[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

[Svitlana85]

@Gabe

Hard Luck owns 100% of the stock in Swamp Land, Inc., a calendar-year S corporation. On December 31, 2013, the corporation sells its only asset, land, for $50,000 and distributes $40,000 of the cash. In 2014, the corporation liquidates. Hard Luck's stock basis is $50,000 before these transactions, and Swamp Land has a basis of $10,000 in the land. What is the amount and type of gain or loss that Hard Luck must recognize for 2013 and 2014?

A.

2013: $10,000 capital gain; 2014: $(40,000) capital loss

B.

2013: $0; 2014: $40,000 capital gain

C.

2013: $40,000 capital gain; 2014: $(40,000) capital loss

D.

2013: $(40,000) capital loss; 2014: $0

Why are we using the 2014 basis in 2013 to calculate the capital gain? (answer is C)

Why is there a loss at all in 2014? I don't get it.

Thanks!

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 i think the 40,000 flow through (remember its an S-corp) and the 40,000 distribution cancel each other out. one increases basis and the other decreases.

it is kind of a poorly worded question imo.

@Svitlana85 heres a better explanation: https://www.another71.com/cpa-exam-forum/topic/confused-about-land-question

[Svitlana85]

Thank you cprv! Wow that was a hell of an explanation, but it makes sense now.

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

[OnlyBelieve]

I know AVD is 6 months after the date of death if elected. However, if the property is distributed before the AVD, the FMV of the property is used to determine basis. Check out the explanation to the question below. Emphasis on “as long as the valuation date is lower than the value at death”. Does this mean that if the AVD was higher and even though elected, the basis would be the FMV at date of death? This part of the explanation( as long as….. could be a little misleading). If AVD is elected, it is AVD and nothing else, right?

Daven inherited property from a parent. The property had an adjusted basis to the parent of $1,600,000. It was valued at $2,000,000 at the date of death and valued at $1,800,000 six months after the date of death. The executor elected the alternative valuation date. What is Daven's basis in the property?

A.

$0

B.

$1,600,000

C.

$1,800,000 correct

D.

$2,000,000

The basis of inherited property is generally the fair market value of the property at the date of death. However, when the alternate valuation date is elected, the basis is the fair market value at that alternate valuation date as long as the valuation is lower than the value at death

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

[Gabe]

So I guess…

Land proceeds 50

land basis (10)

= 40 gain<–rec in 2013

Beg basis 50

cash 10 ($50 received for land – $40 distributed)

= 40 loss rec in 2014

Makes sense…definitely a poorly worded question.

@only here is a thread that might help out:

https://www.another71.com/cpa-exam-forum/topic/alternative-valuation-date

To respond to your question- if AVD is chosen, yes, use AVD. HOWEVER, if you sell the property BEFORE the 6 months, then use the FMV at time of sale. I've never seen a problem that says, the AVD has to be lower than the value at death. Anyone else?

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[Gabe]

Dole, the sole owner of Enson Corp., transferred a building to Enson. The building had an adjusted tax basis of $35,000 and a fair market value of $100,000. In exchange for the building, Dole received $40,000 cash and Enson common stock with a fair market value of $60,000. What amount of gain did Dole recognize?

A.

$0

B.

$5,000

C.

$40,000

D.

$65,000

I originally chose “A” since he was transferring it to a > 80% controlled company. However, since cash or other prop is received, the gain is recognized on the appreciated building to the extent of cash or other prop received. Therefore, answer is C.

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[NJPRU]

Gaaaabeeeee! How are yah? How are you feeling about your exam? Ready to knock it out of the park I hope!

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

IM GOING TO BE A CPA!!!!!

[Gabe]

@NJ!!!!!!!!!! Hey man! How's life on the other side? I feel good! Ready to attack REG and be done!! Thanks for checking in 🙂

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[NJPRU]

@Gabe – Doing well on the other side. I have all the time in the world now and I'm not quite sure what to do with it. lol! Glad you are feeling good about your exam! I'm sure you'll do great, just remember to breeeatthheeee!

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

IM GOING TO BE A CPA!!!!!

[jstay]

GOOD LUCK GABE!!!!

hopefully this exam is your last! sorry I haven't been much of a help in here its been crazy at the office with 4/15 coming up. I'm an intern so they know the exam is more important right now. After 4/15 I will deff be a part of this more.

on the bright side, I said I was going to try 2 chapters a week but its Wednesday and I will have 2 chapters already done for the week, maybe ill try to do 4 chapters this week (skipping the optional questions for the time being).

[Gabe]

@jstay- thanks! I understand that 4/15 deadline all too well 🙂 Good on you for getting through 2 chapters! I'll most likely poke around in here until score release- help explain things if I can.

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[jstay]

yeah ive been reading the thread and some of your explanations are great! Thanks for them

[Gabe]

Just confirming, unlike corps, partnerships DO NOT recognize gain/loss on sale of pship. Correct? Only partners would recognize their portion of the G/L

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[Anonymous]

Hey all. I am done with AUD and BEC. I am taking REG in May. My Becker subscription runs out right after that. I hope to only have FAR left. I also have Gleim, but I don't like the books/lectures and only use Gleim for the multiple choice. I am trying to decide between Yeager and Wiley for my FAR review. Suggestiosn?

[jstay]

@Barf,

how did you like becker? I think they have an extension plan? Also, check out ninja for FAR, it really helped. I didn't use Ninja mcq for REG but bet your butt I am on my retake.

Gabe, how long did you put in for this retake?

[Author]

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