[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]

Yes. That's correct. Like I said, things get tricky when mid quarter convention is used.

[willpassby2014]

On February 1, 2014, Pam Baker purchased a $161,000 machine (5-year property) for use in her business. Pam expensed $25,000 under Section 179 in addition to the regular depreciation of 20% in 2014 and 32% in 2015. Pam's total deductions for 2014 and 2015 for the machine are:

A.

$52,200 (2014) and $43,520 (2015).

Incorrect B.

$32,200 (2014) and $43,520 (2015).

C.

$32,200 (2014) and $51,520 (2015).

D.

$52,200 (2014) and $51,520 (2015).

Why is the answer taking the whole year instead of mid month?

BEC Passed
FAR Passed
AUD Passed
REG Passed

[Anonymous]

Which of the following conditions must be present in a post-1984 divorce agreement for a payment to qualify as deductible alimony?

1.Payments must be in cash.

2.The payments must end at the recipient’s death.

why is the answer both? I thought alimony payments could be to pay a credit card or to pay for school. I remember reading something along those lines in Becker. Can someone clarify?

[willpassby2014]

No. Both the conditions should be met. Payment in cash and must end at the recipients death.

BEC Passed
FAR Passed
AUD Passed
REG Passed

[Gabe]

@will it is not “real property,” therefore, you would never take mid-month. The only choices are mid-year or mid-quarter. Since it was purchased before the 4th quarter, you would use mid year. Since the question asks for the “whole year” the calculation is as follows:

$161- 25k= 136*.2= 27.2k + 25k= 52.2k (yr 1)

$161-25K= 136*.32= 43.520 (yr 2)

It's kind of a weird question, but I hope this helps.

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

OK Candidate

[Troblin]

@Gabe in the problem set above, is Y1 calculation based on 1/5 – 20% ( 200% – bonus depreciation) (1/2 – half year convention)?

I always get confused when the half year and the 200% bonus MACRS Y1 depreciation offset.

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 🙂

[Gabe]

@troblin yeah. At least, that's what I have seen on the exam. If it is something that is different (e.g. using a different exemption amount than normal, using a different %) they will state it in the question.

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

OK Candidate

[want2pass]

I'm getting a little confused with the partnerships and corporations in terms of the basis. When would the FMV be used as the new basis vs. the old basis?

[Sandia]

how do you know when to use half year convention or use mid- Quarter? What is the password for use one or the other? No clear yet x me

This case use half year convention because purchased (FEB1) before the 4th quarter?

I guess the calculation Y1 is:

Depreciation 1/5 = 20%

DDB 20%x 2 = 40%

Half year 40% x 1/5= 20%

Y2:

Depreciation (100%-20%) = 80% x 1/5 = 16%

DDB 16% x 2 = 32%

Thank you,

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

[Sandia]

why do not use mid quarter placed service in 1Q? why FEb 1 = half month?

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

[Sandia]

sorry half year.. mid month is only for Real property

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

[want2pass]

@Sandia I think for a multiple choice question, that formula might get a little confusing. The easiest way for me is to think when the majority of it was placed in service.

In one example, the company purchased and placed the equipment during November Year 1. Being that it was towards the end of the year, mid-quarter would be applicable because the majority was placed in service in the fourth quarter.

Half-year convention everything is more even throughout.

Hope this helps!

[jstay]

@want2pass, isn't FMV used when the fmv is less then the basis?

I may be wrong

[Gabe]

@sandia it states in the question “regular depreciation.” therefore, they are not using MACRS. The question is testing whether you know when to add/subtract the $25k for sec 179. Focus on that. As stated above, depreciation is taken evenly through the year.

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

OK Candidate

[Gabe]

@want to pass- it's one of those things you have to sit down and write everything out

pships:

prop= NBV

services= FMV

corps:

prop= NBV

If S/H have LESS than 80% control after distribution- FMV

post some MCQs and I can probably walk you through it

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

OK Candidate

[Author]

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