[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

[mckan514w]

@wcn825 ha ha ha… yes I spent probably 20 mins on it as well and kept re-checking my notes and kept coming up with the 302– and finally just decided they rounded down… (that or we both worked it wrong but the day I've had I'm going with rounded down 🙂 )

@Claudia- to be honest after FAR– REG has been a welcome “break”– it is frustrating me trying to keep everything straight but I am not having those OH F__CK I can't do this moments that I was having with FAR (gee can't wait to study for that one again 🙂 )

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Anonymous]

Anyone, please help me to understand these rules.

If health insurance premium paid by the employer then it excluded from the employee gross Income.
If paid by the self-employed person then he can deduct the premium paid.
If paid by an Individual then he can claim as Itemized deduction as qualified medical expenses.

[mckan514w]

@Ano- you got it-
Employer paid not wages and not subject to withholding taxes– UNLESS it is an S-corp and the employee owns more than 2% of company than it must be included in wages
100% of paid deductible above the line for self employed
Individual- Itemized Deduction Medical Expenses Schedule A – subject to the 10% AGI threshold– this includes ANY portion that your employer does not cover- so for example Mary and Tom are married and Employer covers 100% of Marys and 50% of Toms then you can deduct the other 50% of toms as an itemized deduction medical expense

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mvol5]

Can anyone explain this question to me. I was thinking that property distributions like this in an S Corp would go down in the stock holders books as at basis, and didn't think a gain would be recognized by the company. However, this is exactly how it should be for a C Corp. Have I just been thinking wrong this whole time? I was thinking S Corp distributions are treated more like Partnerships, instead of C Corps? Can anyone give me a quick run down?

Here is the question:

Clip-Joint, an S corporation hair salon, distributes land with an adjusted basis of $10,000 and a fair market value of $50,000 to its sole shareholder, Louise. Louise's basis in the corporate stock before distribution is $90,000. What is Louise's basis in the land after the distribution?

A.
$90,000

B.
$40,000

Incorrect C.
$10,000

D.
$50,000

You answered C. The correct answer is D.
Louise's basis in the land is $50,000, its FMV at the time of distribution. A property distribution is treated as if the corporation sold the property to the shareholder at its fair market value. Clip-Joint will recognize a $40,000 gain on the distributions which it will pass to Louise.

[ABTX411]

@mvol5

S-corps are treated like C-corps for property distributions.

https://www.fortenberrylaw.com/distributions-s-corporations/

BEC - 90 - 2/04/2016
AUD - 97 - 2/29/2016
FAR - 92 - 4/19/2016
REG - 88 - 5/19/2016

[Claudia408]

Lark owns 25% in Amber. Lark contributes Property worth $60,000 ($50,000 basis), received $10,000 in cash from Amber Co.. What is Lark's realized gain?

Answer: The corporation received a total of $200,000 in contributions from all four investors (net cash of $30,000; land with an FMV of $210,000; assumed liabilities of $40,000). Lark’s 25% interest is valued at $50,000, and he contributed land worth $60,000 and received $10,000 in boot. If the stockholder receives cash or other property in the exchange, then gain is recognized up to the smaller of the boot received or the gain realized. Lark’s realized gain ($10,000) is the difference between the valued of his interest ($50,000) and the $40,000 he surrendered ($50,000 basis in land less $10,000 cash received by Lark). Note that the boot he received was also $10,000

My question is, would the calculation of FMV 60,000 – basis given up 50,000=10,000 also be correct? I know it also happens to be 10,000 but I think this is another correct way to get to the answer?

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

[mckan514w]

Can someone let me know if I finally have the IRA phase outs correct? It seems like every question I answer there seems to be a different amount mentioned and I am getting really confused…

1. A couple filing jointly and one participates in a plan and the other does not- the phase out for the non participating person is $183,000 to $193,000 AGI— HOWEVER his/her spouses limitation- phaseout is $98,000-118,000???— This is the one I am really confused about….

2. If BOTH participate in a plan then their phaseout is the $98,000-118,000???

3. If NEITHER participate they can deduct full amount up to 11,000 or their combined income whichever is less.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Anonymous]

@ mckan514w
I recently studied the IRA and according to me you are absolutely right
I want to add one more phase out for the single taxpayer who participate in employer retirement plan
61,000-71000

[Anonymous]

when employee incurred the business expense and employer reimbursed the amount but an employee doesn't make the adequate accounting of it. then what would be the treatment ?

or if employee do the proper accounting but does not return the excess amount then how to treat it?

[Anonymous]

Can cousin be claimed as Dependent for medical expense

[mckan514w]

@Ano thanks so much!

Regarding your question #1 there are two types of reimbursement plans accountable and non accountable in the first the employee is tasked with providing employer with substantive proof of expenses (receipts etc….) and the employer reimburses then depending on the amount provided. If reimbursement exceeds expenses then it needs to be included in income if the expense exceeds reimbursement then the employee can deduct under itemized deductions schedule A

In a non- accountable plan the employee does not need to provide substantiation and the employer needs to include the reimbursement in income and the employee can then deduct allowable expenses as misc. itemized deductions schedule A

So if employee does not keep adequate records I think he is pretty much SOL if employee reimburses him in any fashion since he can't really prove it was more or less than what was owed.

If the employer was the one that didn't keep good records and does not reimburse the full amount the employee can deduct…

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mckan514w]

@ano regarding question 2 I just went through all of the dependents / qualify person etc… today…. and I would say yes-

If the cousin meets all of the requirements for qualifying relative then yes the medical expenses can be included in deduction (even if they do not live with you– remember qualifying relative is anyone whom you provide over half of the QR's total support, they do not have gross income greater than the personal exemption amount and they are either related or a member of household)

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Anonymous]

@mckan514w
Thank you for clarifying
“In a non- accountable plan the employee does not need to provide substantiation and the employer needs to include “
the employer needs to include or employee need to include ?

Another thing ,Did you ever read that relative should be closer than the cousin , if yes what does that mean and where would it apply?

[mckan514w]

@ano- Yes I have read that the relative should be closer to a cousin however that I believe applies ONLY to related party transactions such as gifting— will double check my notes- I do not think IRS specifically specifies “relative” for qualifying relative provision of claiming dependents / medical expenses- for instance I seem to recall (and I will double check this)- that there has been instances where boyfriend / girlfriend live together but only one works so they are able to claim the other as a qualified relative for tax purposes… even though there is no “relation” between them

See second post for my notes on reimbursement plans…

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mckan514w]

Okay here is what I have for reimbursement plans (sorry may be long post- but it really helps me learn it to type it all out 🙂 )

2 Types of Reimbursement Plans:

1. An accountable Plan- where employee must provide substantiation of expenses:
A. If reimbursement equals expenses the employee excludes the reimbursement from income
B. If reimbursement exceeds the expense the excess should be included in gross income
C. If the Expense exceed the reimbursement the employee deducts the unreimbursable amount as misc. itemized deduction on Schedule A of returns

2. A non-accountable plan- the employee does not provide substantiation for expenses to employer
A. The employer includes reimbursements in income
B. The employee can deduct any un-reimbursed amounts as allowable business expenses as misc. itemized deductions.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Author]

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