[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]

I personally would do Blaw first then tax. Like I've said, Blaw is foreign to most people and there is so much minutia to cover. Like someone else said, there's only so many ways to ask about property transactions, for instance, but really easy to get into the details of the UCC or agency law.

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

[Kate]

Hey all I have a question!

I just did the Becker R2 Sim #2 and was wondering if anyone could clarify something.

In summary, the sim gives us various income and expenses and expenses relating to a home, and asks us the amounts allocated to Schedule C versus Schedule A.

We are told that the individual uses their home 10% as their primary place of business. As a result, things like property insurance, mortgage interest, real estate taxes, and furnace repair are all 10% (of the total expense) deductible on the Schedule C.

Is there some sort of percentage I missed that allows you to deduct personal expenses on a Schedule C?

AUD (2/3/2015) Pass
REG (4/24/2015) Pass
FAR (8/3/2015) Pass
BEC (10/25/2015) Pass

[OnlyBelieve]

Gabe- Foreign income tax- Taxable or deductible at the election of the taxpayer

State and local income taxes, deductible

State, and local personal property taxes, deductible

State and local general sales taxes deductible

AUD - DONE
BEC - DONE
REG - 04/04
FAR - 05/30

[Gabe]

Kate- if they use 10% of their home as a business, than that percentage can be deducted as a “business” expense on sch C. In theory, that 10% is not their “home” it is their business. Fun fact: home office deductions are one of the highest audited aspects of a tax return 🙂

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

[OnlyBelieve]

Kate – If a taxpayer uses his personal home for business, he may deduct 10% of the expenses on schedule C, if such an activity relates to the business of some sort. For example, a taxpayer cannot deduct the use of a kitchen in his home as part of his business due to the fact that you will always eat regardless. No itemized deduction is allowed however, if the home use of property doesn't relate to an interest expense(such as mortgage interest).

AUD - DONE
BEC - DONE
REG - 04/04
FAR - 05/30

[Anonymous]

Gabe, thanks for the input. Think I'll jump over to BLaw. It's been a while since I've looked at any of that stuff and I saw enough of Tim Gearty studying for AUD. Be nice to see Olinto…and that is what my life has become…excited to see a different face on a CPA review lecture…

[Kate]

@onlyBelieve and @gabe thank you!

I have a follow up regarding the same topic. In that same Sim, the mortgage interest expense is 10% allocated to Schedule C and the rest we are told is an interest deduction. However, in a different Sim tab, the solution says that mortgage interest paid on commercial rental property is NOT deductible as an itemized deduction for an individual taxpayer.

Is this what you were saying how if the expense doesn't directly relate to you using the house for business?

Am I missing something or are those conflicting? How is that not an itemized deduction? Is it because its for commercial rental property? Boy is my head spinning!!

That 10% is not a general rule, correct? You allocate based on the percentage given, right?

AUD (2/3/2015) Pass
REG (4/24/2015) Pass
FAR (8/3/2015) Pass
BEC (10/25/2015) Pass

[Kate]

@CTM I believe we were both part of last quarter's audit study group! I see you crushed Audit. Congrats!

AUD (2/3/2015) Pass
REG (4/24/2015) Pass
FAR (8/3/2015) Pass
BEC (10/25/2015) Pass

[OnlyBelieve]

All i want to do right now is go home and study:). Zero productivity at work:)

AUD - DONE
BEC - DONE
REG - 04/04
FAR - 05/30

[Anonymous]

@Kate, we were. Looks like you killed it too! Here's to a similar experience with REG in Q2.

@OnlyBelieve, I know exactly what you mean.

[Gabe]

Kate- off the top of my head I am assuming the rental prop was not rented long enough- per the IRS, ” If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home”

So, if you rented it out for 10 days, it's not “rental” prop and doesn't count.

2. the % is on a case by case basis in re: home office.

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

[BEACPA]

@Kate,

You wrote: the solution says that mortgage interest paid on commercial rental property is NOT deductible as an itemized deduction for an individual taxpayer.

That's correct and yes confusing because of all of the exceptions. In this case, it wouldn't be an itemized deduction to an individual taxpayer unless they filed a Schedule E (1040), in which case they could deduct the mortgage interest and still file a regular individual 1040.

Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests. I like to think of the “E” as self Employed. Hope this helps.

Keep plugging away! You can and you will defeat this beast!

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]

“For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.”

and

“The limits on the amount you can deduct don’t affect the amount you can contribute. However, you can never deduct more than you actually contribute.”

So the break down is…

If you or your spouse are NOT covered- all contributions are deductible (up to $5,500 I think…)

If you are covered- you can only deduct what you contribute?

If you are NOT covered, but your spouse is- fully deductible?

And what are the income phases mentioned? I can't seem to find it on the IRS website…Ninja mentioned $96k-$181k..

Sorry if this is really specific but I keep getting these questions wrong in Ninja.

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

[Kate]

@Gabe and @BEACPA thanks, thanks!

AUD (2/3/2015) Pass
REG (4/24/2015) Pass
FAR (8/3/2015) Pass
BEC (10/25/2015) Pass

[Gabe]

Kate- how far along are you in your studies? Just curious, since we're sitting around the same time 🙂

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

[Author]

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