[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]

@willpassby2014 yea you are right. I was thinking investment interest expense with interest expense.

BEC 79
FAR 86
AUD 79
REG 90

[Meddik]

First go at REG is on Saturday. I have a couple questions if you guys don't mind…

1) Essentially 1/3 of your MCs will be business law right? And another 1/3 will be prof responsibilities/ethics etc (some of which blurs into business law)? Assuming there are no b law/prof responsibilities SIMS, 40% of the whole exam must fit into that 60% of the exam containing MCQs. Or is there a difference in the weighting and CSO that makes that estimate wrong?

2) Do we need to know the penalty amounts related to incorrect tax preparation? CPAexcel has a SIM that requires you to know off the top of your head the penalties that would apply to a situation down to the $ amount. Sometimes CPAexcel goes overboard in its detail and SIMS. Or just have more of an idea as to how X incident would be viewed (negligence, gross negligence, fraud, or done in good faith/due care was exercised etc).

FAR - 86
REG - 83
AUD - 97
BEC -

[Anonymous]

@anjanja, that's funny. I was, and am, an extremely positive person. Every time I took any exam all through school I never worried and always knew I would do good. Then I found the CPA exam and I thought I was going to fail every time I took a section. It is a very humbling exam. Also, I'm sure you'll do great!

[Anonymous]

Meddik,

if you are talking about tax preparer penalties, I have this in my bookmarks, but there is no way I am memorizing this https://www.irs.gov/Tax-Professionals/Summary-of-Preparer-Penalties-under-Title-26

[Meddik]

Yep, those penalties. I definitely wasn't planning to memorize them all but I didn't know if there were any key ones that should be remembered.

FAR - 86
REG - 83
AUD - 97
BEC -

[Anonymous]

CTM,

thanks for believing in us! Yeah, school was a little different

[Anonymous]

Quick question – what is the final word on phase out amounts? Do we need to know the exact amount, or just that it phases out? I know the big ones but there are quite a few.

[Meddik]

@erika I think the general rule is that if it's based off of inflation, you don't need to know it.

Off the top of my head, good credits/deductions/limits to know would be

American Opportunity Credit (up to $2500),

Lifetime Learning (up to $2000),

Child & Independent Care Credit ($3000 for 1 kid, $6000 for 2 or more)

Section 179 – Up to $25,000, phaseout dollar for dollar after $200,000

Organizational Expenses – Up to $5,000, phaseout dollar for dollar after $50,000. But that excess $5000 is just used in the amortization for the next 15 yrs, it's not just a lost expense so to speak

Startup Costs – Same as organizational expenses (so $10k total, potentially)

Does anyone know if my assumption above was correct? That if you have no SIMS for prof responsibilities & business law, then ~2/3 of your MCQs will be on those subjects?

I don't think asking that violates anything, if so, don't answer. Not referring to specific experiences, just theoretically, if 40% of the exam must be on those topics, but they can only appear of 60% of the exam content, then 2/3 of the MCQs will be on it. Or am I missing something?

FAR - 86
REG - 83
AUD - 97
BEC -

[Anonymous]

@Meddik, there is no relationship between MCQs and the SIMs you get. They are randomly selected. The AICPA has published literature about this (not sure if you have read that or not).

[Anonymous]

Also my understanding is that while there are supposed to be X% allocated to different topics, in reality it works out differently.

[Kemi22]

I thought Section 1231 assets were depreciable assets that had been held for 1 year or more. Why would land be a section 1231 asset?

Or are 1231 assets = held for more than a year including those that are depreciable? Maybe I lost that tiny point while summarizing my summaries.

QUESTION:

The sale of which of the following types of business property should be reported as Section 1231 (Property Used in the Trade or Business and Involuntary Conversions) property?

A. Inventory held for resale.

B. Machinery held for six months.

C. Cattle held for 6 months.

D. Land held for 18 months.

Answer = D: The land is business property owned for more than a year, so gain on its sale would generate Section 1231 gain.

2010:
BEC: 74, 71, 74, 75
AUD: 71, 74, 83
REG: 71, 76
FAR: (I quit) 34, 45

2015:
BEC: 79
AUD: 78
REG: 67, 76
FAR: 56 (trial run), 74, 74, 74, 80!
Thank God. Your prayers are always answered! Do not give up. Thank you St. Joseph Cupertino.

[Anonymous]

In other words you could get heavily tested on two topics (I know people that this has happened to), which just throws those percentages out the window.

[Meddik]

Ah okay, thanks. I replied to your question by editing my post up above btw

FAR - 86
REG - 83
AUD - 97
BEC -

[Anonymous]

Yea saw that, thanks. Good luck – you did well on FAR and if you used the same strategy for REG you should do fine. Now I need to follow my own advice and have faith! I thought FAR was bad but I really feel like REG is worse.

[Meddik]

@kemi22

The other 3 answers are absolutely not going to be 1231, which would help you find the answer if you blanked on an exam.

But land is a 1231 asset, it's just not depreciated. Technically it's a 1250 asset too (realty), but since there is no depreciation there's never a 1250 recapture with it.

“Property Used in the Trade or Business and Involuntary Conversions” is a key part of that question too. From what I have seen, land is usually not used for your typical 1231/1250 problems, instead it's usually used in an involuntary conversion problem. In which case:

Reimbursement – Cost of Replacement Property = Recognized Gain

Reimbursement – Adjusted Basis of Converted Property = Realized Gain

Recognized gain may never exceed realized gain (logical if you think about it).

Then

FMV of New Property

-Deferred Gains (realized – recognized)

+Deferred Losses

= Adjusted Basis of new property

@erika

Unfortunately my FAR studying was much more in depth than my REG studying so far. Even without that, I do think REG is harder. Much more detailed, whereas FAR was more just a little bit of everything.

I spent about 10 days on business law/prof responsibilities, just casually reading and taking notes. And for the past 6 days I've been cramming all of the tax information into my brain. Finishing up today, then review for 2 days and taking the exam, lol.

FAR - 86
REG - 83
AUD - 97
BEC -

[Author]

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