[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

[julietul]

@Svitlana85 Lind and Ace Corp:

The formula goes SH basis = basis of property transferred in – boot received + gain recognized.

So, 40,000 -10,000 + 0 = 30,000

Is this correct? I believe because the shareholders get >80% control after the transfer …there is no gain recognized….

I have a week to figure out all this basis' calculations….

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

[Svitlana85]

Hi Julie, yes that's correct. I am still in the process of understanding this and differentiating it from partnership.

What happens if the liability exceeds the basis in the property for a corporation? I know that for partnership, partner would have 0 in basis.

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]

This is extremely confusing to me and no clear guidance from my study material. Does anyone get this?

On one hand it says: On a corporate formation, gain is recognized to the extent that the liabilities assumed by the corporation exceed the basis in the assets contributed by the shareholder.

However, it also says: recognized gain is the lower of 1) the realized gain, or 2) the boot received.

So which one is it? Or is it both depending on the situation?

I have 3 days left till the exam to figure this out.

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]

Under common law, which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client’s financial statements?

A.

The CPA is liable only to third parties in privity of contract with the CPA.

Incorrect B.

The CPA is liable only to known users of the financial statements.

C.

The CPA probably is liable to any person who suffered a loss as a result of the fraud.

D.

The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinion.

I always get this question wrong.

[julietul]

Svitlana85 – If the liability exceeds the property's basis this would trigger recognition of gain, but not loss.

So for example if Lind transferred in a building with NBV of $40,000 and a mortgage of $50,000. There would now be a gain of $10,000 to recognize.. And the adjusted basis of stock to Lind would be = the basis of the property $40,000 + 10,000 recognized gain – boot received $10,000 assumption of mortgage.

I definitely am with you on ….needing to figure this out. I hope the more we work with it …the better we will understand.

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

[Svitlana85]

@cpa8488 the answer is C right?

What helps me to remember is that this CPA is very bad, they committed a fraud and therefore, should pay to everyone who suffered. Makes sense?

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]

Thanks Julie! I think I am starting to sort of get it. I was struggling with Corporation vs Partnership and Partner/SH vs Corp/Partnership basis.

I wish there was like a clear table with explanations and differences, so that i don't have to have 5 tabs opened with all my study material.

Here is what I a coming up with and please correct me if i am wrong

Partner basis in partnership = property basis-liability+liability*(1-% of partnership received).

If liability > basis, partner's basis = 0 and

gain is recognized in the amount of property liability assumed by other partners exceeding basis in the property

Partnership basis in property = basis of partner's property+gain recognized by partner (only happens if liability>basis see above)

SH basis in corp = property basis-liability-boot received+gain recognized

gain is recognized if boot received and is = lower of realized gain or boot received

gain is recognized if liability>property basis and is = liability – property basis

Corp basis in property = SH basis + gain recognized by SH

Please correct if any of these are wrong or add if I missed something.

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

[jstay]

Alrighty folks, just got above 70% on property transactions, now for partnerships…i know it will destroy me. Probably only going to study property and partnerships today then finish R4 tomorrow (i will have completed them all by tomorrow). Anyway, exam is 4 weeks from this Friday and within those 4 weeks i will be studying almost all day, everyday…still feels like not enough time, anyone think i should push it back? i just dont want to delay score release.

[hunter32]

The answer is C, fraud wipes out privity or known third parties

BEC - 80 (Becker)
AUD - 92 (Becker+NINJA MCQ)
FAR - 87 (Becker+NINJA MCQ)
REG - 90 (Becker+NINJA MCQ and Audio)

[hunter32]

You'll be alright Jstay. I thought the same thing until I started drilling MCQ and reading explanations and things will start to click. Do what you did for AUD

BEC - 80 (Becker)
AUD - 92 (Becker+NINJA MCQ)
FAR - 87 (Becker+NINJA MCQ)
REG - 90 (Becker+NINJA MCQ and Audio)

[Anonymous]

Jstay: I finished all of Becker's chapters in mid March. I originally scheduled for May 1 but realized that was way too much time. If you're studying full time you should be ready in 3 or 4 weeks (tops).

Don't schedule too early but at the same time don't give yourself too much time. You'll find that you know more than you think you do and you don't want to forget about the material. Also, from personal experience, it is REALLY hard to maintain a full time schedule of studying and maintain that focus. It really starts to wear you down after a few weeks.

[jstay]

@angelwatch, agreed i did full time study for the others and by the time you get to that last week, your just like give me the exam already lol but it could be my last one so i want to overkill it. Its good that your telling me i still have time so now i wont feel guilty when i go on a bike ride later

[Anonymous]

Sands purchased 100 shares of Eastern Corp. stock for $18,000 on April 1 of the prior year. On February 1 of the current year, Sands sold 50 shares of Eastern for $7,000. Fifteen days later, Sands purchased 25 shares of Eastern for $3,750. What is the amount of Sand's recognized gain or loss?

Incorrect A.

$0

B.

$500

C.

$1,000

D.

$2,000

I still don't understand why the answer is C and not A.

[julietul]

Svitlana85 – I totally agree ….I wish there was a table that shows all the differences in basis and different entities. I just cracked open the book …to try to create something like you did above. I think this is what I need to do for myself….to get the best handle on it. Right now, it is hard for me to understand your notes ….because it is not all clear in my head….I will report back to you…

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

[hunter32]

It's the wash sale rule. He had a 2000 loss on the original sale. He then purchased half the amount of shares originally sold (25/50) so only half the loss is allowed. Atleast I think, anyone else feel free to chime in.

BEC - 80 (Becker)
AUD - 92 (Becker+NINJA MCQ)
FAR - 87 (Becker+NINJA MCQ)
REG - 90 (Becker+NINJA MCQ and Audio)

[Author]

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