[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]

Approximately how many mcq are you guys doing daily?

[jstay]

Right now im doing what I can its tax season so I try and atleast get through a becker chapter every 2 days (only doing MCQ cause its a retake.) But once I get off after tax season im going to aim for 200 a day and with over 20 days that brings me to 4,000+ questions, not as much as I did for AUD but hopefully its enough

[Anonymous]

On May 2, Lace Corp., an appliance wholesaler, offered to sell appliances worth $3,000 to Parco, Inc., a household appliances retailer. The offer was signed by Lace's president, and provided that it would not be withdrawn before June 1. It also included the shipping terms: “FOB—Parco's warehouse.” On May 29, Parco mailed an acceptance of Lace's offer. Lace received the acceptance June 2.

Risk of loss for the appliances will pass to Parco when they are:

A.identified to the contract.

B. shipped by Lace.

C.tendered at Parco's warehouse.

D. accepted by Parco

The answer is C – tendered at Parco's warehouse which makes sense because this is a destination contract. However, per Becker book, for risk of loss to pass, the goods must be identified in the contract which is the first step. So why wouldn't the answer be A? What am I missing?

[jstay]

Risk of loss is IDENTIFIED in the contract (as in we want to have it in writing when risk of loss will be transferred so we know what happens and who has risk), which they had done (fob destination). However its a destination contract, so risk of loss won't pass until they are delivered to Parcos warehouse

that is my interpretation, could be wrong

[Troblin]

Sally Markey, who owns a heavy construction company, decided to spend some of her $2,000,000 2014 profit on a heavy-duty diesel truck costing $111,000 for her business. In order to lower her income taxes for the year, she decided to take the maximum Section 179 deduction plus the MACRS depreciation for 7-year property. The ceiling for Section 179 in 2014 is $25,000. No other capital assets were purchased during 2014. What is the total deduction for the truck in 2014?

A.

$25,000

B.

$37,289

C.

$15,862

D.

$40,862

Can someone explain this to me? B is the correct answer, but I thought 200% depreciation was taken in the first year 25,000+ (2/7)(85,000) = 49,287.

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Anonymous]

Mid year convention.

[jstay]

Can someone explain depreciation for tax purposes?

[Troblin]

Ok, since there is no explicit date that the equipment was placed into service, it is assumed that you use the mid-year convention?

So the calculation would be (2/7) (1/2) (86,000) +25,000.

Can you explain how this problem would change in the mid-quarter convention (assuming this equipment was placed into service in Q4)?

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Anonymous]

Mid Quarter is actually a bit tricky:

It's 2/7 for a full year. .2857

Divide by 2 for half year. .1428

Divide by 2 for 1 quarter .0714

Divide by 2 for mid quarter. .0357

You can't forget that last divide by 2. But you need to do it to get to the middle of the quarter. By the way, this assumes that all of the equipment was purchased in the 4th quarter. If there was stuff purchased in January, you would need to adjust your calculations to account for the stuff purchased earlier in the year.

[Troblin]

@ Angel thanks, this explanation was very helpful. I’m a bit confused by your last statement tho. If some equipment was placed into service in January, however 40% of the total equipment placed into service for the year was placed into service in Q4, would the mid-quarter convention apply to the January equipment as well??

If so, how would that calculation scale back?

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Anonymous]

That's why the calculations get tricky. The 40% purchased in the 4th quarter gets one half of one quarter's depreciation. Stuff bought in January would get 3.5 quarter's depreciation. Stuff bought in April would get 2.5 quarters. And stuff in July 1.5.

I use those months as examples. It really doesn't matter which month it is purchased in. It still gets the same convention.

[Sandia]

@Angel Do you need to memorize the formula?

In simulations the table is given. Calculation of the formula I guess is only for MCQ.

A lot of information to keep in mind!!!

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

[Anonymous]

The formula isn't too bad and I have it memorized by this point. MACRS is simply double declining balance with the mid year or mid quarter convention as a twist. I highly doubt we will need to know the formula on exam day though. I also don't think we will need to know what property is 5 year, 7 year and so on.

But in the end, it doesn't hurt to have a general idea of what fits in where.

[Gabe]

@angel I think it's a good idea to know generally what are 5 and 7. For instance, know computers are 5 yrs, office furniture and “specific” trucks are 7 yrs- those seem to be the most commonly tested/referenced.

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

OK Candidate

[Troblin]

@ Angel Thanks. Just wanted to clarify something really quick.

“

1. Mid Quarter is actually a bit tricky:

It's 2/7 for a full year. .2857

Divide by 2 for half year. .1428

Divide by 2 for 1 quarter .0714

Divide by 2 for mid quarter. .0357

You can't forget that last divide by 2. But you need to do it to get to the middle of the quarter. By the way, this assumes that all of the equipment was purchased in the 4th quarter. If there was stuff purchased in January, you would need to adjust your calculations to account for the stuff purchased earlier in the year.

“

So going back to your example noted above, If equipment was placed into service in January, however, 40% of the equipment placed into service was in Q4, the mid-quarter convention would be used.

The equipment placed into service in Q4 – base value would be multiplied by .0357.

However, the January equipment would be calculated at 3.5 quarters and the calculation would be as follows: (3.5)(.0714)(base).

Is this correct?

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Author]

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