[jeff]

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

[norseman88]

Some of these simulation questions on Becker are so brutal, you complete the question only to find out you got everything wrong because the instructions are not clear. For instance, a question on tax effect and current E&P effect for a particular question. “Please treat each item seperately and indicate the total amount for each situatuin”. I enter the tax effect but find out the solution is looking for the tax effect to be applied on the 100,000 current taxable income before these situations.

I just hope the exam has clear explanation of what they are looking for, is bogus to have the right answer but not enter it in the format they are looking for.

[aatoural]

Rachael, a single filer, has taxable income of $90,900. She has tax preferences and adjustments totaling $40,300. Assume her regular income tax liability is $18,213. What is the amount of Rachael’s alternative minimum tax liability?
A. $1,885
B. $15,899
C. $2,633 CORRECT
D. $0

The AMT exemption for a single filer is $53,900. This exemption is phased out by 25% of the amount of AMTI over $119,700 for single filers. AMTI is $131,200 ($90,900 + $40,300). The phase-out amount is $2,875 [($131,200 – 119,700) × 25%]. The exemption is $51,025 ($53,900 – $2,875). The tentative minimum tax is $20,846 ($80,175 × 26%). The AMT is $2,633 ($20,846 tentative minimum tax – $18,213 regular tax liability).

How am I supposed to know that the tax bracket 26% in exam if (assuming I am correct without googling the tax brackets tables) is the question does not tell you?

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

[aatoural]

Bob Rogers is single and has taxable income in 2016 of $165,000. His only tax preference item is on the sale of qualified small business stock, which he has held since January 2006. He sold the stock on December 31, 2016. The gain realized on the sale was $35,000. However, Bob was able to exclude 50% of this gain. Bob has no other adjustments or loss limitations. What is Bob’s gross AMTI?
A. $200,000
B. $166,225 CORRECT
C. $163,775
D. $165,000

Generally, gross AMTI is taxable income after amounts are added or subtracted for tax preferences, adjustments, and loss limitations. Tax preference items allow relatively favorable treatment in determining regular tax. An amount reflecting the relative preference is added to taxable income in computing AMTI. Bob’s gross AMTI would be $166,225 [$165,000 + ($35,000 × 50% × 7%)]. The 7% is the amount of preference added back for AMTI, not the entire 50% gain exclusion.

WTH????

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

[TXJAM]

I'm having the most difficult time with cash recognized when you contribute to a corp.

I understand:
FMV – NBV = Realized gain

And when a liability is greater than the NBV of a property can you recognize cash.

For example: T contributes 10k cash AND property: FMV- 40k, Liab- 20k, Basis in prop – 5k.

Realized gain = FMV – NBV –> 35 = 40 – 5

What steps do i take for Cash recognized?

[or1on23]

Super helpful !!

Thank you guys !!

[norseman88]

@TXJAM

See below

For example: T contributes 10k cash AND property: FMV- 40k, Liab- 20k, Basis in prop – 5k.

Realized gain = FMV – NBV –> 35 = 40 – 5

What steps do i take for Cash recognized?

Gain Recognized is limited to cash received or the amount that liability over basis exceeds ALL property contributed (including Cash) so in this situation you would calculate as follows:

Liability 20k – Basis 5K = 15K – 10k Cash contributed = 5K Gain Recognized.

[norseman88]

@TXJAM

Quick correction I want to note as my previous post could confuse.

Gain Recognized is limited to cash received or the amount that liability relieved of exceeds basis of ALL property contributed (including Cash) so in this situation you would calculate as follows:

Liability = 20k
Basis of contribution = 5k property + 10k Cash for 15K

20k-15k = 5k gain recognized.

[wakefern58]

Hi All – Could someone please explain to me the Capital Gain BOOT meaning. I am consistently trying to wrap my head around what BOOT is and I feel like it can be explained more simply than I am making it out to be.

[Paul]

@wakefern58 – Roger has a saying ” don't confuse boot with booty” which is totally irrelevant but funny and may of helped me remember this basic explanation.

Boot can be cash, debt relief ( ex: transfer mortgage liability to other party), a car (unlike property), which usually is presented with property during a like kind exchange.

This is the gist of it in the simplist form without going into to much detail. REG is the struggle and my second time around after a fail. I hope this helps towards your understanding of boot.

Best of luck

BEC 10/29/16
FAR 11/26/16
REG TBA
AUD TBA

[HoosierCPA]

@aatoural where are you getting these questions? I've never seen them and they are confusing the heck out of me!!!

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

[JMG]

Does anyone have a reference for all the phaseouts/limitations? I'd like to make a list of them and would be great to see them all in one place.

[RE2PECT]

@dtatham10- They must be from Gleim lol.

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

[aatoural]

@dtatham10 @Re2pect – SORRY!!!! Yes they are. Like re2pect said LOL. The heck they are confusing but then there are some that are not.

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

[isoceles]

@aatoural, I've never seen questions that difficult on AMT. All of the ones I've seen (NINJA and Wiley) are either identifying adjustments/preferences or just broader conceptual questions. Also, many would say “after taking AMT exemptions into account” so you didn't have to worry about that part. Hopefully the exam doesn't have any that hard!

[HoosierCPA]

@isoceles @aatoural @re2pect I'm willing to bet my annual salary that you won't see that complex of an AMT question on the exam ;).

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

[Author]

Replies