expense. You already know that $10k income – $8 NONinterest expense left you with $2 income. If you subtract the $5k, you'd be left with negative $3k. But we can't have a negative so only $2k can be used.

Think of this problem as those annoying algebra word problems in grade school. “A+B=C, solve for B”.

The question wasn't asking for the total loss, it wants just the interest expense amount that we will be allowed to report.

One important thing to look out with is realized vs recognized. In this case, the recognized (reported) interest expense would be $2000 but we realize interest expense $5000 in reality.

Hope this helps.. Even a tiny bit lol.

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[another9215]

Thanks, Pandarama! Definitely helpful.

[Claudia408]

@Panda – ahh yes, I keep forgetting that! thank you.

@Future Ninja – well…. i am kinda struggling… there's so much to remember and i haven't even seen every question once. i would push back my exam but my NTS expires Jan 16, I might as well try my best and get the experience. Still, I'm certain I'll be taking Reg again in Q2. How are your studies? Last section for you!

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Anonymous]

/3/2016 reg2015.ninjacpareview.com/PrintPage.aspx?SessionQuestionId=1280325f­22f4­4a63­8f78­1a51e8c589c6
https://reg2015.ninjacpareview.com/PrintPage.aspx?SessionQuestionId=1280325f­22f4­4a63­8f78­1a51e8c589c6 1/1
CPA 2015.0 ­ REG
Characterization of Income, Question # 1070
During 2015, Lee Smith had $100,000 of mortgage debt canceled because he was insolvent. Immediately
prior to the debt cancellation, Smith's adjusted basis in his home was $150,000. As a result of the
cancellation, Lee Smith will recognize income of:
Incorrect A. $0.
B. $50,000.
C. $100,000.
D. $150,000.
You answered A. The correct answer is C.
Discharge of debt due to debtor insolvency is generally not included in gross income. Instead, the
adjusted basis of assets is reduced by the amount of debt forgiven. In this case, Lee Smith's adjusted basis
of his home will become $50,000 ($150,000 − $100,000). However, for 2015 the mortgage debt
forgiveness has expired. Therefore, Lee will recognize $100,000 as income. Since Lee is not filing
bankruptcy and the debt forgiveness has expired, he must claim the full amount of mortgage

I have wiley 2015,and book says Taxpayer can exclude the discharge of indebtness upto $2 million and reduce the basis of house , does this rule not in effect any more. this is what the ninja explaination is saying or I am understanding something wrong.
anyone please help.
thanks in advance.

[Pandarama]

@ano – https://www.irs.gov/uac/Home-Foreclosure-and-Debt-Cancellation

Second paragraph makes it sound like the debt forgiveness exclusion of up to $2mil was for debt cancellations between 2007-2014. So it looks like ninja's explanation was right. It's possible wiley's book was written right before this update came out.

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[Pandarama]

Here's two tricky questions (I'll post them separately):

Which of the following items of information should be included in a corporation's articles of incorporation (charter)?
A. Name and address of each preincorporation subscriber
B. Nature and purpose of the corporation's business
C. Name and address of the corporation's promoter
D. Election of either C corporation or S corporation status

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[Pandarama]

Which of the following items of information should be included in a corporation's articles of incorporation (charter)?
A. Name and address of each incorporator
B. Nature and purpose of the corporation's business
C. Name and address of the corporation's promoter
D. Election of either C corporation or S corporation status

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[steph2014CPA]

@panderama I hate those questions! on one of my practice exams I got them both and decided to take good notes on that for review. Answer should be A for both? to be honest, I'm not even sure what preincorporation subcribers are, but given the others are not required….

o RMBCA Require articles of incorporation to include:
 The corporation name
 Number of authorized shares
 Address of the initial registered office of the corporation and first registered agent
 Names and addresses of all incorporators

Thanks for the review 🙂

FAR: 80
AUD: 83
BEC: 79
REG: 56, 74, 74, January 6th

[Anonymous]

Jim and Kay Ross contributed to the support of their two children, Dale and Kim, and Jim’s widowed parent, Grant. Dale, a 19-year-old full-time college student, earned $4,500 as a baby-sitter. Kim, a 23‑year-old bank teller, earned $12,000. Grant received $5,000 in dividend income and $4,000 in nontaxa­ble Social Security benefits. Grant, Dale, and Kim are U.S. citizens and were over one-half supported by Jim and Kay. How many exemptions can Jim and Kay claim on their joint income tax return?

[Pandarama]

@steph – I hate these questions too!!!!! ONE STUPID WORD is what changes everything.

Answers:
#1=B [the key word in that problem was *should*, the remaining options were all items that are not required nor should be included]
#2=A [the key word was *must*]

The first problem's answer letter A said “PREincorporator” rather than just incorporator.

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[Pandarama]

@bond – Exemptions would be 3: Jim,Kay, and Dale. The daughter Kim makes too much and wasn't a full-time student. Although Grant didn't work, he earns too much dividend income to be an exemption.

BEC - 80
AUD - 64, 75 - credit lost, 90!!
REG - 73, 74, 83
FAR - 61, 72, 85

Feels good finishing on my best note. Time to watch the mailbox.

[Claudia408]

Hi can someone help with this depreciation recapture calculation? I think the calculation is right but not quite sure why/how to get to $30,000 is ordinary gain and $40,000 is LT gain in the explanation.

In Year 1 Keller, an individual, purchased depreciable real property for $80,000. In Year 5 Keller sold the property for $100,000. At the time of sale the property had a basis of $30,000 due to $50,000 depreciation taken during the holding period. Of the depreciation taken, $30,000 is in excess of the amount that would have been taken under straight-line depreciation. Keller is in the 15% long-term capital gain tax bracket.
Which will be the net gain (loss) reported by Keller and at what applicable tax rate(s)?

My calc:
cost 80,000
MACRS (50,000)
= basis 30,000
sale price 100,000
= gain 70,000
recapture 30,000
sectin 1231 gain 40,000

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[Anonymous]

@panda – Doesn't Dale exceed the gross income test?

[marqzho]

Claudia408

selling price is $100,000
basis by MACRS is $30,000
if SL is used, basis is $30,000+30,000 = $60,000

So capital gain = $100,000-60,000= 40,000 * capital tax rate
excess depreciation needs to be recapture = $30,000 * ordinary tax rate

REG 90
FAR 95
AUD 98
BEC 84

[Author]

Replies