[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

[SaveBandit]

The explanations on these partnership questions seem to conflict. Thoughts?

Day's adjusted basis in LMN Partnership interest is $50,000. During the year, Day received a nonliquidating distribution of $25,000 cash plus land with an adjusted basis of $15,000 to LMN and a FMV of $20,000. How much is Day's basis in the land?

a. $10,000
b. $20,000
c. $25,000
d. $15,000

Answer D. In a nonliquidating distribution, the partner takes the partnership basis for assets distributed. This basis cannot exceed the partner's partnership interest.

Owen's tax basis in Regal Partnership was $18,000 at the time Owen received a nonliquidating distribution of $3,000 cash and land with an adjusted basis of $7,000 to Regal and a FMV of $9,000. Regal did not have unrealized receivables, appreciated inventory, or properties that had been contributed by its partners. Disregarding any income, loss, or any other parthership distribution for the year, what was Owen's tax basis in Regal after the distribution?

a. $9,000
b. $8,000
c. $7,000
d. $6,000

Choice B. is correct. In a nonliquidating distribution the partner's basis is reduced first by the amount of cash received and then by the adjusted basis of any property received.

What am I missing here? If you apply the logic in question 1 to question 2 you get $7,000 not $8,000.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[ChristieF]

@SaveBandit, you are correct, but the second question is asking the partners remaining basis in the partnership, so $18,000 – $3,000 cash distribution and then minus the $7,000 land baits distribution, that leaves the partner $8,000 basis left in the partnership.

[pracap]

Guys,
Does anybody have clarity on Basis & At-risk rules with regard to PS and S corp?
Its so confusing!!! Can somebody help me…

[mariam almas]

@pracap i have a same question as yours, hope somebody will explain it.

AUD: 81 (Done)
REG: Currently studying
FAR: TBD
BEC: TBD

NH

[tickles]

Hi,

Does anyone understand why for computing the taxable dividend procedure is different between a and d/e?

AEP CEP Distribution (july 1)

a. $9,000 $9,000 $16,000 Answer is :16000 dividend

d. $40,000 ($55,000) $15,000 Answer: is 12500 dividend

e. $30,000 ($20,000) $18,000 Answer is: 18000 dividend

Im not understanding why we would not prorate letter a as well then since technically on July 1, they would have only half of the 9000 CEP at that date, and so AEP and CEP would be 13500

Does anyone have insight on why if CEP is negative, we would prorate but not in situations where there is enough CEP and AEP?
Thanks!

[tickles]

Hi,

Does anyone understand why for computing the taxable dividend procedure is different between a and d/e?

AEP CEP Distribution (july 1)

a. $9,000 $9,000 $16,000 Answer is :16000 dividend

d. $40,000 ($55,000) $15,000 Answer: is 12500 dividend

e. $30,000 ($20,000) $18,000 Answer is: 18000 dividend

Im not understanding why we would not prorate letter a as well then since technically on July 1, they would have only half of the 9000 CEP at that date, and so AEP and CEP would be 13500

Does anyone have insight on why if CEP is negative, we would prorate but not in situations where there is enough CEP and AEP?
Thanks!

[ChristieF]

Hey everyone, quick question. So.. I'm using the Wiley books, Ninja MCQs and I've got the Yaeger lectures from last year.
I've been considering getting Ninja notes or audio for REG, but wanted to see if anyone else thinks that would be too much. I am currently the only one working, my husband is having a hard time finding a new job, so making sure I'm smart about spending that $60+ for notes,etc is super important right now. I took notes off the free Blitz last weekend, but wanted to see what everyone thought of the notes and if I'd need them. I've failed 3 exams already – and now I really can't afford to not pass another exam. I want to be as prepared as possible. Notes or no notes? Thanks everyone!!

[SaveBandit]

@FrostyCPA

I've bought ninja notes for previous sections but haven't used them much. Not that they're bad – they're basically a high level summary of all the major topics. I just would rather have more detail in my notes.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[SaveBandit]

When Jim and Nina became engaged in April of the current year, Jim gave Nina a ring that had a FMV of $50k. After their wedding in July that same year, Jim gave Nina $75k in cash so Nina could have her own bank account. Both are US citizens. What was the amount of Jim's marital deduction?

A. 0
B. $125k
C. $75k
D. $115k

Answer C.

I understand why the answer is C but what I don't get is why you get a deduction for giving your spouse $75K. Wouldn't people just give their spouse a bunch of money every year and reduce their tax liability to nothing? I know that isn't the case so there must be parameters around this rule that I am missing.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[Bnots]

@SaveBandit, it's not an income tax deduction but rather a gift tax deduction. They're two different taxing schemes. If I give you $75,000, I have to file a Form 709 and pay a gift tax on $61,000 ($75k minus the $14k annual gift exclusion) of that amount. That's in addition to the income taxes I paid when earning it. If I gave that $75,000 (or $75 million for that matter) to my wife, assuming she's a US citizen, I wouldn't owe gift tax on any of it because of the marital deduction.

There's also a lifetime exclusion (the unified credit) which is, IIRC, $5.34 million beginning with the 2014 tax year and $5,43 million beginning with the 2015 tax year, and shared with your estate when you die. Because I haven't used any of my unified credit, I wouldn't actually owe any gift taxes on the $75,000 I gave you.

[pracap]

Guys,
Am reposting same query, please somebody help me….

Does anybody have clarity on Basis & At-risk rules with regard to PS and S corp?
Its so confusing!!!

[Anonymous]

Basis and at-risk rules are definitely must-know topic before testing. You'll most likely see this topic in your SIMs. I took REG six times and I still could not figure it out.

You might need to keep researching online, or post the entire question (plus the solution), then ask what you want to clarify with.

Here's what I dug from somewhere:

https://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2015/Tax/complicated-at-risk-rules.jsp

Good luck!

[SaveBandit]

@bnots

Thanks, that makes sense

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[SaveBandit]

@pracap

Roger has some helpful videos for Pship basis. Just google “Roger basis” and search under videos. Unfortunately, he doesn't have anything for c-corps as far as I can tell.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[pracap]

@ Amor D and SaveBandit

thanks for your feedback.

[Author]

Replies