[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

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

[Anonymous]

Thanks, CantStop. I am glad you mentioned that 2000 SHs. I need to go back to my book and make sure I really get it. Your explanations for A, B, and D make sense. But with C, hmm, so total assets less than $10M really don't matter.

[rosecpa]

Amor d, I don't think becker deals with the jobs act at all. If you find it, please tell me where.

[rosecpa]

valorx28

I believe you are right. The FMV is only used if lower than the rollover basis of the donor.

[nib]

@melodylocquiao_pinoycpa

Any time a corporation is formed and “property” (not services rendered) is transferred to the corporation “solely in exchange for stock” of that corporation and immediately after the transfer, the transferors are in “control,” no gain or loss is recognized. (IRC Section 351(a))
So then corpn takes an adjusted basis in the property received from contributing shareholder

S/H BASIS OF CORPN=
Adj basis of property transferred
+ Gain recognzd ( only if ownership < 80 %)
+ < Boot recd > ( includes assumption of a liability )
———————————————————————-
S/H BASIS

in your question,What was Lind’s basis in Ace stock =
40000 ( adj basis ) – 0 gain – 10 mortgage asumed =30000

[nib]

@amor D

I just read ,

1)interest and dividend both are portfolio income .
2)portfolio income cannot offset passive loss .
3) so in your question interest income received from temporary investment is portfolio income and cannot offset passive loss.
So passive loss = 5 % 0f 100,000 = 5000

[Anonymous]

@CantStop, I found the topic from my book and it finally clicked. Thanks again.

Becker's R5 page 51:
1934 Act Registration Requirements
Only 2 types of companies must register their securities:
(1) Companies whose shares are traded on national exchange; OR
(2) Companies that have more than:
…….(I) $10M in assets; and
…….(ii) at least >>>>>2,000 SHs OR
…….>>>>>>>>>>>>>500 SHs who are not accredited {as defined below**} in any outstanding class.

**SECURITIES UNDER RULE 505 MAY BE SOLD TO ANY NUMBER OF ACCREDITED INVESTORS AND 35 OR FEWER UNACCREDITED INVESTORS. NOTE THAT AN ACCREDITED INVESTOR IS ONE SUCH AS AN INSTITUTIONAL INVESTOR, A BANK, A NATURAL PERSON WITH AT LEAST $1M IN NET WORTH OR $200,000 IN ANNUAL INCOME, OFFICERS OR DIRECTORS OF THE ISSUER, ETC.

[nib]

@ @BondVillain

Received gifted property and then sale——-
1) Loss on sale use lesser of basis or FMV
2) GAIN on sale use donor’s basis
3) Sold at prices in between donor’s basis and FMV , no G/L

thus in your question ,
2500-1200= 1300 gain

[nib]

@amorD

Good question on compliance of SEC 1934 ACT requirement .
As you brought this to our notice . i will always remember this .

[nib]

hello friends ,

Please help me with easy understanding of following terms. I’m not able to answer question related to those topics.

Types of warranties include the following:
a. Warranty of title
b. Express warranty
c. Implied warranty:

Warranty of merchantability,
Fitness warranty.

Disclaimer or disclaimed

[Anonymous]

@Bin, thank you for your explanation about passive I/L. I am now able to see it more clearly how to differentiate these 3 types of income: ACTIVE, PASSIVE, AND PORTFOLIO.
I just need to compartmentalize stuff so I could avoid getting them mixed up.

For your question about warranties. I can share with you several pass keys of Becker if you don't have it.
Anyway, the way I understand warranty is I break it into two types:
-Express Warranty
-Implied Warranty

Then, I break implied warranty into 3:
-Title
-Merchantability
-Fitness

Express Warranty [EW] can be created by any of the following:
5 [D-SPAM]
D – Description
S – Sample
P – Promise
A – Affirmation
M – Model
EW can be affirmed by any seller and it cannot be disclaimed.

Let's say, for implied warranty, Jeff sells you his NINJA products. Jeff warrants that the title is good and he owns the right to sell it. He also warrants you the merchantability, because he is a merchant. He also warrants you the fitness of the product for your CPA preparation. It is assumed that you are preparing for CPA tests, not for medical board exam, so you bought NINJA.

[Anonymous]

Is the explanation (below) written in typographical error?
Or am I just missing something?

Which of the following items is not listed on Schedule K, Form 1120S, as a separately stated item?

A.
Net income from rental real estate

B.
Royalty income

C.
Pension expense

D.
Interest expense related to portfolio income
The correct answer is C

EXPLANATION:
Expenses related to pensions, profit sharing, etc. are included in the computation of ordinary income and are not on Schedule K.

[nib]

@amarD

THANKS .Please help me with term ” disclaim “

what seller does or doesn't do when we say ” EW cannot be disclaimed ” .

“If implied warranty can be disclaimed “what action seller take .

[melody_pinaycpa]

Thanks @bin for sharing your knowledge.

Had the question asked for Ace's (corporation) basis, the answer would have been 40K (basis of the property in the hands of contributing shareholder = 40K + cash paid = 0)

FAR (Apr 2015) - 88
AUD (July 2015) - 86
BEC (Oct 2015) - 82
REG - 73, 70, retake Sept 2016

[Anonymous]

@Bin, it is what it is under express warranty.
Let's say I buy a car from Toyota or Volvo (my dream car). It's a car that comes with a 5-year warranty or first 100,000 miles free of service (whichever comes first). The car should run without defects given that express warranty. If there are problems with the car, then I can take it back to the car dealer and have them fix it. The car dealer CANNOT tell me (or cannot disclaim), “we regret to inform you we cannot fix it for free”, or “we cannot replace the defective parts without charging you”. Such disclaimers contradict what are warranted on the agreement (i.e., EW).

Implied warranty can be disclaimed. >> With the NINJA product or any CPA review materials that I've already bought, they are great to use to pass. But they don't come with absolute warranty that I would pass all at any given time. And there's nothing the seller can do about it.

[Anonymous]

I am lost with this S Corporation sample MCQ.
Someone from another thread advised that this problem can be better understood with JEs.
Can anyone help or explain this problem better?
Thanks.

In 2014, Clyde formed an S corporation by contributing $5,000 in stock and $10,000 in loans. In 2014, the corporation had a net loss of $5,000 leaving Clyde with no stock basis and $10,000 in debt basis. Clyde expects the S corporation to have a small loss in 2015 also. Although Clyde knows he has a debt basis he still decides to take a $3,000 distribution in 2015. Clyde will have to report:
A.
$3,000 as a dividend.
B.
$3,000 as a capital gain.
C.
$5,000 as a capital loss.
D.
$2,000 as a capital loss.

The correct answer is B.

Explanation:
Although debt provides basis for the purpose of deducting losses, it is not considered basis for purposes of distributions. The $3,000 will be treated as a capital gain because Clyde had no stock basis. Had the $3,000 been treated as a debt repayment, instead of as a distribution, Clyde would have recognized no income.

[Author]

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