[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

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Future Ninja]

Note: S corp. in recognition of SH's Income to report as AGI = do not include Tax-exempt Income. But to get SH's basis include Tax-exempt Income as addition. example:

Graphite Corp. has been a calendar-year S corporation since its inception on January 2, 2009. On January 1, 2015, Smith and Tyler each owned 50% of the Graphite stock in which their respective bases were $12,000 and $9,000. For the year ended December 31, 2015, Graphite had $80,000 in ordinary business income and $6,000 in tax-exempt income. Graphite made a $53,000 cash distribution to each shareholder on December 31, 2015. What total amount of income from Graphite is includible in Smith’s 2015 adjusted gross income?
A. $96,000
B. $93,000
C. $43,000
D. $40,000

ANSWER: D

You own 100% of Ricochet, Inc., an S corporation, filing returns on a calendar year. For tax year 2015, the corporation has an operating loss of $11,000 and separately stated tax-exempt income of $10,000. Your basis on January 1, 2015, is $2,000. What is the basis at the end of 2015?
A. $2,000
B. $11,000
C. $1,000
D. $0

ANSWER: C.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[rithzz]

Thanks Credit Revenue that makes more sense now.

AUD: 78
BEC: 81
FAR: 73, 85
Reg: 84

[Anonymous]

@future ninja
for the question no 2 I don't think with the available information, we can compute the basis of the shareholder
however upon the distribution of profit shareholder basis will increase by his share of the gain.

[Anonymous]

@ monikernc
If you specify the particular area where you having the problem then we can work together on this.
Or
we can start discussion topic by topic like if we start from the transaction in property first then partnership and so on.

[Blue.auditor]

Ninja Simulation # 15:

Kimberly's records for the year ended December 31, 2015:

Depreciation:
Real property (1) 50,000
Personal property (4) 100,000

The depreciation expense reported on Kimberly's tax return for the year is $158,000 and is the sum of three figures ($50,000, $100,000, and $8,000).

The $8,000 is the MACRS depreciation of furniture and fixtures. I understand how they come up with the $8,000.
But I don't understand why Kimberly's records don't reflect any depreciation for the furniture and fixtures.
I thought that the $8,000 was included in the $100,000 personal property depreciation.

The simulation notes the following: “No election was made by the company to expense part of the cost of the property.”

FAR 90 - 11/16/2015
BEC 81 - 2/14/2016
REG 87 - 5/23/2016
AUD - 8/8/2016

[mpd92]

Can someone please explain corporate liquidating and non-liquidating distributions? I feel like one question will say there's a gain but a different question asking the same exact thing will say they don't recognize it. HELP!!!

[rithzz]

Corporate Non-Liquidating Distributions:

Dividend income up to Current and Accumulated profits. Once it exceeds that you got to net it to the stock basis. After that its taxed at a capital gain.

So for example:

You have a 10K distribution and E&P = 3000 and basis in stock is 4000

3k (the E&P) = Dividend Income leaving 7k of the distribution left. The next 4k is tax free. 7k – 4k = 3k which is left now. That is taxed at capital gain.

Property distributions have to be FMV or basis (whichever is greater) – liabilities. Then you do the above netting procedure

For Liquidating you're going to have to find an example for me to explain it but you basically just recognize the gain/loss over the basis. Property distributions are calculated by the higher of the basis, FMV, or Liability.

Someone else please correct me if I said anything wrong as I wrote this pretty quickly and late at night!

AUD: 78
BEC: 81
FAR: 73, 85
Reg: 84

[Future Ninja]

@rithzz – i think you're correct.

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Future Ninja]

anyone get FAR like SIM in REG?

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Anonymous]

NINJA MCQ:

Which one of the following statements is correct with regard to unrelated business income of an exempt organization?
A. An exempt organization that earns any unrelated business income in excess of $100,000 during a particular year will lose its exempt status for that particular year.
B. An exempt organization is not taxed on unrelated business income of less than $1,000.
C. The tax on unrelated business income can be imposed even if the unrelated business activity is intermittent and is carried on once a year.
D. An unrelated trade or business activity that results in a loss is excluded from the definition of unrelated business.

The correct answer is B. Fine but, the answer explanation says this:

Tax-exempt organizations will be taxed on any amount of unrelated business income (IRC Sections 511(a) and 512(a)). Imposition of this tax does not affect the organization's exempt status. (IRC Section 513(a) and (c); Regulation Section 1.513-1)

So why is B correct? Thanks!

[Credit Revenue]

It's a tax rule. Like the standard deduction or any other tax rule. The 1st $1,000 of unrelated business income is tax exempt for a tax exempt organization. The answer would be better if it mentioned the exemption on the first $1,000.

A - 79 expires 4/30/16 need a pass on REG
B - 78
F - 80
R - 83!!! Can live again!

[Anonymous]

That's what I was wondering. Thanks. Heads up if anyone's reading at NINJA to please fix that answer.

[Fk]

What is difference between Rental Income and Rental properties , Rental Income is considered Business Income and Rental Properties Income or Loss as Passive Income.

[monikernc]

FutureNinja and Ano, thank you for your responses – I did not see them until now. I have some additional materials now and have been hitting mcq's hard this weekend to wrap my head around S-Corp and C-Corp contribs/distribs/basis. I have made progress on the partnership treatments but the Corp's are still messing with me.

I am looking through the new materials now to see if the info is presented in a manner that can penetrate my thick skull 🙂

thank you, again for your offers of assistance – i will post questions as they come up. best to all!!!

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

Anyone knows about the rules ,regulation and obligation of volunteer tax return preparer?
I am asking from exam point of view , what should we need to know about the volunteer tax return preparer?

[Author]

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