[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

[FAR_WARS]

The following information pertains to Wald Corp.’s operations for the current year:

Worldwide taxable income—————————–300,000
US source taxable income—————————–180,000
US income tax before foreign tax credit————–96,000
Foreign nonbusiness-related interest earned——-30,000
Foreign income taxes paid on
nonbusiness-related interest earned——————12,000
Other foreign source taxable income——————90,000
Foreign income taxes paid on other
foreign source taxable income————————–27,000

What amount of foreign tax credit may Wald claim for the current year?
a. $28,800
b. $36,600
c. $38,400
d. $39,000

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

[monikernc]

getting through the sims really helps seal the deal on some of these topics. the instructions will screw me. one was the entries for 1065 k1 and all deductions had to be negative – no hint in instruction. another, was c corp 1120 deductions but did not require negatives. both nailed me.looking at the actual tax forms did not help either.

what else did i learn?
vacation expense is added to salaries and wages
capital gains are short term if the property is exactly one year to the day. long term is more than 1 year.
ignore federal taxes on the taxes and licenses
other expenses include startup and organization costs. deductions for startup and organization costs are calculated separately – do not combine them.

for research questions, the IRC organization is as follows:
6654, is the section
6654 (c) is the subsection
6654 (c) (1) is the paragraph
6654 (c) (1) (A) is the subparagraph
so watch closely what they are asking for

finally, i have a question. the c corp 1120 from ninja sim 37. charitable contribution included real property held less than one year – i calculated the allowed contribution from the cost basis not FMV. the solution allowed the FMV amount. i thought capital gain property had to be held long term to use FMV as the charitable contribution amount. is treatment for real property different? anyone?

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

[wcn825]

@far_wars is the answer C?

[Anonymous]

@monikernc
That is, the taxpayer is not allowed to offset boot received with boot paid. However, when the taxpayer gives and receives boot in the form of liabilities, the taxpayer is allowed to net the boot received and the boot paid.”

but we do offset the cash paid with cash received right?

[monikernc]

here is a different thread for the truck like-kind exchange…

https://www.another71.com/cpa-exam-forum/topic/question-for-like-kind-exchange

and another…

https://www.another71.com/cpa-exam-forum/topic/like-kind-exchange-gain-recognition

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

[FAR_WARS]

@wcn825:

The answer is B. 2 limits need to be calculated. 1 for passive foreign income, and 1 for nonpassive foreign income. You can do this by allocating the amounts of US TAX that are applicable to each. One of the limits is ABOVE the actual number, so we use the actual number. The other limit is BELOW the actual number, so we use the limit.

Explanation:

The requirement is to determine the amount of foreign tax credit that Wald Corp. may claim. Since US taxpayers are subject to US income tax on their worldwide income, they are allowed a credit for the income taxes paid to foreign countries. However, the amount of credit that can be currently used cannot exceed the amount of US tax that is attributable to the foreign income. This foreign tax credit limitation can be expressed as follows:
Foreign TI Worldwide TI
× (US tax) = Foreign tax credit limitation
One limitation must be computed for foreign source passive income (e.g., interest, dividends, royalties, rents, annuities), with a separate limitation computed for all other foreign source taxable income.
In this case, the foreign income taxes paid on other foreign source taxable income of $27,000 is fully usable as a credit in 2013 because it is less than the applicable limitation amount (i.e., the amount of US tax attributable to the income).
$90,000 $300,000
On the other hand, the credit for the $12,000 of foreign income taxes paid on non-business-related interest is limited to the amount of US tax attributable to the foreign interest income, $9,600.
$30,000 $300,000
× ($96,000) = $28,800
× ($96,000) = $9,600

Thus, Wald Corp.’s foreign tax credit totals $27,000
+ $9,600 = $36,600. The $12,000 – $9,600 = $2,400 of unused foreign tax credit resulting from the application of the limitation on foreign taxes attributable to foreign source interest income can be carried back one year and forward ten years to offset US income tax in those years.

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

[FAR_WARS]

In a common law action against an accountant, lack of privity is a viable defense if the plaintiff:

a. Is the client’s creditor who sues the accountant for negligence.
b. Can prove the presence of gross negligence that amounts to a reckless disregard for the truth.
c. Is the accountant’s client.
d. Bases the action upon fraud.

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

[Anonymous]

@far wars
answer is b
we have to compute foreign tax credit in two category
passive and general
ratio of world income and us tax is 96000/300000=32%

1( Passive foreign income 30000*32%=9600
take lesser of 9600 or actual foreign tax paid 12000 9600
2) general 90000*32%=28800
foreign tax paid 27000 lesser is 27000
total credit 27000+9600=36600

[Anonymous]

@ Fae Wars
A

[Claudia408]

Hi guys, can someone explain what an exchange treatment on redemption is? At first I thought had to do with control and the explanation is pretty weak…

Calliope Corp. has outstanding 400 shares of common stock of which Yak, So, Day, and Ren each own 100 shares or 25 percent. No stock is considered constructively owned by any of the shareholders under section 318. Calliope redeems 34 shares from Yak, 24 shares from So, and 42 shares from Day. Which shareholder(s) qualify for exchange treatment on this redemption?
1. Yak
2. So
3. Day

Answer: Day

BEC - 75 (3x)
AUD - 78 (3x)
REG - 67, 66, Aug 1
FAR - 54, Sept 8

[FAR_WARS]

@Ano- yes b/c we have no “Privity of Contract” w the client's creditor.

While conducting an audit, Larson Associates, CPAs, failed to detect material misstatements included in its client’s financial statements. Larson’s unqualified
opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client. Larson knew that its opinion and the financial statements would be used for this purpose.

In a suit by a purchaser against Larson for common law
fraud, Larson’s best defense would be that:

a. Larson did not have actual or constructive knowledge of the misstatements.
b. Larson’s client knew or should have known of the misstatements.
c. Larson did not have actual knowledge that the purchaser was an intended beneficiary of the audit.
d. Larson was not in privity of contract with its client.

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

[Anonymous]

What should we know about the credits ,
AmorD gave the list of refundable and nonrefundable credits in spite of this what we should know about the credit.
Do you guys study each and every credit or selected one..
My review course just tells to learn the earned income, child tax , American opportunity , lifetime learning and foreign tax credit.

In spite of these, what credits do you guys think I should know?

[Anonymous]

@farwars
A

[FAR_WARS]

@Ano:

Yes A is correct

you should remember that the Earned Income Credit is refundable!

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

[monikernc]

claudia, the redemption reduces the number of shares outstanding to 300. Day is the only one left with less than 20% of shares outstanding.

please provide the full explanation, if you can.

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

[Author]

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