[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/

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

installment sale? 400 will be paid later

[Sand Wraith]

@ jstay It's an installment sale question so it's asking about the gross profit percentage which is what you said 450/600 = 0.75

AUD ... Passed
REG ... Passed
FAR ... Passed
BEC ... Passed

I'm Done!!

[Tncincy]

Oh Ninja's I just had a real lesson on installment sales…..this guy has sold two properties he financed. the sales price was 49,000, the cost was 28,442 and he paid 100.00 title expense. He received 7,000 down and 150.00 payment toward principal and 350. in interest.(500.00 1rst payment). if the selling price is 49,000 where would you show the 7,000 down payment?

The second property was similar. sales price 12,900 cost 16,900, 83.00 for title transfer, 2800 in payments and 700 down payment. (loss on sale)

This guy wants to show the 7,000 and 700 down payments as regular income…..I am pulling my hair out trying to explain it is not regular income…..and they guy is hard of hearing.

Where would you should these down payments……or explain where he can understand.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[stoleway]

@tncincy

Is the seller financing the deal himself or through the bank?

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Tncincy]

financing himself

It begins with a 75
Been here too long as a cheerleader....ready to pass

[stoleway]

In the 1st case, the seller will report the transaction on an installment basis. A portion of the $7000 will be reported as income and another portion will be a recovery of investment/principal. when I did my calculation over here, I show $2922.57 as taxable and $4077.43 is the principal.

In the second case, the seller will not be able to use the installment method since there was a loss. The entire loss is recognized in the year of sale, but there are rules relating to losses of business or personal assets

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Anonymous]

The YZ partnership had the following income items during the year.

Income from operations $10,000

Section 1231 gain 7,000

Dividend income 6,000

Recovery of bad debt previously written off 1,000

What amount should be reported as ordinary income by the partnership for the year?

I thought dividend income was ordinary income?

[Tncincy]

@stoleway where will he report the 7000 payment as installment sale income or ordinary income under recapture I think 4797 is the form.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Anonymous]

cpa8488,

maybe because dividends are reported on partners' 1040? I would get this one wrong. And many others

[Anonymous]

The answer is 10,000 and yes your probably right because the other 3 would be separately stated items.

[stoleway]

@incy….yes, use 4797 to figure it out.

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Tncincy]

Thanks, wow. I take reg at the end of may…..I guess I better nail down installment sales. I got the second part of the question. I was a little embarrassed but this old guy was really challenging with his questions. I hope he continue to do business with me and Yes, I took the humble road and said let me look into this.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[Anonymous]

Is recovery of debt stated separately? Where?

[vritti]

Hi, can someone help me with this?

Rita Spano is an active participant in a company retirement plan. Her husband, John, age 45, works for a company that does not have a retirement plan. The Spanos' joint adjusted gross income for 2014 is $185,000. John contributes $4,000 to an IRA for himself. How much of this $4,000 contribution for John can the Spanos deduct on their 2014 joint return?

This is the explanation:

1) Modified AGI : 185,000 – 181,000 = $ 4000

2) Full contribution limit : 4000/10,000 = 0.400

3) Maximum contribution ($4,000 x 2) $ 8,000

Reduction factor x 0.400

Reduction amount $ 3,200

I understand everything except 3) Why are we multiplying 4000 x 2 ?

Sorry if this is a silly question. Thanks.

[Anonymous]

Internally generated goodwill? How is that determined?

Which one of the following is a capital asset when a business was built by the taxpayer?

A. Goodwill.

Answer (A) is correct.

Capital assets include all property held by a taxpayer unless excluded by the IRC. Goodwill is not excluded unless it was acquired in connection with a trade or business. Goodwill acquired is thus treated as amortizable property, which is not a capital asset. Internally generated goodwill, however, is a capital asset.

[Author]

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