[jeff]

Welcome to the Q2 2015 CPA Exam Study Group for REG.

“Death and Taxes” – Individual Tax for the CPA Exam

Posted by Another71 on Monday, November 24, 2014

Free NINJA: https://www.another71.com/cpa-exam-study-plan/

[Gabe]

@HR thats what i thought…no additional information. This was from AICPA 2014 released questions..the answer states: Porter's transfer is not taxable because the 80% control test is met. Corley's transfer IS taxable because the 80% control test is not met.

So I guess we just assume Porter's interest in the company is > 80%?

Further, the answer key does refer to R3-3, but I don't see anything in the question that “backs up” using FMV.

CPA, CFE
CISA- Experience will be completed by August 2016

[Holly]

@Gabe Okay – Becker does have over and over in pass keys that a taxable event we're to use FMV. That was tricky.

BEC - 79
REG - 85
AUD - 5/27/16

[Peterman25]

That's what I assumed…He transferred property 2 years prior and was 100% owner.

More from the Roger book…

If the aggregate adjusted basis of transferred property (C/O basis = 10,000) exceeds its aggregate FMV (7,000) the corporate transferee's aggregate basis for the property is generally limited to its aggregate FMV immediately after the transaction (7,000). Any required basis reduction is allocated among the transferred properties in proportion to their built-in loss immediately before the transaction (transferor's basis in stock would be the carryover basis of 10,000).

Alternatively the transferor and the corporate transferee are allowed to make an irrevocable election to limit the basis in the stock received by the transferor to the aggregate FMV of the transferred property (transferor would have 7,000 basis and the corporation would have carryover basis of 10,000).

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Gabe]

@Peterman…ok maybe I am being dense…can you dumb it down- what makes this a taxable event? I don't see how the aggregate AB of prop ($300?) exceeds the aggregate FMV ($700).

OOOOOOh wait, so Porter transferred in prop for 100% interest= BASIS is used…then Corley came in and transferred in prop for LESS THAN 80% (10%) interest so FMV is used? Is that right?

CPA, CFE
CISA- Experience will be completed by August 2016

[mour84]

Hi all, I wish to appear for reg by the end of april. i am preparing entirely from wiley cpa gold course. is it sufficient? How should i go about it? Please help

[Peterman25]

@Gabe

Bingo. That's exactly how I interpret it. Contribute property/cash for more that 80% ownership = carryover basis carryover holding.

Those that contribute cash/property and their combined ownership share is less than 80% = FMV basis to corp and the contributors shares will be valued the same. Contributors of property will report a gain = FMV- their basis because of the transfer.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[BEACPA]

@Pass

I felt horrible about the SIMS. I couldn't find the research, which was a first for me. However, I just entered in “IRC” for the research, because I hear they grade everything – so leave nothing blank. Also, I ran out of time on one sim and I didn't fully understand the question, so I entered in one number that I was a complete guess and I entered zero for the other cells. I was someone familiar with the other four sims. However, I had started studying right after the exam because I thought I failed. Praise God!

FAR - 2/28/14 PASS Praise be to God!
AUD - 7/5/14 PASS Praise be to God!
BEC - 11/29/14PASS Praise be to God!
REG - 2/28/14 PASS Praise be to God!

[Gabe]

Thanks Peterman!!

CONGRATS BEACPA!

CPA, CFE
CISA- Experience will be completed by August 2016

[Gabe]

Just to confirm…so the corp would report Corley's prop at FMV of $500k, and Corley would RECOGNIZE a gain of $250k?

CPA, CFE
CISA- Experience will be completed by August 2016

[Peterman25]

Yup…according to the examples that I am seeing in my book….Corley's basis in the corp stock = $500 and Corely would recognize gain.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Anonymous]

Question for those of you using Becker:

Without using the Solution, how the heck are you supposed to figure out some of these Sims?

For example, R3, Simulation Bank 2, Simulation 2 states the following:

Based on the data provided in the tab titled, “Information,” blah blah blah. Use the spreadsheet below to calculate the value to enter on Line 26 of Form 1120.

If I can't find the actual form in the AL. How the heck am I supposed to be able to figure out a Sim like this? Memorize all of the tax forms? That's ridiculous.

[Anonymous]

@angel I remember complaining about the same damn it!! A lot of people printed out the really popular tax forms and practiced by paper/pencil to fill them out. However, your not guaranteed a “tax-form” type SIM on the exam. I know I didn't have any when I took it before.

[Anonymous]

Lane, is a single taxpayer, received 160,00 in salary, 15,000 in income of an S corp in which lane doesn't materially participate, and a 35,000 passive loss from a real estate rental activity in which lane materially participated. lane's MAGI is 165,000. What amount of real estate rental activity loss was deductible?

1) I know the mom and pop exception doesn't qualify because MAGI is to high.

My question is does it matter if Lane doesn't materially participated in one and DOES materially participate in another? I didn't offset the passive loss of 35,000 with the passive income of 15,000 because of this.

[Holly]

@Angel The first task has a total on line 14 Other Deductions and in the instructions for the first task it tells you to calculate Other Deductions in Task 2. All they're asking for is the breakdown of that total, which would be the only expenses that didn't have line items in Task 1. In the instructions for Task 2 it reads – Line 26 of Form 1120, Other Deductions and on the worksheet on line 6 it's labeled transfers to line 26 — which is confusing because in Task 1 it's line 14. You would think if they were going to reference a form, they'd keep it all matching. I think what they're trying to do here is the Other Deductions are always in total on page 1 of the 1120, but there is a required statement that shows all the detail.

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

@CPA8488 I THINK (not sure) that your answer is $15,000 – is this right? My reasoning is that even though it says he materially participated in a rental activity, it's still passive because he's not a real estate professional. So, the pal is limited to the passive income.

BEC - 79
REG - 85
AUD - 5/27/16

[Author]

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