[jeff]

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

[aatoural]

No the one I have does not come with the book. But I don't really want the book. I am PDFing the explanation of results to re study again.

I did SIM 4 and a lovely 51% terrible!!

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[r_f_94]

is anyone planning on memorizing the DPAD equation? I dont think I've ever seen a question come up on it. Has anyone else?

[aatoural]

Not me

For tax purposes advanced payments are always added to income when received?

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Teal]

Why is this? I thought his basis would be the adjusted basis in the land? I've got my mind all twisted up on these things!
Olson, Wayne, and Hogan are equal partners in the OWH partnership. Olson's basis in the partnership interest is $70,000. Olson receives a liquidating distribution of $10,000 cash and land with a fair market value of $63,000, and a basis of $58,000. What is Olson's basis in the land?

Incorrect A.
$58,000

B.
$60,000

C.
$63,000

D.
$70,000

You answered A. The correct answer is B.

The basis of property (other than money) distributed by a partnership to a partner in liquidation of the partner's interest is equal to the adjusted basis of the partner's interest in the partnership reduced by any money distributed in the same transaction. In this case:

Olson's basis in partnership interest $70,000
Cash liquidating distribution (10,000)
——–
Basis in property liquidating distribution (land) $60,000
If this was a nonliquidating distribution, different rules would apply for determining basis in the land.

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

[HoosierCPA]

@teal the key word here is LIQUIDATING DISTRIBUTION..you need to make sure you pay close attention to the wording in these situations.

In a liquidating distribution of a partnership you will first lower the basis by the cash…then the property will automatically take on the remaining basis of the partner, no matter what is left over. So if you reworded this question and the partner had a basis of 70k received a cash distribution of 10k and property w/ a basis of 25k and FMV of 30k they will still have a property basis of 60k…whatever amount that will take the partners basis to zero is what the properties basis assumes.

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

[aatoural]

@Teal – Remember that with partnerships a liquidating distribution that includes cash and property/land, the basis of partner is 1st decreased by cash distribution to that partner, then the basis of land/property reduces the basis as well, but since is a liquidating distribution that basis of land/property HAS to make the partners basis ZERO.

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Teal]

okay thanks guys! I know it's mostly memorization, but I don't like basis transactions. They don't seem like common sense to me haha. Although, I suppose it is common sense that their basis would be taken down to 0.

Thanks again! Happy 2017!

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

[jack yassa]

Greetings,

For guys that took the exam before, does it happens in the SEARCH question to be “TS” in the code or it's always “IRC”?.
If so what's the difference between both?
Thanks.

[Namstut]

@aatoural I just wanted to comment on the post related to the Safe Harbor rules. In your earlier reply you referenced safe harbor rules related to deminimis; however, in the problem posted on the subject I think a different section of Safe Harbor rules would apply better. Do you agree?

https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations

Safe Harbor Election for Small Taxpayers
You are not required to capitalize as an improvement, and therefore may be permitted to deduct, the costs of work performed on owned or leased buildings, e.g., repairs, maintenance, improvements or similar costs, that fall into the safe harbor election for small taxpayers. The requirements of the safe harbor election for small taxpayers are:
Average annual gross receipts of $10 million or less; and
Owns or leases building property with an unadjusted basis of less than $1 million or less; and
The total amount paid during the taxable year for repairs, maintenance, improvements, or similar activities performed on such building property doesn't exceed the lesser of-
Two percent of the unadjusted basis of the eligible building property; or
$10,000 (for questions about how to calculate the unadjusted basis, refer to “Figuring the Unadjusted Basis of Your Property” in Publication 946
You make the election to use the safe harbor for each taxable year in which qualifying amounts are incurred.
The election is made by attaching a statement to your income tax return for the taxable year. See When and how do you make an election provided under the final tangibles regulations?
An annual election is not a change in method of accounting. Therefore, you shouldn't file Form 3115, Application for Change in Method of Accounting, to make this election or to stop applying the safe harbor in a subsequent year.

Safe Harbor for Routine Maintenance
You are not required to capitalize as an improvement, and therefore may deduct, amounts that meet all of the following criteria:
Amounts paid for recurring activities that you expect to perform;
As a result of your use of the property in your trade or business;
To keep the property in its ordinarily efficient operating condition; and
You reasonably expect, at the time the property is placed in service, to perform the activities:
For building structures and building systems, more than once during the 10-year period beginning when placed in service, or
For property other than buildings, more than once during the class life of the unit of property.

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

[Namstut]

Late start today so watch out for my post diarrhea!

For tax purposes advanced payments are always added to income when received?

@aatoural, are you referring to advanced rent payments? If that is what you are referring to then for accrual basis taxpayer they will be included in taxable income. For cash basis taxpayer they will not be included in taxable income. The revenue is not recognized, the receipt will probably sit in prepaid rent, which is an asset account, and will not be reflected on the Income Statement until earned.

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

[Namstut]

@jackyassa,

If the question is about the AICPA Professional Standards related to Tax Services you would search in TS. TS includes professional responsibilities of the tax preparer, etc.

If the research question is in about the tax return and tax return items (deductions, AGI, etc) the information you need will be in the Internal Revenue Code section (IRC).

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

[Namstut]

@cpaMD86 it really does all come together at the end. One huge advise I would give is to allow enough time to review. Everyone is different but for me 2 weeks was good but not good enough, another week would probably took me over the FAIL hump.

Also, going through questions in this study group and figuring out/researching the answers is really helpful. Usually the most complicated and confusing topics come up on the board. It helps you isolate your weak areas and redirect your efforts to a specific topic.

I can't say enough about this board!

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

[Teal]

Nevermind found it!

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

[Namstut]

@aatoural scratch my reply regarding advance rent payments. I just came across a review question in Becker for a cash-basis taxpayer where advance rents for next year are included in the calculation of gross income.

A cash basis taxpayer should report gross income for the year in which income is either actually or constructively received, whether in cash or property.

This is NOT good 3 days before the exam! 🙂

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

[Namstut]

Is it just me or is this question confusing?

During the current year, Nale Corp. received dividends of $1,000 from a 10% -owned taxable domestic corporation. When Nale computes the maximum allowable deduction for contributions in its current year return, the amount of dividends to be included in the computation of taxable income is:

a. 0
B. 1,000
c. 200
d. 300

What's your answer?

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

[Author]

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