[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]

@CPAer, is there a specific question or question(s) that you're struggling with in re: consideration?

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

[Anonymous]

Under the UCC rules, you can modify a contract without added consideration.

Not sure what added consideration means.

[Anonymous]

Under the UCC rules, you can modify a contract without added consideration.

Not sure what added consideration means.

[Gabe]

Train issued a note payable to Blake in payment of contracted services that Blake was to perform. Blake endorsed the note “pay to bearer” and delivered it to Reed in satisfaction of a debt owed Reed. Train refused to pay Reed on the note because Blake had not yet performed the services. Under the Negotiable Instruments Article of the UCC, must Train pay Reed?

A. No, Train does not have to pay Reed until the services are performed.

B. No, Train does not have to pay Reed because the note was converted into a bearer paper.

C. Yes, train has to pay Reed because the note was converted into bearer paper

D. Yes, Train has to pay Reed because Reed was a holder in due course.

Any help with this one?

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

[Gabe]

@CPAer .Becker R6-30, under UCC you can modify a contract without added consideration. Here is an example:

Rick, a book distributor, offers to sell Steve, a bookstore, 100 books for $1. Rick later realizes he is losing money on the sale and asks Steve if he would be willing to buy the books for $1.05. Steve agrees. This change is binding.

You could NOT do this under common law.

Think of it this way: merchants buy and sell for a living, they are used to changes in prices, quantities, etc.

Regular people do not buy and sell things on a regular basis so they would be more likely to “flake” and change their minds…thus, additional consideration is needed if there is going to be a modification in a contract under common law.

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

[OnlyBelieve]

Gabe, Answer is D.

A holder in due course is a person who takes a negotiable inst. for value, in good faith, and without notice of any defenses or claims to the instrument and also for an inst to be negotiable, it must be payable to the “order” to “bearer” of…….

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

[OnlyBelieve]

typo….to ‘order' OR ‘bearer'

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

[Gabe]

@only thanks. I chose C but I guess I should have gone one step further and chose “D” as he is an HDC

here's another fun one

Destry, a single taxpayer, reported the following on his 2014 U.S. Individual Income Tax Return Form 1040:

Income:

Wages $ 5,000

Interest on savings account 1,000

Net rental income 4,000

Deductions:

Personal exemption $ 3,950

Standard deduction 6,200

Net business loss 16,000

Net short-term capital loss 2,000

What is Destry's net operating loss that is available for carry back or carry forward?

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

[Svitlana85]

Tom Lewis, an individual taxpayer, was assessed $250 in the current year for the construction of street lights in his neighborhood. It is thought that the street lights will reduce crime in the neighborhood. Tom's neighborhood is the only area of the city that is assessed the charges. Before the end of the year, Tom is assessed another $100 for repairing the street lights damaged in a storm. How much of the $350 paid by Tom is deductible as an itemized deduction in the current year?

A.

$0

B.

$100

C.

$250

D.

$350

The answer is B, but isn't this a casualty loss with $100 deductible?

CPA Excel/Wiley/Ninja Notes/MCQs

FAR Feb 2014 85
AUD Aug 2014 88
BEC Nov 2014 85
REG Feb 2015 71 Retake April 16, 2015

[Anonymous]

No, it's not a casualty loss because it's not Tom's property. It's city property and the city is charging Tom to repair their own property (it happens).

[willpassby2014]

Can any one explain why C is not a correct answer- CHARITABLE CONTRIBUTION

Following are a list of donations made during the current year. Which is a tax deductible contribution by the donor? Assume all recipients are qualified charities.

A Bob is a carpenter who works three to four hours each week doing carpentry work at the local homeless shelter. He normally charges $40 per hour for his work.

B Nancy donated $100 to the local fire department. In exchange, she received a coupon book for 10 car washes at the Bubbles car wash. Bubbles normally sell the same coupon books for $150.

C Harry owns several rental properties. He lets the local youth group use a suite of offices free of charge. Bob gets $3,000 in rent per month for similar suite.

D Zachary made a large donation to a nearby university. In exchange he receives the right to purchase football tickets for the upcoming season

BEC Passed
FAR Passed
AUD Passed
REG Passed

[willpassby2014]

Can any one explain why C is not a correct answer CHARITABLE CONTRIBUTION

Following are a list of donations made during the current year. Which is a tax deductible contribution by the donor? Assume all recipients are qualified charities.

A Bob is a carpenter who works three to four hours each week doing carpentry work at the local homeless shelter. He normally charges $40 per hour for his work.

B Nancy donated $100 to the local fire department. In exchange, she received a coupon book for 10 car washes at the Bubbles car wash. Bubbles normally sell the same coupon books for $150.

C Harry owns several rental properties. He lets the local youth group use a suite of offices free of charge. Bob gets $3,000 in rent per month for similar suite.

D Zachary made a large donation to a nearby university. In exchange he receives the right to purchase football tickets for the upcoming season

BEC Passed
FAR Passed
AUD Passed
REG Passed

[okcpa2015]

@Gabe, the answer is a $7,000 NOL. The only “business income/loss” are the wages, rental income, and the net business loss.

Personal exemptions and Standard Deductions can't create an NOL and the other items are portfolio income which also can't create an NOL.

FAR - 91
REG - 88
AUD - 98
BEC - 88

[okcpa2015]

@Willpass, I believe the reason is that to be able to itemized a charitable deduction the deduction only made for cash or property donated.

So answer C would not qualify because the donation is neither cash or property, just time used at the property.

Is the correct answer D?

I didn't think A was correct because you can't deduct services, and B would not be correct because the taxpayer received something of value in return that was more than the value of the donation.

FAR - 91
REG - 88
AUD - 98
BEC - 88

[Anonymous]

So prepaid rent can be deducted as long as it doesnt substantially extend beyond the tax year? Can anyone confirm this?

[Author]

Replies