[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

[Theodore]

Can someone help me understand this. I am reviewing and I am still having trouble understanding the Passive activity loss mom and pop exception.

Smith has an adjusted gross income (AGI) of $120,000 without taking into consideration $40,000 of losses from rental real estate activities. Smith actively participates in the rental real estate activities. What amount of the rental losses may Smith deduct in determining taxable income?
a.
$40,000
b.
$0
c.
$15,000
d.
$20,000

FAR: 66, 76!
REG: 76!
AUD: 72, 9/7/2016
BEC: TBA

Don't Stop When You Are Tired, Stop When You Are Done.

[Anonymous]

@Rosy0407

Since AGI is over 100,000 and Smith actively participates, the following formula is used:

25,0000 (max loss deduction) – 50%(amount excess of 100,000)

25,000 – 50%(20,000)

25,000 – 10,000

= 15,000 rental loss Smith is allowed to deduct

@TheWheelHouse

Thanks for your explanation especially for #2. I was going to ask why the 2016 income wouldn't be included in 2015 tax return but I guess it's for matching purposes. That 2016 income starting July 1, 2015 will be included in his 2016 tax return.

[Future Ninja]

@TheWheelHouse – you are right.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Anonymous]

@FutureNinja
For your Q#1 below, the taxable income should be $35,000
+ 25,000 =>OBI
+ 10,000 => GP
———————-
= 35,000 => To be included in 1040 calculation

Please note:
Include OBI (+) and Distributions (-) in calculation of partner's basis
Disregard GP to compute for the partner's basis.

#1. question on distribution of partnership asset:

As a general partner in Greenland Associates, an individual’s share of partnership income for the current tax year is $25,000 ordinary business income and a $10,000 guaranteed payment. The individual also received $5,000 in cash distributions from the partnership. What income should the individual report from the interest in Greenland?

A. $5,000
B. $25,000
C. $35,000
D. $40,000

– See more at: https://www.another71.com/cpa-exam-forum/topic/reg-study-group-q1-2016/page/23#sthash.gaZzgMGg.dpuf

[Anonymous]

@FutureNinja

these are true?
to compute basis of partner = deduct the cash distribution. to compute the income/interest of the partnership = do not include the current distribution (cash). those were the items i learned from practicing mcq. please let me know if those are correct. Thank you.

True as a general rule.
Caveat: However, there's an exception to every rule.

If distributions exceed basis, they can be taxable and treated as capital gains, or in other cases, as return of capital.
It depends with the situation (partnership, S Corp, C Corp) given.
Please give us examples of this kind of situation so we can be at the same page.

[Anonymous]

@FutureNinja
#2.
Gilroy, a calendar-year taxpayer, is a long-time partner in the firm of Adam and Company, which has a fiscal year ending June 30. The partnership agreement provides for Gilroy to receive 25% of the ordinary business income of the partnership. Gilroy also receives a guaranteed payment of $1,000 monthly, which is deductible by the partnership. The partnership reported ordinary business income of $88,000 for the year ended June 30, 2015, and $132,000 for the year ended June 30, 2016. How much should Gilroy report on his 2015 return as total income from the partnership?

A. $25,000
B. $55,000
C. $34,000
D. $28,000

I would select letter C: $34,000
+ $22,000 = Gilroy's 25% share in OBI
+ 12,000 = GP
—————————————————
= $34,000
=============================

OBI of $132,000 is not included in 2015 tax return computation because the partnership has a fiscal year ending June 30. This income has not been earned nor reported until 06/30/2016.

[Anonymous]

I went out of town this weekend. I missed to read @WheelHouse's reply to @FutureNinja.

I got the same answer with her/his answer for #3:
#3 I got B. Revenue of 120,000 reduces by salaries, guaranteed payments, rent expense, and depreciation (other expenses are separately stated) = $35,000.

[Theodore]

@cantstopwontstop Thank you!!

FAR: 66, 76!
REG: 76!
AUD: 72, 9/7/2016
BEC: TBA

Don't Stop When You Are Tired, Stop When You Are Done.

[Future Ninja]

when we say goodbye to our loved ones and we normally say “take care” = TC = trust (calendar year) reqd to use calendar year not fiscal year. ^_^

for me to remember.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Min]

quick question regarding 1933 vs 34 act.

Is due care only a defense for 33? Or would it also still apply to 34?

[Andyred04]

Helloooooooooooo REG Study Group. I'll be here for at least a week & then until 4/15 if I see a passing score for FAR on the 2/23 score release. I look forward to the journey through REG will all of you!

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[Anonymous]

@ Min As per my understanding Due care is the defense for both but the due diligence defense is only for the 1933 act.

[Future Ninja]

All of the following events will cause the termination of an S corporation’s S election except:

A. Transaction that results in over 100 shareholders.
B. Donation of stock to a tax-exempt organization under 501(c)(4).
C. Sale of stock to a resident alien.
D. Failing the passive income test for 3 consecutive years.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Future Ninja]

soo stupid. that question i posted earlier is sooo simple and i misread the choice C. I thought its sale of stock to non-resident alien. Can I bang my head against the wall now? whats going on with me?

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Future Ninja]

On December 31, 2015, LS Corporation terminated its S election. LS Corporation had been an S corporation since its inception in 2013. When may LS Corporation reelect S corporation status without IRS consent?

Reelection Date:

A. January 1, 2019
B. January 1, 2020
C. January 1, 2021
D. December 31, 2020

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Author]

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