[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]

@Claudia408

Token 15% ownership: $10,000 in cash; property worth $40,000 ($5,000 basis), with related assumed recourse liability of $20,000

Basis to the Token = adjusted basis+gain recognized +boot received
(10000+5000)+5000-20000=0
gain recognized is the difference of liability assumed minus total basis of property contributed
so recognized gain is 20000-(10000+5000)=5000
corporation basis on property is basis to shareholder + gain recognized
(10000+5000) + 5000=20000

[Anonymous]

@mtaylo24
is answer is 72,000

[Anonymous]

@mckan514w
In tax return, dividend income is zero because this is a parent – subsidiary co and they filed the consolidated tax return ,so

the intercompany dividend will be eliminated.
gain and loss on sale of goods will be deferred until sold to the outsiders
and
they can offset the ordinary income and capital gain of one with the ordinary loss and capital loss of other

[mtaylo24]

@Ano….I'm getting something different

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Anonymous]

@mtaylo24
Do you know the correct answer.

[mckan514w]

@Ano- thanks I just seem remembering answering another similar question where the Corp owned 80% of the other corp and I answered 0 and got it wrong because it said I needed to recognize the dividend then offset it with the DRD… I see what you are saying and am assuming in the other question it was because they were not filing a consolidated return???

@Ano and @Mtaylo24 I also get 72,000

80,000 basis less 23,000 depreciation=57,000 adjusted basis
Money received for Impairment= 70,000
70,000-57,000=13,000 gain not recognized

Purchased New Duplex 85,000 less gain not recognized of 13,000= adjusted basis of 72,000

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

[mtaylo24]

The correct answer is B. 67,000

Don't forget that its a Duplex, she lives in one half and rents out the other half

Step 1: 40,000 (orig cost) – 23,000 (Depr) = 17,000 (Adj Basis)
Step 2: 35,000 (1/2 of the city's 70K) – 17,000 (adj basis from step 1) = 18,000 (Gain)
Duplex 1: 42,500 (85K / 2) – 18,000 (Gain on old prop) = 24,500 (Adj basis new prop)
Duplex 2: : 85,000 / 2 = 42,500
Basis on replacement property = 24,500 (Duplex 1) + 42,500 (Duplex 2) = 67,000

Gleim's Solution:

Answer (B) is correct.
Gwen has two assets, one for rental and one for personal use. Each asset must be computed separately. The basis of the rental building before the sale was $17,000 ($40,000 purchase price – $23,000 depreciation taken). That portion of the building was sold for $35,000, leaving a gain of $18,000. The gain is deferred, leaving a basis for the replacement property of $24,500 ($42,500 – $18,000). The personal-use building has a $5,000 loss ($35,000 selling price – $40,000 basis). That loss is a nondeductible personal loss. The replacement portion has a basis of $42,500, the purchase price. The total basis is $67,000 ($24,500 rental portion + $42,500 personal-use portion).

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mckan514w]

GROAN! Thanks mtaylo24 (as I hit my head against the wall) 🙂

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

[mtaylo24]

Yeah…Your signature couldn't be any more true! haha!
Don't forget, you can't take depreciation on the personal use side, only on the rental. It screws up the allocation.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mckan514w]

LOL– I miss drinking!!!

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]

@mtaylo24
Thanks for posting such type of question , it remind us what points we need to keep in our mind on exam day.

[mtaylo24]

Miss? That's what is getting me through this process. HA!

On to corporate tax:

On December 31, 1993, Homer Corporation issued $2 million of 50-year bonds for $2.6 million. On December 31, 2015, Homer issued new bonds with a face amount of $3 million for which it received $3.4 million. Part of the proceeds received were used to repurchase $2,320,000 of the bonds issued in 1993. No elections were made to adjust the basis of any property. Assume the straight-line method is used for premium amortization. What is the taxable income to Homer on the repurchase of the 1993 bonds?

A. $0
B. $16,000
C. $264,000
D. $336,000

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[mtaylo24]

@mckan514w I ignored your question from the last Page, but it is 0 because they file a consolidated return, you can't report dividends from a subsidiary. I have a similar question in Gleim

Page Corp. owns 80% of Saga Corp.’s outstanding capital stock. Saga’s capital stock consists of 50,000 shares of common stock issued and outstanding. Saga’s current year net income was $70,000. During the current year, Saga declared and paid dividends of $30,000. In conformity with generally accepted accounting principles, Page recorded the following entries in the current year:

Debit

Credit

Investment in Saga Corp. common stock

$56,000

Equity in earnings of subsidiary

$56,000

Cash

24,000

Investment in Saga Corp. common stock

24,000

In its current-year consolidated tax return, Page should report dividend revenue of:

A. $0
B. $4,800
C. $7,200
D. $24,000

Solution: Answer (A) is correct.
Page is the parent of Saga, and they file a consolidated return. Thus, the full amount of dividends from Saga to Page are eliminated from Page’s taxable income.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[csvirk]

Does Business Law section takes forever or is it just me? I try to do atleast 100 MCQs a day and it's taking forever!

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[Claudia408]

@Ano – thanks for the help. just confused on the basis to the corporation for the property… what happened to the liability?

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

[Author]

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