[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

[Anonymous]

@BondVillain (C)
Cash $4000
Bought in church (1200-800)=400
Donation $500

total$4900

[Claudia408]

I'm constantly missing questions that have related party sales. Can someone please help to clear up the rules?

Gibson purchased stock with a fair market value of $14,000 from Gibson's adult child for $12,000. The child's cost basis in the stock at the date of sale was $16,000. Gibson sold the same stock to an unrelated party for $18,000. What is Gibson's recognized gain from the sale?

Answer: 2,000 gain

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

[Anonymous]

when child sold to Gibson for $12000.,the basis was $16,000 so the loss on sale was (16000-12000=$4000.but the loss on sale between the related party is not allowed , so the loss of $4000 remain unrecognized.
now when Gibson sold to unrelated party the gain on sale is 18000-12000=$6000
Gibson can offset the gain up to the extent of unrecognized loss ie $4,000 so recognized gain is 6000-4000=2000

[Anonymous]

@ano, you are correct but I'm not sure why that is the answer. Why is the contribution amount the difference between the FMV and the taxpayer's cost basis?

[Anonymous]

@BondVillain
I don't understand what you wanted to know.
child sold for $12000
less cost to child $16000
loss to child $4000

Now Gibson bought the stock for $12000, so 12000 is his cost or basis for stock
now he sold for $18000 so he has gain of $6000
but he can offset up to previously unrecognized loss from gain ie $4000
so he can recognize $2000.
this is just deferred treatment.

[monikernc]

BondVillain is talking about the earlier question. Charitable contributions can only be taken for the amount in excess of fair value received. He paid $1200 for a painting worth $800. He esentially bought the painting for $800 and made a contribution of $400

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]

21. GreenCorp.wasincorporatedandbeganbusinessin 2012. In computing its alternative minimum tax for 2013,
it determined that it had adjusted current earnings (ACE) of $400,000 and alternative minimum taxable income (prior to the ACE adjustment) of $300,000. For 2014, it had adjusted current earnings of $100,000 and alternative minimum taxable income (prior to the ACE adjustment) of $300,000. What is the amount of Green Corp.’s adjustment for adjusted
current earnings that will be used in calculating its alternative minimum tax for 2014?

a. $75,000
b. $(75,000)
c. $(100,000)
d. $(150,000)

(b) The requirement is to determine the adjustment
for adjusted current earnings (ACE) that will be used in the computation of Green Corp.’s alternative minimum tax for 2014. The ACE adjustment is equal to 75% of the difference between ACE and pre-ACE alternative minimum taxable income (AMTI). The ACE adjustment can be positive or negative, but a negative ACE adjustment is limited in amount to prior years’ net positive ACE adjustments. For 2013, Green had a positive ACE adjustment of ($400,000 – $300,000)
× 75% = $75,000. For 2014, Green’s ACE is less than its pre-ACE AMTI leading to a negative ACE adjustment of ($100,000 – $300,000) × 75% = $150,000. However, this negative ACE adjustment is allowed only to the extent of $75,000, the amount of Green’s net positive adjustment for prior years.

Why is B the answer rather than A? I understand that the dection is limited to 75% of last year (400-300)=100*.75= 75. But what makes the answer negative? Thanks!

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

[monikernc]

Farwars- the 2014 adjustment will be negative (100,000<300,000) to the extent that 2013s is positive. The total amount for 2104 is (150,000) but it is limited to the positive 2014 amount of $75,000, ,so 2014s adjustment is not ($150,000) it is ($75,000)

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]

Ok so

in 2014:
ACE 100
AMTI 300
=
loss of 200, but this loss is limited to 75% of prior year, or (75) !

Thanks. REG concepts are taking awhile to sink in for me.

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

[FAR_WARS]

Rona Corp.’s 2014 alternative minimum taxable income was $200,000. The exempt portion of Rona’s 2014 alternative minimum taxable income was
a. $0
b. $12,500
c. $27,500
d. $52,500

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

[Claudia408]

does anyone feel that Ninja MCQ for Reg have a lot of questions that are random and won't be tested?

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

[Anonymous]

I'm reading conflicting information about the deductible real estate passive activity loss. If the taxpayer is MFJ do they get to deduct 50K instead of 25K?

[Anonymous]

@BondVillain
for individual and for MFJ deduction is up to $25,000
for MFS its 12,500

[FAR_WARS]

During 2014, Stark Corp. reported gross income from operations of $350,000 and operating expenses of $400,000. Stark also received dividend income of $100,000 (not included in gross income from operations) from an investment in a taxable domestic corporation in which it owns 10% of the stock. Additionally, Stark had a net operating loss carryover from 2013 of $30,000. What is the amount of Stark Corp.’s net operating loss for 2014?

The requirement is to determine Stark Corp.’s net operating loss (NOL) for 2014. A NOL carryover from 2013 would not be allowed in computing the 2014 NOL. In contrast, a dividends received deduction (DRD) is allowed in computing a NOL since a corporation’s DRD is not subject to limitation
if it creates or increases a NOL. Stark Corp.’s NOL would be computed as follows:

350
-400
+70
=
-20

A net operating loss is generally carried back two and forward twenty years, so why do we not carry over the 30,000 NOL? THANKS!

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

[Anonymous]

Thanks, Ano – that's what I thought. One of the questions in Ninja MCQ states:

Individuals may offset up to $25,000 ($50,000 if married filing jointly) of ordinary income with losses from rental real estate activities. This exemption is reduced (but not below zero) by 50% of the amount by which the adjusted gross income of the taxpayer for the year exceeds $100,000.

Clearly this is incorrect.

[Author]

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