[jeff]

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

[aatoural]

Justin Justice owns 55% of the outstanding stock of Rego Corporation. During the current year, Rego sold a trailer to Justin for $10,000. The trailer had an adjusted tax basis of $12,000 and had been owned by Rego for 3 years. In its current-year income tax return, what is the allowable loss that Rego can claim on the sale of this trailer?
A. $2,000 Sec. 1245 loss.
B. $2,000 ordinary loss.
C. $2,000 Sec. 1231 loss.
D. $0.

Answer (D) is correct.
A loss from the sale or exchange of property between related parties is not deductible.

I thought for tax purposes related parties were 80% or more.

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

[wakefern58]

Pat, a single taxpayer, has adjusted gross income of $40,000 in the current year. During the year, a hurricane causes $4,100 damage to Pat's personal use car on which Pat has no insurance. Pat purchased the car for $20,000. Immediately before the hurricane, the car's fair market value was $11,000 and immediately after the hurricane its fair market value was $6,900. What amount should Pat deduct as a casualty loss for the current year after all threshold limitations are applied?

I understand why the answer is zero for this Casualty/Loss itemized deduction… But when determining the lesser of the Adjusted Basis or the Decrease in FMV (Which is 11000-6900), how would you compute the adjusted basis here? Thanks for the help!

[aatoural]

basis should be the 20 because not other information was given on depreciation

At least that is how I see it.

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

[Teal]

@wakefern According to Roger it is the amount paid for the property plus any repairs made after the damage occurred. In this case, the basis would just be $20,000. I am surprised he doesn't say to subtract the damage though, but the book does not say that – it only adds the amount paid to repair the property.

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

[Teal]

I have been out of this group this time around. I hope that's not a bad sign because my test is tomorrow! eek! Good luck to everyone taking it this week 🙂

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

[aatoural]

good luck Teal!

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

[HoosierCPA]

@teal good luck!

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

[HoosierCPA]

@aatoural related party transactions are >50%. The 80% you are referring to is the control group test..which is 80% or greater you are entitled to file a consolidated return.

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

[Teal]

thanks @dtatham and @aatoural!!

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

[Namstut]

@Teal good luck!!!

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

[Teal]

thanks @namstut

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

[Namstut]

@aatoural

What am I missing here. If line installation was 20% business then it should be and expense of 13(65*20%). Why is that not there and why is that extra 3,000 deducted?
$95,000 – $5,000 – $1,500 – $50 – ($30,000 – $3,000)

You probably already figured this out but I am just now catching up with all of the activity.

I don't think the $3,000 is double-counted, it's deducted from $30,000 and if you open the parenthesis the (-) will change to (+) since “minus” negative $3,000 really is “plus” $3,000 so it really is added back to revenue:

$95,000 – $5,000 – $1,500 – $50 – $30,000 +$3,000 = $61,450.

The phone line is still confusing like heck. This is the first question on Farming income that I see…ever… There is nothing in Becker review course. I will pretend I didn't see it but thanks a ton for posting! Who knows?

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

[Namstut]

@wakefurn58 I think the basis should be ignored in this case since it was not a total loss. In total loss you would compare the amount of basis lost to the reduction in fair value and use the lesser to calculate your taxable losses. This is just a semi-educated guess. Time for Google!

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

[aatoural]

@dtatham10 – thank you! I got confused there with tax and GAAP rules

@namstut – dispite everybody else advise (which they are soooo right on that point) I have been doing some mcq's from GLEIM on my still weak areas becuase I have memorized most of Beckers. So that farm income uestion is from there.

BTW GLEIM SIMS are a dart to the heart. Only one I got 85% and becuase it was individual tax, the rest Im stock in between the high 65-66%.

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

[HoosierCPA]

@aatoural I was scoring around the same. Don't get discouraged. Most of it's material I'm sure you know they just add a bunch of twists that you aren't used to.

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

[Author]

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