[jeff]

Welcome to the Q2 2016 CPA Exam Study Group for REG.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

[Spartans92]

I wanna say 16k? Really dont know..

Whats the answer guys??

BEC- PASS

[Bear-Bear]

Yeah, I can't feasibly arrive at any of the other answers. 16k?

[Just3Letters]

The answer is A. I got it wrong. The explanation is crazy.

The interest income (nonbusiness income) is offset by nonbusiness expenses, up to the amount of nonbusiness income. The standard deduction is a nonbusiness expense for this purpose.

IRC Section 172(d)(4)

The net capital loss (nonbusiness) is only deductible to the extent it is offset by nonbusiness capital gains.

IRC Section 172(d)(2)

Personal exemptions and unused personal deductions are added back to taxable income in arriving at net operating losses so they do not increase the carryback or carryforward.

The net business loss must be offset by wages and rental income for this year.

IRC Section 172

Wages of $5,000 plus net rental income of $4,000 minus the loss of $16,000 equals a net operating loss carryback or carryforward of $7,000.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Spartans92]

So what is offsetting the interest income?? Why does the explanation have to be so complexed

I guess Ill check back here tomorrow morning. Goodnight y'all! thanks for the questions. To be continued…

BEC- PASS

[Just3Letters]

The standard deduction apparently offsets the interest income which is weird because standard deduction is not a passive activity. It's not an activity at all. It's just the standard deduction.

I don't know. The person who thought of this question hates us all.

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Spartans92]

Just3, your logic makes sense to me.. What doesn't is the explanation lmao. Yes, that question could potentially be the difference of a 75 or a 74! UGH..

BEC- PASS

[Anonymous]

where is that question from?

[Just3Letters]

It was a Ninja question

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Anonymous]

Well I feel good about one thing – at least everyone is posting the same questions I've flagged as tricky. NOt that last one though with the NOL – That one pushed me over the edge.

[Anonymous]

well i dove into the literature on NOLs and wow it's dense (and it's late haha). the first few sections of Publication 536 help, and it has an example like your question above. (https://www.irs.gov/publications/p536/ar02.html)

here's the long way to think of it:

Total Income
(Total Deductions)
+Disallowed items
————————
NOL
===========

Disallowed Items are:
-Personal exemption
-Capital losses in excess of capital gains
-Nonbusiness deductions in excess of nonbusiness income (this is where the standard deduction less interest income goes)

so, to not overthink it (too much), for a question like that, just find what is disallowed and eliminate it before making the calculation.

[csvirk]

Guys does this happen to anyone of you. Every morning I get this feeling that i have forgot all the material I learned. Specifically all those tax related material that trick us all the time. For example this morning I freaked out in shower when i tried to recall tax BS. By the time I am done with CPA I might end up in Phsyc. ward.

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[csvirk]

Here the question to enjoy with your hot cup of Joe.

Nan, a cash-basis taxpayer, borrowed money from a bank and signed a 10-year interest-bearing note on business property on January 1 of the current year. The cash flow from Nan's business enabled Nan to prepay the first 3 years of interest attributable to the note on December 31 of the current year. How should Nan treat the prepayment of interest for tax purposes?

A.
Deduct the entire amount as a current expense

B.
Deduct the current year’s interest and amortize the balance over the next 2 years

C.
Capitalize the interest and amortize the balance over the 10-year load period

D.
Capitalize the interest as part of the basis of the business property

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[musiccitycpa]

Yea the Wiley test bank just magically appeared for me a few days ago as well. I asked the live chat people why “successful candidates score 60 or above” and they said that that is based on surveys and the test bank questions are all “difficult” questions. So if you are doing well on those, you should be solid. Reg just worries me because of how much of it is based on luck of the draw. I was much better prepared the second time I took it. My scores reflect otherwise.

AUD- 77
BEC- 84
FAR- 69, Sep 16
REG- 71,61,88

[Bear-Bear]

@musiccitycpa – Thanks for doing the legwork on that one…makes sense to me now in context.

@csvirk – B.

[csvirk]

@Bear Correct it is B.

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[Author]

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