[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for REG. 🙂

[HoosierCPA]

So I'm going through some flash cards. A couple of the cards talk about when you sell property to a related party below FMV and that related party later sells the property but assumes the original parties basis. All of which I understand. What I'm not sure I understood is that this type of transaction fell under gift tax rules. Is this true? I would have just assumed this is just a regular capital gain situation?

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[LIZZ]

Has anyone done the practice exam on the AICPA website? I was just wondering if it was worth my time. That new SIM format has me really nervous.

AICPA Practice Exam

FAR - 05/2015
AUD - 75,11/2014
REG - 07/2015
BEC - 09/2015

[Namstut]

@lizz I did it and I highly recommend it.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[RE2PECT]

@dtatham10- How often do you go through flash cards? I have the Ninja ones and don't use them very often. For some reason I feel like I should be constantly doing mcq's or sims, but I probably should switch it up a little.

@LIZZ- I would check it out. Although it's not the full AL, it's good practice to browse through and get familiar with the search functions.

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[HoosierCPA]

@re2pect just here and there. I don't go through them during my normal study hours but try and bring them with me everywhere I go so I can flip through them on my down time. During the holidays my wife was driving and I was looking through them in the car. During the day whether at work or at home I will have them on me and if I find a time where I'm just sitting on the couch or need a break from work I will flip through a couple. I try to stick with the chapter I am working mcq'son and not work ahead so I can apply the flashcards to mcq's.

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Namstut]

@re2pect, regarding the study time – I might be pushing it trying to get ready in 9 weeks. I have been working in accounting for the last 20+ years, mostly corporate GL accounting but this is such a narrow spectrum of what FAR is made of. I will attempt. At this point I have nothing to lose. If I fail both, REG and FAR I will wait to take them at the end of the Summer, closer to the score release so at least I will enjoy summer.

@dtatham10 can you post the question from flashcard you are referring to? I am confused – since it's a sale why does it fall under gift tax rules?

Also, the IRS publication 946 states the following regarding Section 179 deduction:

The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business.

Any cost not deductible in one year under section 179 because of this limit can be carried to the next year.

You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit.

https://www.irs.gov/publications/p946/ch02.html

I don't remember Becker mentioning the carry over. I am still looking through the textbook.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[HoosierCPA]

@namstut so I'm not sure they directly state it's subject to gift tax but there a couple flash cards that make me believe it because they talk about the donors basis and keep wordking it as “Gift basis”

1)In general how is the donee's basis of a gift determined? How is the holding period determined?

Answer:
– In general the donee's basis of a gift is the same as the donor's basis. The carryover basis may be increased for gift tax paid on appreciation of gift.
-The holding period includes the donor's holding period unless basis becomes FMV, then holding period starts at date of gift

2)What is the basis of a gift for determining gain or loss in a sale transaction?

Answer:
-For purposes of calculating a gain on sale, the gift basis to use is the donors rollover basis.
-For purposes of calculating a loss on sale, the gift basis to use it he FMV at the date of gift.
-if the sales price is between the donors rollover basis of the gift and the FMV of the gift at the date of gift, no gain or loss is recognized on sale.

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Namstut]

@dtatham10 I got it! The donee does not recognize gain or loss at the time the gift is received. The gain or loss is recognized when the donee sells the property.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[HoosierCPA]

@namstut so does that mean this gain recognized falls under gift tax? This concept falls close to my heart because lets just say I've seen it in the past in much more strenuous circumstances ;).

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Namstut]

@dtatham10 no it will be a long term or a short term capital gain or loss.

Do you still have Becker review software? R4 SIM 1 Testlets 3 and 4 – good practice!

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[HoosierCPA]

That's just odd…lets just say based on where these questions landed during my “strenuous circumstances” that makes NO sense lol! But I went with the same logic that you just mentioned that it would fall under regular capital gain/loss treatment and not gift tax. Just seems odd that you would see this scenario in 2 of 5 questions under a “gift tax” sim…guess it makes me feel better that I wasn't going crazy!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Teal]

I just did an AICPA practice exam and have a question on the Document Review SIM. One of the questions was what the proper basis was for an exchanged delivery van. It appeared that what they did to get the answer was take the purchase price of the new van and added a years worth of depreciation (related to the old van) back to the purchase price of the new van to get the current adjusted basis of the new van. I am so baffled as to why this is. I would have taken the old van's basis and left it at that. Has anyone seen this before?

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[JMG]

Individual Lark's Year 2 brokerage account statement listed the following capital gains and losses from the sale of stock investments:

Short-term capital gain $ 6,000
Long-term capital gain 14,000
Short-term capital loss 4,000
Long-term capital loss 8,000

In addition, two stock investments became worthless in Year 2. Public Company X stock was purchased in December of Year 1 for $5,000, and formal notification was received by Lark in July of Year 2 that it was worthless. Private-company Section 1244 stock was issued to Lark for $10,000 in January of Year 1 and was determined to be worthless in December of Year 2. What is Lark's Year 2 net capital gain or loss before any capital loss limitation?

A.$2,000 net capital loss
B.$3,000 net capital gain Correct
C.$7,000 net capital loss
D.$8,000 net capital gain

Ninja didn't do a very good job of explaining the treatment of the worthless stock, anyone want to take a crack at it?

[RE2PECT]

@dtatham10- Same here. I might do a quick set when I get in bed or while watching tv with my wife. Some people swear by them, but I guess that's because they make their own.

@Teal- If you haven't already, check out Roger's video on the DRS's. I think he walks through the same problem on the practice exam. If you get one on your exam I would save it for last because they can be very time consuming.

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[Namstut]

@jmg I think loss from worthless 1244 stock is an ordinary loss, only you have to be the original owner. Otherwise it's capital loss. The max deductible is 50k for single and 100k for MFL.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Author]

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