[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]

Okay Ano– here is the answer straight from IRS:
If the cousin lives with you then they can qualify as a qualified dependent if they meet the test provided thus you are able to deduct their medical

ex: You support an unrelated friend and her 3-year-old child, who lived with you all year in your home. Your friend has no gross income, isn't required to file a 2015 tax return, and doesn't file a 2015 tax return. Both your friend and her child are your qualifying relatives if the support test is met.

if the cousin DOES NOT live with you you MAY NOT claim them / deduct their expenses:

Relatives who do not have to live with you. A person related to you in any of the following ways doesn't have to live with you all year as a member of your household to meet this test.
Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted child is considered your child.)

Your brother, sister, half brother, half sister, stepbrother, or stepsister.

Your father, mother, grandparent, or other direct ancestor, but not foster parent.

Your stepfather or stepmother.

A son or daughter of your brother or sister.

A son or daughter of your half brother or half sister.

A brother or sister of your father or mother.

Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

Any of these relationships that were established by marriage aren't ended by death or divorce.

https://www.irs.gov/publications/p17/ch03.html#en_US_2015_publink1000170933

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 once again,
employer include in income mean employer include in employee salary

[mckan514w]

Also remember you can gift medical care to your cousin as long as you pay it directly to the medical provider- however I don't think this would be a deductible medical but rather fall under the gifting rules…

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 thats how I read it…. so if I reimburse you $500 then I must include this in your W-2

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
got it thank you.

[Claudia408]

when calculating a partner's share in an S Corp, when do I include LT/ST cap/gains and losses in the calculation of their basis?

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

[Claudia408]

This is why:
The IRS requires that the annual calculation of a shareholder’s S-Corporation stock basis be conducted in the following order:

Increased for income items (including gains) and excess depletion;
Decreased for distributions;
Decreased for non-deductible, non-capital expenses and depletion; and
Decreased for items of loss and deduction.

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

[mckan514w]

thanks for this @claudia!!!

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]

Can anyone please explain to me when the stock dividend is taxable and when not , and please give me some example to better understand .
And cash dividend is always taxable ,right?
Thank you in advance.

[Martin]

I have a quick question. I sold a rental property I had for a few years, and all the losses that were not deducted before were now deducted the year of sale, and the net loss went against my regular income. I understand up to the point. The part I dont understand is when does the capital loss limit of 3K come into play? I thought that when you sell a rental property you either have a gain or a loss, and if you have a loss the limit is 3k against regular income. My loss was 20k and went against regular income. Is this because my property is not a capital asset renting I was renting it, so no 3K limit?

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

[FAR_WARS]

When computing a corporation's income tax expense for estimated income tax purposes, which of the following should be taken into account?

Corporate tax credits
Alternative minimum tax

a. No No
b. No Yes
c. Yes No
d. Yes Yes

d is correct. When computing a corporation's income tax expense for estimated income tax purposes, both corporate tax credits and the alternative minimum tax should be taken into account.

I do not understand why the tax credits would matter. Wouldn't this just change the amount of the LIABILITY that we owe, but the expense would be the same regardless?

Thanks.

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

[Anonymous]

Because the corporation estimated tax is its
expected tax liability minus allowable tax credit.

If you know what tax credit you gonna to get then why don't you pay estimated tax after considering credit , otherwise you just paid excess estimated tax and which result in the refund.

tax liability + AMT -estimated tax paid – tax credit = tax due or refund.
so you need to consider both AMT and TAX CREDIT

[wcn825]

Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?

a. $0

b. $15,000

c. $25,000

d. $35,000

i do not understand this problem at all. The answer is B but how can the deduction be that high?

[Anonymous]

Baum, an unmarried optometrist and sole proprietor of Optics, buys and maintains a supply of eyeglasses and frames to sell in the ordinary course of business. In the current year, Optics had $350,000 in gross business receipts and its year-end inventory was not subject to the uniform capitalization rules. Baum's current year adjusted gross income was $90,000 and Baum qualified to itemize deductions. During the year, Baum recorded the following information:
Business expenses:
Optics cost of goods sold $ 35,000
Optics rent expense 28,000
Liability insurance premium on Optics 5,250
Other expenditures:
Baum's self-employment tax $ 29,750
Baum's self-employment health insurance 8,750
Insurance premium on personal residence. In the current year, Baum's home was totally destroyed by fire. The furniture had an adjusted basis of $14,000 and a fair market value of $11,000. During the year, Baum collected $3,000 in insurance reimbursement and had no casualty gains during the year. 2,625
Qualified mortgage interest on a loan to acquire a personal residence52,500
Annual interest on a $70,000, 5-year home equity loan. The loan was secured
by Baum's home, obtained January 2 of the current year. The fair market value
of the home exceeded the mortgage and the home equity loan by a substantial
amount. The proceeds were used to purchase a car for personal use.
3,500
Points prepaid on January 2 of the current year to acquire the home equity loan
1,400
Real estate taxes on personal residence
2,200
Estimated payments of current year federal income taxes 13,500
Local property taxes on the car value, used exclusively for personal use
300

What amount should Baum report as current year net earnings from self-employment?
a. $243,250
b. $273,000
c. $281,750
d. $252,000

I can figure these questions out, but they take me 5-10 minutes to read though/reason them all. I find them to be a huge waste when I am timing myself. Can someone comment on whether or not questions of his length are a realistic possibly of being asked?

[Anonymous]

@wcn825
when taxpayer materially participates in rental real activity then he is eligible to deduct up to $25,000 from active income but there is phase out if AGI increase from $100,000 at 50%, so there is complete phase out when AGI exceed to $150,000.
so in the given question lane is not able to use that $25000 deduction,
however, we can offset the passive loss from passive income, so s-corp income where Lane is not materially participate considered as passive income so he can offset up to $15,000 of passive loss.

[Author]

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