[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/

[PasstheCPA7]

@ onlybelieve – thanks!

[PasstheCPA7]

Hi guys,

Just a quick question. What does it mean for a tax position that it would be more likely than not be “upheld”? What does upheld mean in this context? Does this mean there is a greater than 50% chance it will win? I think the word “upheld” is confusing me. Does “upheld” mean to lose?

Thanks.

[Anonymous]

It means you took a tax position (such as a deduction) that if challenged in court, would be more likely than not to be upheld. I.E. The taxpayer would win and the IRS would lose.

And More Likely Than Not is greater than 50%.

[PasstheCPA7]

@ angel – thanks!!

[NJPRU]

Best of luck today PASS!!!

AUD: DONE
FAR: DONE
BEC: DONE
REG: DONE

IM GOING TO BE A CPA!!!!!

[Gabe]

Good luck @PASS!

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

[Anonymous]

I found out earlier this year when studying for BEC that CO's requirements change effective July, and I'm no longer eligible to be licensed if I don't pass all sections before then unless I go back to school for two years, which is not going to happen for many reasons. This means I have one and only one shot at passing REG. I'm doing my best not to panic.

I'm really struggling with all the different tax credits, the phaseout thresholds, the calculation when it exceeds the threshold, the amount of tax credit, etc. (Not to mention I can't figure out AMT but that at least seems doable.) I am using Gleim, and was told by two different employees at Gleim contradicting information – one said I do not need to memorize all the different threshold amounts and that they would be given on the test, and the other said that I do need to know them (at least a ballpark number) and that under no circumstances would they be presented on the test. It's not just the phaseouts for credits, it's all the different limits. It's so hard to memorize all these random numbers!

Can someone please point me in the right direction? In my unenviable situation, I was planning on memorizing everything, but looking more closely at the material, I just don't see how that is possible.

[Anonymous]

Ugh. Not liking the Dividends Received Deduction. Can anyone try explaining it a little bit better? I'm having a very hard time wrapping my head around it.

Thanks.

[OnlyBelieve]

Angel- If you have becker, listen to Gearty's lecture on DRD. He does a good job explaining this topic. I tried typing something as an explanation, but it got complicated:).

Please post a question on this if you see one. Explaining this topic from a question will deepen your understanding even better.

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

[Gabe]

Angel…

Let's say you are a corp and you own 10% of Apple. You get dividends of $100. Instead of being taxed on the entire $100, you get to reduce it by 70%, so you only get taxed on $30! (100-70) How nice 🙂 . If you own 25% of Apple, you would have to report $20 (100-80). If you own 100% of Apple, you do not have to report any of it.

So…

Ownership % DRD

0-20% 70%

21-80% 80%

>80% 100%

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

[Anonymous]

Thanks. I think I get it now. I actually don't think Becker did a good job of explaining it though. I think they over complicated it.

[Holly]

@Gabe I'm looking at your explanation of Dividend Received Deduction. I thought dividend income was included in gross income at 100%, then the deduction was figured later by your percentage and you're left with the actual taxable amount. I believe the total amount is reportable, but not taxable.

BEC - 79
REG - 85
AUD - 5/27/16

[Anonymous]

HRSexton: I think you're right. Remember that this only applies to C Corps where dividend income doesn't get preferential treatment and is considered ordinary income. So you would report it as income but then take it as a deduction as per the Dividend Received Deduction rules (i.e. you're paying very little taxes on it).

[Kate]

Hi all! Taking my second CPA exam (Reg) early April. Glad to join the group; hopefully you all will be patient with me…

I've compiled a few questions and hope someone can help me out. For some odd reason, the wording of the Becker REG text is very confusing. Sorry, again, for how basic these questions might be. If anything, it'll help you all feel more confident in your preparation 🙂 Lol

For a nondeductible IRA, the contribution limits according to Becker are up to the lesser of: 5,500 for 2014, individual's compensation, or limit not contributed to other (regular and Roth) IRAs. My question is regarding the third. Does this mean that the “limit not contributed to other IRAs” would be essentially $5,500-Deductible IRA contribution-Roth contribution= How much you can put in a nondeductible IRA?

Another question I have in Individual Taxation is the fact that a taxpayer can claim the American Opportunity or Lifetime Learning Credit for a tax year and also exclude from gross income amounts distributed from Coverdell education savings account (educational IRA). I apologize if I totally missed the boat on this, but I thought distributions from Coverdells were already tax free? Why would you claim the American Opportunity or Lifetime Learning credit on something that is already tax free?

There are a few exceptions if premature distributions were used to pay certain expenses that allow a taxpayer to avoid the 10% penalty tax. Are these exceptions applicable to ALL IRAs? Or just a Roth IRA and a Traditional?

Finally, for taxes on self-employment, Becker always has us write in red “you pay both halves: boss and employee,” meaning you pay social security/Medicare and income tax twice? Or, just Social Security? How does the “one half self employment FICA” work then– which part is deductible? The boss, or the employee half and is FICA referring to social security/Medicare AND income tax or just one?

Thanks all!

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

[PasstheCPA7]

@ Gabe & NJ – thank you! I thought it was very hard. Not sure what to even think right now. A lot of the items were not covered in Becker, but, it might be pre-test. I don't know.

NJ and Gabe – is that how you guys felt too?

[Author]

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