[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

[princeCPA]

I think some thing is wrong here. I answered $50,000 and the answer is $35,000 and here is NINJA's explanation.

The interest, taxes, and miscellaneous itemized deductions are not deductible for AMT (alternative minimum tax). The medical expenses are deductible to the extent that they exceed 10% of AGI for both regular and AMT. Miscellaneous itemized deductions are deductible for regular tax (not AMT) only to the extent that they exceed 2% of the individual's AGI. For this taxpayer, the miscellaneous itemized deduction for regular tax would be limited to the amount exceeding AGI of $150,000 × 2% (or 0.02) = $3,000.

Therefore, the taxpayer would have as a miscellaneous itemized deduction $2,000 ($5,000 – $3,000). This deduction is not allowed for AMT and would be added back to taxable income to calculate the alternative minimum taxable income.

Add back:

Interest ($15,000) + Taxes ($18,000) + Miscellaneous itemized deductions ($5,000 – ($150,000 × 0.02)) = $35,000

BEC 79
FAR 86
AUD 79
REG 90

[Anonymous]

see, this is what I don't get. Why should anything be added back if the amount given is AGI? AGI doesn't include any itemized deductions, they are below the line. If 150 was a taxable income, then we would add back those that not allowed for AMT

[princeCPA]

@Anjanja They had $150 AGI and they also claimed those itemized deduction. The AGI is not their taxable income. their TI would be much lower.

BEC 79
FAR 86
AUD 79
REG 90

[Anonymous]

I guess I am having hard time with subjunctive form here

the question should read: what would have been added back to taxable income should all listed above claimed as itemized deductions

[Anonymous]

Oh ok i see, I guess I should have rtmfq

And I see why 35000

[princeCPA]

@Anjanja Why is it only $35,000? I think it should be $50,000. What am I missing here?

BEC 79
FAR 86
AUD 79
REG 90

[Anonymous]

agi 150000 minus itemized deductions:

– home equity interest 15000

– state tax 18000

– med expenses 15000 – (10% * 150000) = 0

– misc 5000 – (2% * 150000) = 2000

taxable income = 115000

now add all those back to get AMTI

[jstay]

@paince, the can still take the 15,000 of madical. it doesnt need to be added back since its not in excess of 10%

had it been 18,000 of medical expenses, 3,000 would be added back.

[princeCPA]

Ohhh my. I deducted the medical expense from AGI. Thanks so much.

BEC 79
FAR 86
AUD 79
REG 90

[Anonymous]

Becker users: R3 SIM #2 (first set). Where is the 30,000 for tax basis for Carey coming from?

[Anonymous]

if they were 65 or older, they would have deducted $3750 as itemized and it would have to be added back

If they were younger than 65 and had med expenses of 18000 as jstay said, they wouldn't have to add 3000 back, med expenses in excess of 10% of AGI are allowed for AMT purposes

[Anonymous]

Just finished R4 and I feel like REG would be tough with only the first four chapters included. Amazing to think that there is still another FOUR chapters left on Business Law. Praying to god the next four chapters aren't as extensive as Tax was.

[jstay]

@cpa8488, R3 sims are the only ones i havent touched yet, lol sorry. ill probably take a look at them tomorrow

@amb2588, the questions go faster for blaw

[Anonymous]

thanks jstay… I asked another question further up any thoughts on it?

[Anonymous]

Also, Martin contributed property to a new partnership in return for a 25% interest. Property had FMV of 150,000, adjusted basis of 100,000, and subject to 100,000 mortgage, assumed by the partnership. What was Martin's basis in the partnership as a result of contribution?

A. 25,000

Lets say that they were talking about a corporation instead of a partnership would it be as follows….

FMV 150,000

basis (100,000)

realized gain 50,000

Liability assumed (100,000)

recognized gain 50,000

and basis of corp. is 100,000

[Author]

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