[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

[Credit Revenue]

I not even sure it is using 2014 numbers, but it is using old numbers for sure.

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

[Muse0407]

@Credit Revenue

Thanks for the quick reply!!!

[Credit Revenue]

YW

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

[Martin]

b

Through God all things can happen!

“You never fail until you stop trying.”
― Albert Einstein
When I was young, I used to admire intelligent people;as I grow older, I admire kind people.
“Just keep swimming, just keep swimming.”

FAR= 72-84
Audit= 73-82
BEC= 74-75
Reg=77

[Anonymous]

Mike and Jane Lewis, a married couple, file a joint 2015 federal income tax return. They have one child, age 15, whom they support 100%. Both are under age 65. They have the following income and expenses for the year:

Mike's wages $65,000
Jane's wages 60,000
Total allowable itemized deductions 13,000
Mike's contribution to an IRA 4,000
Jane's contribution to an IRA 4,000

Mike is not covered by a pension plan at work, while Jane is covered by a plan at her employer.

The exemption amount (per exemption) for 2015 is $4,000. The standard deduction amount for married filing jointly is $12,600.

What is the Lewises' taxable income amount for 2015?

A.
$92,000

B.
$96,000

C.
$96,400
D.
$100,000

In Wiley book, it is written that “The maximum deductible IRA contribution for an individual who is not an active participant ,but whose spouse is , will be proportionately phased out at a combined AGI between $183000 and $193000.

So if the phase-out amount is in between $183000 and $193000 and there combined AGI is $121000 then why don't the contribution of Jane is deducted for computing the AGI

[jmc0434]

I would say A.

Income: 125,000
Less IRA contributions: (8000)
AGI = 117,000
Less Itemized Deductions (13,000)
Less Personal Exemptions (12,000)
Taxable Income = 92,000

Max IRA contribution deduction to arrive at AGI is 5,500 per taxpayer. Since MFJ and they contributed below the max deduction allowed they can deduct the full $8,000.

They can use the itemized deduction since it is higher than the std deduction

They get to claim a personal exemption for themselves (2) and their child (1) at 4,000 each which = 12,000.

BEC - 79
AUD - 89
REG - 80
FAR - 7/19/16

[jmc0434]

@Ano – What is the right answer? Sorry I just saw the end of your post.

The phase out of the 183,000 and 193,000 is considered when the MFJ are “excessively rich” which then both individuals get tested together. Since they have an AGI below 183,000 they are tested separately. And I believe for the individuals not able to deduct IRA contributions they would have to be considered Rich AND Actively participating in another qualified plan.

To be considered rich you have to have an AGI that exceeds

Single = $61 – 71,000
MFJ = 98 – 118,000

So, maybe that is why Jane's IRA contributions are not deducted. Since they had an AGI 121K, they are over the AGI limitation for MFJ and the problem states that Jane is the only one that is active in her employer's plan (another qualified plan). So Jane meets the requirement of Rich and Actively Participating while Mike does not. So, Mike's IRA contribution is deductible to arrive at AGI.

BEC - 79
AUD - 89
REG - 80
FAR - 7/19/16

[Anonymous]

@jmc0434 Thank you for the response but my question is when phase out will be applied for each case of IRA deduction,I am keep getting confuse with the phase amount especially with the IRA.

The Lewises' taxable income amount is calculated as follows:

Mike's wages $ 65,000
Jane's wages 60,000
Mike's contribution to an IRA (4,000)
———
Adjusted gross income $121,000
Less Itemized deductions (13,000)
Less Exemption amount (12,000)
———
Taxable income $ 96,000

Note

The Lewises could not deduct their standard deduction amount since they itemized their deductions. Taxpayers cannot take the standard deduction amount if they itemize their deductions. Taxpayers can elect each year to itemize deductions or take the standard deduction.

Since only Jane is covered by a pension plan at work, Mike may take an IRA deduction in 2015 because they are below the threshold in AGI. Jane's IRA contribution is not deductible since they are above the threshold of $118,000 in AGI and she is covered by a pension plan at work.

[Credit Revenue]

I don't love those questions either. There is one where you take both IRA deductions and one where you only take one.

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

[jmc0434]

@ Anos – Thank you for posting this question! It helped remind me that there was a phase out for the IRA contributions! (I am never going to remember all the tax exceptions or phase limitations!)

BEC - 79
AUD - 89
REG - 80
FAR - 7/19/16

[Anonymous]

Vernon receives a truck from Berry Trucking Company as a distribution in complete liquidation. Vernon’s basis in the stock of Berry Trucking Company is $2,000. The fair market value of the truck on the date of the distribution is $30,000. There is a $15,000 loan on the truck, which Vernon assumed. What is the basis of the truck to Vernon?
A. $28,000
B. $30,000
Answer (B) is correct.
If a shareholder assumes a liability of the liquidating corporation or receives property that is subject to a liability, then the liability reduces the amount realized by the shareholder, thus reducing the shareholder’s gain or increasing the shareholder’s loss. Nevertheless, the shareholder’s basis for the property is the property’s fair market value, in this case $30,000.
C. $15,000
D. $13,000

Why is the SH basis not 30,000 reduced by 15,000 liability. Thus 15,000. If SH assumed the liability, which is supposed to reduce the amount realized?

[SaveBandit]

A taxpayer reports income from a state tax refund on his tax return for the current tax year. Match the phrase that best describes the status for alternative minimum tax (AMT) computations of this tax item.

A. Not a preference or an adjustment for the AMT

B. An AMT preference or adjustment which is a deferral item for the AMT

C. An AMT preference or adjustment which is an exclusion item for the AMT

D. An AMT preference or adjustment which is an exemption item for the AMT

A taxable state tax refund is an AMT adjustment which is an exclusion item. This adjustment will reduce AMT income because otherwise taxable income is excluded.

Becker specifically says taxable refunds are added back. So, why is NINJA saying the exact opposite?

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[FAR_WARS]

Hello team-

had to disappear from the forum in the midst of busy season & my AUD retake. Am now starting REG with a 6/10 scheduled test date.

Any tips for tackling REG or things you would have done differently? Right now I am studying Individual Tax.

(@moniker- I am sure you will have some for me)

FAR- 80
BEC- 75
AUD- 78
REG- ?

[FAR_WARS]

Q:
During 2014, George (age nine and claimed as a dependency exemption by his parents) received dividend income of $3,700, and had wages from an after-school job of $1,700. What is the amount that will be reported as George’s taxable income for 2014?

A:
The requirement is to determine George’s taxable income. George’s adjusted gross income consists of $3,700
of dividends and $1,700 of wages. Since George is eligible to be claimed as a dependency exemption by his parents, there will be no personal exemption on George’s return and his basic standard deduction is limited to the greater of $1,000, or George’s earned income of $1,700, plus $350.

“basic standard deduction is limited to the greater of $1,000, or George’s earned income of $1,700, plus $350.”

this is from a 2015 Wiley Book. Still the correct amount?

FAR- 80
BEC- 75
AUD- 78
REG- ?

[FAR_WARS]

@Save

I feel the question is vague because you don't know if the refund was due to itemized deduction or due to standard deduction. Answer would make sense if it was a standard deduction since it was never deducted so can't be included in the AMT calculation. Is that what I'm supposed to assume? Or does this refund not qualified as a tax “deduction” item (adjustment item)?

FAR- 80
BEC- 75
AUD- 78
REG- ?

[Author]

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