[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

[Gabe]

@amor I did the exact same thing- I know which SIM you are talking about

@Angel- thanks! When is it NOT appropriate to net mortgages? I thought there was an exception to that…anyone?

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

[Anonymous]

Yes, Gabe, I remember encountering a problem like that. There's sure one exception to this Like-Kind Exchange rule. I will let you know as soon as I recall or encounter it again.

[Gabe]

Amor- found in Ninja notes:

If the netting of Mortgages results in net boot paid

o DO NOT subtract the boot paid amount from the

cash received

o Ignore the boot paid amount from the mortgage

completely

So if it results in boot paid (as opposed to boot received?)…ignore it?

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

[Gabe]

Amor- found in Ninja notes:

If the netting of Mortgages results in net boot paid

o DO NOT subtract the boot paid amount from the

cash received

o Ignore the boot paid amount from the mortgage

completely

So if it results in boot paid (as opposed to boot received?)…ignore it?

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

[Anonymous]

Just scheduled REG for May 15th. This will hopefully be my last section (please God let it be my last section!). If I don't pass REG in Q2 I lose BEC (took a long break last year after passing it in 2014 Q1…stupid). Needless to say I am extremely nervous about REG. I see a lot of people in this group that are taking it for the second time and that has me even more freaked out. I'm still fairly early in my studies and things seem to be going pretty well but the more I read here about past failures the more nervous I get. Is REG really that daunting? I have a solid base in individual tax from working through 5 tax seasons (6 if you count an internship). I'm looking for any advice to help me knock it out first time through. Obviously everyone is different but I'm open to all suggestions. I'm using Becker and Ninja MCQ. I would like some input from anyone that has passed on the first attempt with a solid score as well. Thanks.

[Pwrcat]

@Anna. I agree the Roger course seems to test things you haven't learned which is really frustrating. I also find their MCQ's to be easier then the Ninja ones which is why I always study with the Ninja ones too.

I was excited to get the email a couple weeks ago that they were updating their whole MCQ area but apparently they couldn't get it to work. It is also a little frustrating that you can't study research on there too. I do like his teaching style though as this stuff is soooo dry!!

FAR - 87 11/15/14
AUD - 88 1/26/15
REG - 91 4/6/15
BEC - 86 5/11/15

[Gabe]

On February 1, 2014, Pam Baker purchased a $161,000 machine (5-year property) for use in her business. Pam expensed $25,000 under Section 179 in addition to the regular depreciation of 20% in 2014 and 32% in 2015. Pam's total deductions for 2014 and 2015 for the machine are:

Correct A.

$52,200 (2014) and $43,520 (2015).

B.

$32,200 (2014) and $43,520 (2015).

C.

$32,200 (2014) and $51,520 (2015).

D.

$52,200 (2014) and $51,520 (2015).

Can someone explain why A is correct?

I understand on 2014 calc is:

$161-25=136 * 20%= 27.2 + 25= 52.2

In 2015 the answer states:

$161-25= 136 * 32%= 43.52

So, why is the $25k taken out for both years?

Or is the $161-25 the basis you use every year and the ADDING back of $25k in yr 1= 179 deduction? Little turned around…

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

[Anonymous]

@Gabe, I encountered this kind of question last month or so. I remember picking out the wrong answer. I am not really sure, but you may be right, just ignore it. Let's say in the prior example posted by Angel, if boot paid (mortgage assumed) was greater than boot received (boot relieved), net boot received should be zero? Therefore, recognized gain is zero.

[Gabe]

Amor- I know this is redundant, but can you post a simple example with numbers?

So…let's say

Basis- 17k

Value received- 20k (which, in Angel's calc, is that just adding 17.5+3-1?)

Mortgage assumed- 4500

Mortgage relieved- 3500

Since mortgage assumed (boot received) is greater than mortgage relieved (boot paid)…we disregard it?

edit: for previous example, I followed Peterman's suggestion and did jr entry:

DR new veh 17.5

DR mortgage relieved 3.5

CR mortgage assumed 1

CR old vehicle 17

CR real gain 3

Does anyone know what the JE would be for rec gain? They seem to make more sense to me than remembering rules.

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

[Anonymous]

Reg is getting overwhelming and I haven't even started the tax section yet! There's a rule than like 384841093 exceptions… Seriously annoying!

[Anonymous]

When I overthink stuff, that's when I start losing my mind. So I want the rules laid out in front of me first, read/understand, and stick to it.

With like-kind exchange, all I need to know is the cost, NBV,FMV of the old asset, and same thing about the new asset plus the boot paid and received.

Determine realized gain.

Determine boot received.

Compare the two.

Recognized gain is the lesser of two above.

Calculate further if the problem asks for basis of new asset, etcetera.

If boot paid exceeds boot received, then recognized gain should be zero?

Correct me if I am wrong.

[Anonymous]

@Gabe, I don't think we need to sweat on working like-kind exchange transactions and interpret them into journal entries. Although the formulas don't make sense but the rule for the basis computation is very straight-forward. I really hope I get a SIM for like-kind in my next REG test!

I've learned the basis rules for partnership, corporations (C & S), casualty loss, etcetera. But I keep getting them confused most of the time. Grrrrrrwwwwllll!

[Anonymous]

Like-Kind Exchange Basis:

Basis of exchanged “stuff” + Recognized Loss – Boot Paid

A lot of times the Recognized Loss and the Boot will net to zero.

That's the formula I use for the Basis.

[Anonymous]

A review of Bearing's Year 2 records disclosed the following tax information:

Wages $ 18,000

Taxable interest and qualifying dividends 4,000

Schedule C trucking business net income 32,000

Rental (loss) from residential property (35,000)

Limited partnership (loss) (5,000)

Bearing actively participated in the rental property and was a limited partner in the partnership. Bearing had sufficient amounts at risk for the rental property and the partnership. What is Bearing's Year 2 adjusted gross income

a. $19,000

b. $54,000

c. $14,000

d. $29,000

I got the answer correct but the question is asking what his AGI would be and you deduct half of SE tax above the line on page 1 to determine AGI. He clearly has SE income (Schedule C trucking business) so why doesn't the question require you to calculate the one half of SE tax deduction as well? Also, this is an AICPA released question so unless I am missing something here they really need to get it together.

[Kate]

Hey all, my question is regarding trade or business deductions, specifically regarding bonus accruals (non shareholders/employees), in Becker its in the C Corp section of R-3.

It says that bonus paid by an accrual basis taxpayer are deductible in the tax year when all events have occurred. First and foremost, is the bonus accruals deduction only for accrual taxpayers?

Hypothetically, if you were dealing with a cash basis taxpayer, would you essentially (if you could) only deduct it when the bonus was paid?

Also– seeking advice–

For those of you who have gotten through R-3 in Becker, the questions seem to ask things like “what planet do we live on?” and I excitedly select “Earth,” just to find that the solution is something along the lines of, “7-11 slurpee, because basketball is pink.” (Basketball because my alma mater is playing at 8:30, hehe)

Did anyone feel like the R-3 C-corp MC questions your first shot were very tricky?

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

[Author]

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