[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/

[Anonymous]

also, confused by the calculation of gift tax attributable to appreciation. Say you have a property with value of 65000, basis of 26000 and you paid 19000 of gift tax. How much of 19000 is attributable to appreciation? I'd think 0.6 * 19000?

[skoog]

I thought you are supposed to use mid-quarter if the 40% or more of all purchases occurred in the last quarter. If not, then use mid year?

[skoog]

26,000 + 19,000((65,000-26,000)/(65,000-14,000)) = 40,529

[Anonymous]

yes, if 40% was purchased in last quarter, you use mid quarter, but I thought it was assumed that other 60% are also purchased in the last quarter, which is wrong. If something was bought in January, mid quarter is used, but 1st mid quarter, not last

[Anonymous]

ok this 65,000-14,000 doesn't make any sense to me

[skoog]

If you isolate this 19,000((65,000-26,000)/(65,000-14,000)), this is the amount of the gift tax attributable to appreciation 14,529.

[skoog]

That is the difference between the FMV of the gift and the $14,000 gift exclusion. Honestly, its one of those equations that you just need to memorize.

[Anonymous]

what is 14000 here?

[skoog]

The gift exclusion.

[Anonymous]

I don't know if there was an exclusion, maybe she ran out if it?

I'll memorize, thanks!

[Meddik]

Well the 14000 is per donee, and I doubt she hit her unified tax credit unless it's explicitly stated she did.

Also from the last page I was still making sure

>50% (more likely than not) probability for positions taken on a tax shelter, and >40% for other positions (substantial authority)

Is that correct – both the %s and terminology associated with them?

FAR - 86
REG - 83
AUD - 97
BEC -

[Anonymous]

In that sim it says she paid 19000, why would she have to pay if she had exclusion available?

Regarding tax position, I have no idea, Roger has some nonsense in his notes, I can't even consider it valid. Aicpa says reasonable/realistic https://www.aicpa.org/interestareas/tax/resources/standardsethics/statementsonstandardsfortaxservices/pages/statement_on_standards_for_tax_services_faqs.aspx

irc says sub authority.

If you are not lazy please research and let me know what's your conclusion

[Meddik]

I think I get it now.

IRC says substantial authority as a minimum & more likely than not for tax shelters.

So always apply the IRC rules first. Then…

Edit, “if a taxing authority has no written standards for preparing or signing tax returns, or if its standards are lower, then two AICPA standards apply”

Those two are 1) Realistic possibility (33% likelihood) OR 2) A reasonable basis (20-33%) and that position is disclosed to the IRS for further review

And this reminds me, the hierarchy of tax law is:

Supreme Court –> IRC –> Treasury Dpt information –> everything else? I know I have it written somewhere but I can't seem to find it.

FAR - 86
REG - 83
AUD - 97
BEC -

[Anonymous]

I thought irc was the primary source

[Meddik]

That's where I wasn't sure. I was thinking that the Supreme Court, being the ultimate judgement of all law, would be the official interpretation of any IRC. Then followed by the IRC, Treasury Dpt sources, and other courts and sources. However I could just be thinking my way out of the correct answer to things.

FAR - 86
REG - 83
AUD - 97
BEC -

[Author]

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