[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]

I didn't quite get this question from Ninja MCQ hoping you guys could help!

Brand New, Inc., was organized and began active business on January 2, 2014. Brand New incurred the following expenses in connection with creating the business:

State incorporation fees $ 5,000

Legal fees for drafting the charter 35,000

Printing costs for stock certificates 10,000

Professional fees for issuance of stock 15,000

Broker's commission on sale of stock 25,000

Expense for the temporary directors 20,000

---

Total $110,000

What is the maximum amount of organization expense that Brand New may deduct on its 2014 tax return?

A. $4,000

B. $5,000

C. $8,667

D. $12,000

I got C because I thought the first year is $5000 + 12 months amortization of the 180 months, which is C. But Ninja MCQ said the correct answer is A. What do you guys think?

[willpassby2014]

BOKER BEAR,

While doing wiley i always was confused by this. Is it 5000 + any excess of amount amortized over 180 months for $50,000 or more

But here we this is how it is calculated. The maximum amount of amortization per month is 60,000 / 180=333.33

333*12=4000.

BEC Passed
FAR Passed
AUD Passed
REG Passed

[Anonymous]

My understanding is $5000+ excess which is what you calculated @willpassby2014 not sure why the answer is A.

[RTCPA]

hi

can any one explain to me what is disclosed position / undisclosed position

thnx

[Anonymous]

willpassby2014

Same with me also. your explanation cleared my confusion… thanks.

[Anonymous]

@cpaimustpass

From my understanding if your organizational costs were in total $16,000. You can deduct for the year, 5000 + (16000-5000)/180. That is the instant 5000 deduction then reduce the organizational cost by the amount you instantly deduct and amortize it over the remaining 180 months.

However, there is a sort of “phase-out limitation” to that instant 5000. If a company has organizational costs over 50,000 that instant exemption is reduced dollar for dollar. So in that question where Bokerbear had $60,000 of qualified organizational costs. You lose that instant exemption and can only deduct 60,000/180 * 12months for that first Year. Which equals 4000

Now for example if we had organizational costs of 52000. We could only instant deduct 3000. So for the first year we would have 3000 + (52000-3000)/180.

I'm fairly confident these are the rules.

[Anonymous]

Dzyj that is correct. You've got it.

[No_one]

@Dzyj:- Can you please help me understand this 52000/- eg. that you mentioned in your explanation.

Correct me If i am wrong: up to 50,000/- we can deduct 5000+ 180 amortization

above 50000 its just 180 amortization.

That's why incase of 60000/- cost we did 180 mnths amortization only..

But for 52000/- how come you got 3000/-?

CA Candidate
FAR: You are down...
Aud: Surprised me...Thanks
BEC: 75% work done
REG: It's 80 but I am 100% done 🙂

[No_one]

I don't see becker is very clear about this rule, or I might be missing big time.

CA Candidate
FAR: You are down...
Aud: Surprised me...Thanks
BEC: 75% work done
REG: It's 80 but I am 100% done 🙂

[Anonymous]

No_one,

it completely phaseouts at $55000. Whatever is over 50000 is subtracted from allowed 5000. When you have 52000, you subtract 2000 from 5000 = 3000

[No_one]

Thanks Anjanja: Now I am clear about this. I was doing it all wrong…so far..

CA Candidate
FAR: You are down...
Aud: Surprised me...Thanks
BEC: 75% work done
REG: It's 80 but I am 100% done 🙂

[Tncincy]

At Anjanja: Are you still going for the 30th? (test day)

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

[Anonymous]

tncincy, I am, probably won't be done with blaw though

[Tncincy]

I am doing terrible on mcq's. I may go for my date as well. I just don't want to waste anymore time. But I do want to give myself the best chance to pass. My notice won't expire til 8/1 but I prefer to be studying for another part in the next window.

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

[Anonymous]

West, an Indiana real estate broker, misrepresented to Zimmer that West was licensed in Kansas under the Kansas statute that regulates real estate brokers and requires all brokers to be licensed. Zimmer signed a contract agreeing to pay West a 5% commission for selling Zimmer’s home in Kansas. West did not sign the contract. West sold Zimmer’s home. If West sued Zimmer for nonpayment of commission, Zimmer would be:

A. liable to West only for the value of services rendered.

B. liable to West for the full commission.

C. not liable to West for any amount because West did not sign the contract.

D. not liable to West for any amount because West violated the Kansas licensing requirements.

Correct answer is listed as C; I contend that it should be D. Thoughts? My understanding was that West's selling the home when it is illegal for West to do so (no license) renders the contract void or voidable. If West was licensed, Zimmer would still be liable to West even if West did not sign the contract, so long as Zimmer signed. At least that's what Gleim says (this is a Ninja question).

[Author]

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