[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]

Here is the original question from Wiley and it's equally poorly worded answer:

https://www.another71.com/cpa-exam-forum/topic/cash-basis-income-earned

🙂

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

[Anonymous]

R3 c corp lecture is soooo long it's unbearable! I'm really dragging here lol

[Anonymous]

R3's lecture might be bad but the concepts aren't too terrible. The main things I remember are adjusting book income to taxable income and dividend rules.

[Gabe]

@angel just did a sim on M1, M2, M3 recons 🙂

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

[moczulgs]

Is anyone using Gleim Study software? See alot of Wiley and Becker.

[Gabe]

Baker, an individual, owned 100% of Alpha, an S corporation. At the beginning of the year, Baker's basis in Alpha Corp. was $25,000. Alpha realized ordinary income during the year in the amount of $1,000 and a long-term capital loss in the amount of $3,000 for this year. Alpha distributed $30,000 in cash to Baker during the year. What amount of the $30,000 cash distribution is taxable to Baker?

Ninja/Becker says answer is $7k (30-23)

Wiley says answer is $4k (30-26–>Baker will not be able to deduct the long term capital loss of 3000 this year because the cash distribution reduced his stock basis to zero. Instead the 3,000 loss will be carried forward and will be available as deduction when he has sufficient basis to absorb the loss)

Any thoughts on which one is correct?

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

[OnlyBelieve]

I wil go with Ninja- Since an S corp is a pass thru entity, its shareholders can deduct their share of the loss. However, the loss cannot exceed their adjusted basis

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

[Anonymous]

Agreed with OnlyBelieve

[Gabe]

Thanks guys! After reading through Becker, it seems Wiley is incorrect.

Another one for you all 🙂

Fern received $30,000 in cash and an automobile with an adjusted basis and market value of $20,000 in a proportionate liquidating distribution from EF Partnership. Fern's basis in the partnership interest was $60,000 before the distribution. What is Fern's basis in the automobile received in the liquidation?

A.

$0

B.

$10,000

C.

$20,000

D.

$30,000

If this were a non liquidating distribution, what would the basis be?

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

[julietul]

@Gabe – Answer is D, $30,000 for liquidating distribution. And $20,000 if non-liquidating?

FAR - pass (expires 7/31/15)
AUD - pass
BEC - pass
REG - April 20

[okcpa2015]

@julietul you are correct. Good job.

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

[Gabe]

I am a little confused…usually with non liquidating distributions we take

Pship interest

<cash>

remaining distribution

for example on Becker R4-56 (non liquidating)

Basis: 30

Cash: 24

Land: 9 (AB)

Basis in land= 6

So, why wouldn't the basis in the land for the previous question still be 30 for non liquidating?

Basis: 60

Cash: 30

Car: 20

Basis in land= 30

ooooh for this situation, there is basis left to take the entire 20k, so that's why basis is $20k for non liquidating and $30k for liquidating- correct?

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

[OnlyBelieve]

Gabe – you are correct. In a non-liquidating distribution, the remaining basis(Partner's interest-cash, hot assets), cannot exceed the adjusted basis of the partner's interest in the partnership.

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

[Anonymous]

For schedule m-1 why are the muni bond interest deductible but the interest to carry muni bonds is added back?

[Holly]

@cpa are you reconciling to taxable income on the m1? It would be because nontaxable interest income is deducted to reduce taxable income, while the expense is added back to get to taxable income.

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

[Author]

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