[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

[Anonymous]

Robert had current year AGI of 100,000 itemized deductions are:

Medical expenses (before % limits) $12,000

State income and real estate taxes 7,500

Qualified residence mtg. Interest 10,000

Home equity mtg. Interest 4,500

Charitable contributions 5,000

What are Roberts itemized deductions for AMT?

Answer: 19,500

Medical expenses excess of 10% 2,000+ qualified residence mtg. Interest of 10,000 + char contributions of 5,000. Ummm… Nooooo isn't it 14,000 = the 2,000 of medical expenses, state/real estate of 7500+ home equity of 4500. $14,000 wasn't even an answer option. What am I missing?

[Anonymous]

Thanks gabe for the link. I checked it out. It helped 🙂 it's these stupid 5 or so questions that aren't making any sense (note the one above). Sorry I don't have an answer to your question Im not their yet.

[Gabe]

@cpa I hate this question…it is poorly worded.

You're thinking of this backwards (which is what I did when I used becker). The question is asking what itemized deductions are you ALLOWED to take for AMT:

From Ninja Notes: the following are “add backs” to AMT (aka not allowed!):

* No state income tax, real estate tax, or personal property tax allowed for AMT.

* No personal exemptions or standard deductions

* Construction: Only % of Completion Method allowed

* No installment method on sales allowed

so, the answer would be:

mortgage interest for qualified residence- $10k

charitable contributions- $5k

medical- $2k

$17k is correct answer.

Check out this thread: https://www.another71.com/cpa-exam-forum/topic/reg-amt-question

Also look at the AMT form (it helped me visualize things better): https://www.irs.gov/pub/irs-pdf/f6251.pdf

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

[Anonymous]

Thanks gabe yeah I started to realize that I was looking at it backwards lol. Hence, if an item is “added back”, than it is NOT allowed to be deducted. So I get the charity and the home mtg but I thought medical exp in excess of 2% was added back? I'm just going to cough this question up as a bad one (obviously since it was released) and move on. I will check out those 2 threads in a few. Thanks again 🙂

[Svitlana85]

On April 1, Roe borrowed $100,000 from Jet to pay Roe's business expenses. On June 15, Roe gave Jet a signed security agreement and financing statement covering Roe's inventory. Jet immediately filed the financing statement. On July 1, Roe filed for bankruptcy. Under the Federal Bankruptcy Code, can Roe's trustee in bankruptcy set aside Jet's security interest in Roe's inventory?

A.

Yes, because a security agreement may only cover goods actually purchased with the borrowed funds

B.

Yes, because Roe giving the security interest to Jet created a voidable preference

C.

No, because the security interest was perfected before Roe filed for bankruptcy

D.

No, because the loan proceeds were used for Roe's business

What do they mean “set aside”? Will this be a good thing for the creditor?

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]

Answer B because this transaction occurred so close to the date of filling bankruptcy the court can “set it aside”. Yes, I would say its a good thing for the creditor/creditors. Look into the proper definition of a voidable preference. It should help with this question.

[Sandia]

C? because it is a business expenses – inventory

FAR - 77 x2 Wiley book & no test bank
AUD - 83 x3 NINJA Test bank 3 time
REG - 80 x1 NINJA Test bank
BEC - 78 X2 NINJA Test bank ..done!!promesa cumplida mama -que llege al cielo 🙂
Ethic 100% Licensed VA CPA

[Svitlana85]

It's B. Thanks cp8488!

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

[Svitlana85]

Follow up question on voidable preference, my study material has the following example

The debtor was a minor at the time of transfer. The debtor, now in bankruptcy, still has the right to disaffirm the transfer due to his or her minority. The trustee can set aside this transfer.

In this case the transfer is set aside, meaning creditor will not be getting anything.

It is confusing, but cause in my questions above, it was actually for the benefit of the creditor. Can it be both?

Thanks guys!

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]

Gabe: How important was Trust and Estate taxation on your exam?

And can anyone give me a good definition and examples for the following terms?

Completed Gift:

Non-Completed Gift:

Gift of a Present Interest:

Gift of a Future Interest:

Not loving estate and gift taxation. I get the basics but am having trouble with the specifics.

[Gabe]

@angel not that important from what I remember, but every test and every quarter is different

completed gift: I give you a car

incomplete gift: I give you car (in a trust) but reserve the right to revoke that car at any time (basically any time I see “revoke” I think incomplete)

Present interest: I give you a $500

Future interest: I give you $500 (in a trust), but you cannot touch any of it until you turn 45

These are all really simple examples, but I hope it helps.

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

[Gabe]

@svit in re: to your first question, I took the answer as being good for Roe, the trustee can set aside that inventory and cannot be touched just because he's filign for bankruptcy.

I like to think of it as a garage sale. The trustee is looking through all your stuff to see what he can sell.

Trustee: Hey Roe, what about this inventory?!

Roe: Nope, I already filed a security interest with J, so let's set it aside and look for something else to sell.

Does that make sense/help?

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

[Gabe]

So confused…I have always thought basis in prop= AB for S/H

However, with a lot of corp distribution questions they are using FMV as a basis. Can anyone break this down for me please?

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

[Anonymous]

Thanks for the explanation Gabe.

As for your Basis question, can you post an example? I'm not sure if this is what you're referring to but when a corporation distributes property as a dividend, they have to write it up to thei fair value before distributing it.

For example, a corporation gives out land with a basis of 20,000 but FMV of 50,000 as a dividend. When they declare the dividend, they will make an adjustment to the land to bring basis up to fair value and record a gain of 30,000. Then the land is distributed and the basis would be 50,000 to the people receiving it as a dividend.

Is that what you're thinking?

[Gabe]

@angel yes! Dumb question- so anytime a corp distributes prop= dividend?

Also, the 80% control rule is throwing me…

If, after the distribution, S/H own > 80%- not taxable, thus use NBV

If, after distribution, S/H own < 80%= taxable, thus use FMV

Correct?

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

[Author]

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