[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

[Anonymous]

Amor D…the correct answer is B
AICPA sets the standards and policies and it's in a higher hierarchy than State board

[Anonymous]

Now I want to bang my head against the wall…hahaha

[nib]

@ @ fruitsyrup
Inheritance is always considered long term .

Property basis considered value at date of death or alternate valuation date .
Alternate valuation date is 6 months after death .
But if property distributed before 6 months , then property basis= fmv on date of distribution.

In mcq, property distributed before 6 months , then property basis= fmv on date of distribution= 4500
So Gain / Loss= sale price- basis= 4500-4500 = 0

[Mole351]

Thank you Amor D!

One last question – ha. Do separately stated items reduce partnership basis? I thought it was ordinary loss and distributions…but I have a note that says “and special expense items, such as charitable contributions.”

Does “special expense items” mean separately stated items?

Thought I had this until now/the last minute…starting to question everything. d'oh!

FAR - 87 (5/15)
AUD - 93 (8/15)
REG - 86 (2/16)
BEC - 87 (5/16)

[fruitsyrup]

@bin thank you! I am confused about this question. Do you know why the correct answer is B? I understand that you cannot recognize a loss but I thought you cannot recognize a gain either since no cash was distributed in excess of the basis?

Partnership JKL has decided to liquidate. Partner J's adjusted basis in the partnership is $55,000 and he received only equipment (FMV $55,000, adjusted basis to the partnership of $40,000) in complete liquidation of his share of the partnership. What is the amount of gain or loss Partner J will recognize on his personal tax return?

A.
Gain of $15,000

B.
Partner J may not recognize a loss on the liquidation of the partnership.

C.
Loss of $15,000

Incorrect D.
Partner J will not recognize a gain on the liquidation of the partnership.

You answered D. The correct answer is B.

FAR - 71, 78
AUD - 71, 72, 78
BEC - 75
REG - 48, 60, 67, 76

[fruitsyrup]

Lind and Post organized Ace Corp., which issued voting common stock with a fair market value of $120,000. They each transferred property in exchange for stock as follows:

Adjusted Fair Market Percentage of
Property Basis Value Ace Stock Acquired
——– ——– ———– ——————
Lind Building $40,000 $82,000 60%
Post Land 5,000 48,000 40%

The building was subject to a $10,000 mortgage that was assumed by Ace.

What was Lind’s basis in Ace stock?

A.
$82,000

B.
$40,000

Correct C.
$30,000

D.
$0

Hi, how come Lind's basis is not increased for his share of the liabilities (60%)?

FAR - 71, 78
AUD - 71, 72, 78
BEC - 75
REG - 48, 60, 67, 76

[nib]

@ fruit

Let me try to answer .

1)You are right both answers sound correct . But more precise answer out of those 2 options is B.
2)In case of Gain , simply 2 options
Cash or cash equivalent = recognize Gain
Non cash items = no Gain

4) In case of loss
Cash or cash equivalent= Loss
Non cash equivalent (unrealzed rec / inv) = Loss recognize
Non cash equivalent (only property or only equipment) = No Loss recognize
5) “ONLY EQUIPMENT “ looks like key word .

[nib]

@ fruit

i think you've mixed corporation with Partnership. This question is on corporation.

In corporation when property is contributed & liability is assumed by the corporation. The basis for the shareholder would be NBV of the asset Less:Liability assumed by the corporation(entire 100%)

Dr corporate stock basis30
Dr liab 10
Dr boots recd 0
Cr building basis 40

[MOAC]

can someone help me with this qn?

It's a sim task qn in Becker.

Richard Norton is required to pay a self-employment tax based on the net profits of the farm business. For purposes of this task (Self-Employment Tax), assume that Richard had a net profit of $105,000 from the farm business for Year 3 and $10,000 of Section 1231 gain. Also assume that the maximum net income for social security tax is $117,000 for Year 3. Assume the following rates: 12.4% for social security and 2.9% for Medicare.

Net earnings from Employment?
Becker says answer is 96,968,
Explanation is only 92.35% of the line 1 ($105,000) is actually defined as net earning from from employment. 105,000 x 0,9235= 96,968.

How did Becker get 92.35%?

FAR May 2012 81 (lost credit, didn't sit for other sections.)
FAR 86 Aug 2015
AUD 85 Nov 2015
BEC 84 Dec 2015
REG 78 Mar 2016

Passed ALL sections in first attempt!!

[Anonymous]

One half of self employment tax is deductible to arrive at AGI. Self employement tax is 15.3% so therefore, half of that is 7.65%. $105,000 X 7.65 = $8,032.5. $105,000 – 8032.5 = 96,967.5 net earnings.

[pracap]

Guys,
I have a Becker question on C corp:

I was under the impression that gain has to be recognized if corporate distributes property at FMV, gain being FMV and property's basis!!!

(question 2027)
Mintee corp an accrual basis calender year c corp, had no corporate shareholders when it liquidated in year1. In cancellation of all their Mintee stock, each Mintee shareholder received in year1 a liquidating distribution of $2000 cash and land with a basis of $5000 and FMV of $ 10,500. Before the distribution, each shareholder's tax basis in Mintee stock was $6500.
what amount of gain should each Mintee shareholder recognize on the distribution?
a) $4000
b) $6000
c) 0
d) $500

Explanation
Choice “b” is correct. When a corporation liquidates and distributes assets to shareholders, gain is recognized to the extent that the FMV of assets distributed to a shareholder exceeds the shareholder's basis in the corporation's stock.

[nib]

@ pracap

1)Liquidating corporation is treated as selling asset at FMV .

2)corporation recognized gain = FMV- adj basis of property

3) Corporation also recognize if any loss

4)For shareholder new basis = FMV

Gain recognzd by shareholder = FMV of property + cash received -Basis in corp

[pracap]

@bin
Thanks for the clarity.
By the way, when is your exam? Seems you are prepared well!

[Zaid3155]

hi everyone!

I finished the tax part and started the BUS law section. I hate reading 🙁
how do you study it? any suggestions? and what should i focus on! is the TB enough for the BUS LAW?

thank you

[MOAC]

@emitremus3 that makes sense but then on the next part:

It asks for the self employment tax

and that's How becker did it 96,968 x .153 (15.32%).

Shouldn't it be 105,000 x 15.3% because we multiply the percentage by gross? Plus, since half has already been deducted to reach 96,968 why are we again including that by multiplying it with the full percentage?

Help from anyone would be appreciated.

FAR May 2012 81 (lost credit, didn't sit for other sections.)
FAR 86 Aug 2015
AUD 85 Nov 2015
BEC 84 Dec 2015
REG 78 Mar 2016

Passed ALL sections in first attempt!!

[Author]

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