[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

[KJF1031]

Those that have actually taken the test before, approximately what % of Business Law is on the test and are the questions very detailed or basic? Test Sunday, don't know it all too well..

BEC: Passed (8/31)
AUD: Passed (11/20)
FAR: Passed (2/26)
REG: 5/22

[mtaylo24]

^^^^The one I took back in Feb was pretty much mixed with everything. BLAW, Ethics, and Tax, that test didn't discriminate at all

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)

[Claudia408]

mckan – i was thinking the same thing, how can it be below zero and be negative. but this is a ninja mcq question and the answer is:

A partner's distributive share of partnership loss is allowed only to the extent of the adjusted basis of the partner's partnership interest: 2014 2015
——— ———
Mutt's share of profit(loss) at 50% ($15,000) $14,000
Basis 8,000 0
——— ———
Unallowed loss (carryover) ($ 7,000) ($ 7,000)
Taxable income(loss) allowed ($ 8,000) $ 7,000

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

[mckan514w]

Right Claudia- the question was asking the tax recognition though correct??? not the basis- the deduction would be an 8,000 loss in 2014 giving the partner a basis of 0 and a 7,000 carry-over loss that he can't take that year- and then a 7,000 gain in 2015 with a basis of 7,000 (0+14,000-7,000).

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

[Claudia408]

mckan- ahhhh ok thanks. i was thinking basis!

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

[Claudia408]

i thought the basis for a corporation receiving property is the shareholder's basis. this problem has it as FMV and the explanation is kinda weak. i'm all confused after this question, can someone clear it up for me?

Porter, the sole shareholder of Preston Corp., transferred property to the corporation as a contribution to capital. Two years later, Corley transferred property to the corporation in exchange for a 10% interest in corporate stock. The property transferred was valued as follows:

Porter’s Transfer Corley’s Transfer
Basis $50,000 $250,000
Fair market value 200,000 500,000
What amount represents the corporation's basis in the property received?

Answer: When property is transferred to a corporation, the basis of any property received is the fair market value (FMV) at the time of the transfer. Porter's transfer two years ago had an FMV of $50,000, but the current FMV does not have an impact on the corporation's basis in the property. The basis in Corley's contribution is the current FMV, and their basis in the property does not affect the corporation's basis. The total basis in property contributed to the corporation is the $50,000 original contribution (FMV) from Porter, plus the $500,000 current contribution (FMV) for Corley, which equals a total of $550,000.

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

[Anonymous]

I need to someone to give confirmation on it.

1) when we compute the Trust or estate taxable income then we add the capital gain/ loss allocable to the corpus in addition to capital gain/loss attributable to the income.
and deduct the trustee fee related to both income and the corpus.

2) when we compute DNI then we don't add anything related to the corpus and we deduct the trustee fee which is related to taxable income or non-taxable income
does not deduct the trustee fee related to the corpus .

Does the above two treatment is correct?

[mckan514w]

@Claudia- I just rechecked my notes on this because I was thinking like you and i have noted that the Basis to corp is the basis of shareholder if he has control and FMV if there is no control…. so in the question Porter was a sole shareholder when he contributed property thus basis to corp was Porters basis… two years later Corley gave property for 10% which is Not control (control being 80%) so it is FMV.

@Ano that sounds right to me

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]

Wow look at this answer explanation. Not even sure if this is worth memorizing.

Answer (D) is correct.

First, allocate expenses that are not directly related to a particular type of income. This is the $15,000 of expenses attributable to all interest income, which consists of the $66,000 of interest income and the $24,000 of tax exempt interest.
1A. Allocate the expenses attributable to interest income: $15,000 × ($66,000 ÷ $90,000) = $11,00
1B. Find the remaining balance of the interest income: $66,000 – $11,000 = $55,000
2A. Allocate the expenses attributable to tax exempt interest: $15,000 × ($24,000 ÷ $90,000) = $4,000
2B. Find the remaining balance of the tax exempt interest: $24,000 – $4,000 = $20,000
Next, allocate the trustees’ commissions of $13,000 to the $55,000 of interest income, $20,000 of tax exempt interest, $25,000 of dividend income, and $30,000 of capital gains.
3A. Allocate the commissions attributable to interest income: $13,000 × ($55,000 ÷ $130,000) = $5,500
3B. Find the remaining balance of the interest income: $55,000 – $5,500 = $49,500
4A. Allocate the commissions attributable to tax exempt interest: $13,000 × ($20,000 ÷ $130,000) = $2,000
4B. Find the remaining balance of the tax exempt interest: $20,000 – $2,000 = $18,000
5A. Allocate the commissions attributable to dividend income: $13,000 × ($25,000 ÷ $130,000) = $2,500
5B. Find the remaining balance of the dividend income: $25,000 – $2,500 = $22,500
6A. Allocate the commissions attributable to capital gains: $13,000 × ($30,000 ÷ $130,000) = $3,000
6B. Find the remaining balance of the capital gains: $30,000 – $3,000 = $27,000
**Note: Since capital gain is charged to principal and in a simple trust, there is no distribution of principal; rather, it is eliminated and not included on the K-1 of a beneficiary.

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)

[Tncincy]

What question in which test bank is that…..I don't think I would memorize that either…..Oh Lord, I getting nervous again.

It begins with a 75
Been here too long as a cheerleader....ready to pass

[mtaylo24]

^^^That's from Gleim and is an enrolled agent exam question. I'm on Trust and Estate Tax Finally. Excuse the formatting.

Given the following information, compute the character and amount of income shown on beneficiary’s K-1 (simple trust). Assume that none of the expenses are subject to the 2% limitation.

Interest income $66,000
Dividend income 25,000
Tax-exempt interest 24,000
Capital gains 30,000
Expenses attributable to all interest income 15,000
Trustee’s commissions allocable to all income
including capital gains 13,000

The beneficiary’s K-1 will show the following amounts:

(Interest) (Dividends) (Tax-exempt Interest) (Capital Gains) (Other Expenses)

A. $66,000 $25,000 $24,000 $0 $25,000
B. $66,000 $25,000 $21,000 $0 $24,000
C. $55,000 $22,500 $21,000 $0 $0
D. $49,500 $22,500 $18,000 $0 $0

Answer (D) is correct.

First, allocate expenses that are not directly related to a particular type of income. This is the $15,000 of expenses attributable to all interest income, which consists of the $66,000 of interest income and the $24,000 of tax exempt interest.
1A. Allocate the expenses attributable to interest income: $15,000 × ($66,000 ÷ $90,000) = $11,00
1B. Find the remaining balance of the interest income: $66,000 – $11,000 = $55,000
2A. Allocate the expenses attributable to tax exempt interest: $15,000 × ($24,000 ÷ $90,000) = $4,000
2B. Find the remaining balance of the tax exempt interest: $24,000 – $4,000 = $20,000
Next, allocate the trustees’ commissions of $13,000 to the $55,000 of interest income, $20,000 of tax exempt interest, $25,000 of dividend income, and $30,000 of capital gains.
3A. Allocate the commissions attributable to interest income: $13,000 × ($55,000 ÷ $130,000) = $5,500
3B. Find the remaining balance of the interest income: $55,000 – $5,500 = $49,500
4A. Allocate the commissions attributable to tax exempt interest: $13,000 × ($20,000 ÷ $130,000) = $2,000
4B. Find the remaining balance of the tax exempt interest: $20,000 – $2,000 = $18,000
5A. Allocate the commissions attributable to dividend income: $13,000 × ($25,000 ÷ $130,000) = $2,500
5B. Find the remaining balance of the dividend income: $25,000 – $2,500 = $22,500
6A. Allocate the commissions attributable to capital gains: $13,000 × ($30,000 ÷ $130,000) = $3,000
6B. Find the remaining balance of the capital gains: $30,000 – $3,000 = $27,000
**Note: Since capital gain is charged to principal and in a simple trust, there is no distribution of principal; rather, it is eliminated and not included on the K-1 of a beneficiary.

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]

Joe Dock placed into service Section 179 property that cost $225,000. What is the maximum amount Joe can expense for 2015?

A.
$500,000

B.
$50,000

C.
$2,500,000

D.
$0

Correct answer is D. Can someone explain! Thank you.

I thought we can expense maximum of 500,000 with threshold amount is 200,000. I am completely lost.

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

[monikernc]

i have been studying sect 179 limits for 2015 as 25,000/200,000 no bonus depreciation, and for 2014 500,000/2,000,000 and 50% bonus depreciation

am i wrong? exam is tomorrow

csvirk – as i have been studying, for 2015, 0 is correct. 25,000-(225,000-200,000)=0

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

[monikernc]

csvirk – jeff just confirmed that the old limits will be tested for 2015 until july exams.

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

[Claudia408]

What is it about these questions about contracts and liability that I should keep in mind? I am not seeing the theme or message here and I feel like sometimes 2 or even 3 answers could be possible.

West, Inc. and Barton entered into a contract. After receiving valuable consideration from Egan, West assigned its rights under the Barton contract to Egan. In which of the following circumstances would West not be liable to Egan?
Answer: Egan releases Barton

Pierce owed Duke $3,000. Pierce contracted with Lodge to paint Lodge's house and Lodge agreed to pay Duke $3,000 to satisfy Pierce's debt. Pierce painted Lodge's house but Lodge did not pay Duke the $3,000. In a lawsuit by Duke against Pierce and Lodge, who will be liable to Duke?
Answer Pierce and Lodge

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

[Author]

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