[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

[Andyred04]

As I'm working through the 750 Ninja MCQ BLaw questions 1 thing is for sure… I'm glad I didn't pursue a career in law!

FAR: 80 (Gleim, Ninja Notes, Ninja MCQs)
REG: 87 (Gleim, Ninja Notes, Ninja MCQs)
BEC: 87 (Gleim, Ninja Notes, Ninja MCQs)
AUD: 8/27/16

PA Candidate

[yawen]

Can someone explain me where is the “less Less Exemption amount $12,000” coming from on the answer section.

Mike and Jane Lewis, a married couple, file a joint 2015 federal income tax return. They have one child, age 15, whom they support 100%. Both are under age 65. They have the following income and expenses for the year:

Mike's wages $65,000
Jane's wages 60,000
Total allowable itemized deductions 13,000
Mike's contribution to an IRA 4,000
Jane's contribution to an IRA 4,000

Mike is not covered by a pension plan at work, while Jane is covered by a plan at her employer.

The exemption amount (per exemption) for 2015 is $4,000. The standard deduction amount for married filing jointly is $12,600.

What is the Lewises' taxable income amount for 2015?

A.
$92,000

B.
$96,000

C.
$96,400

D.
$100,000

Answer:
The Lewises' taxable income amount is calculated as follows:

Mike's wages $ 65,000
Jane's wages 60,000
Mike's contribution to an IRA (4,000)
———
Adjusted gross income $121,000
Less Itemized deductions (13,000)
Less Exemption amount (12,000)
———
Taxable income $ 96,000

[Anonymous]

@yawen $12000 is for Personal exemption ,$4000*3=12000
one for mike ,his wife and one child.

[Anonymous]

@Amor D Thank you!
I understand that small corporation who has $1M or less average annual gross receipts can use Cash method of accounting ,but I am confused that what if it has inventory.
Does a corporation having inventory and $1M or less AGR can use the cash method .

[yawen]

@Ano, Thank you !!

[Tncincy]

@Ano, I think I understand your question, but from what I have read, The basis of accounting that is required for most corporations is Accrual. The exceptions to accrual accounting would be (a) small corps (avg gross recpts less than $5 million),( b.) personal service corps, and (c.) S-corps.

I was just reading the flash cards for this, but I did not read anything about inventory. I don't think you can use cash basis for inventory anyway.
Please add to this if you have more information. I happen to be trying to nail down corps and working on the dividend received deduction portion. (not too exciting)….

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

[Future Ninja]

please explain further in lay mans term:

In 2015, Sam Dunn provided more than half the support for his wife, his father’s brother, and his cousin. Sam’s wife was the only relative who was a member of Sam’s household. None of the relatives had any income, nor did any of them file an individual or a joint return. All of these relatives are U.S. citizens. Which of these relatives should be claimed as a dependent or dependents on Sam’s 2015 joint return?
A. Only his wife.
B. Only his father’s brother.
C. Only his cousin.
D. His wife, his father’s brother, and his cousin.

ANSWER: B

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[monikernc]

Future… this is a qualifying relative question. Your spouse is never your dependent, you either file jointly with them or separately. The cousin did not live with them all year so he does not meet all of the qualifying relative tests. the siblings of your parents, aunts and uncles, can be qualifying relatives even if they do not live in the taxpayer's household. The uncle also meets the other tests, citizenship, support and tax return, with the info given in the question so he can be claimed as a dependent.

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

[Anonymous]

@Ano, you might want to check this thread from study group last quarter.

https://www.another71.com/cpa-exam-forum/topic/reg-study-group-q1-2016/page/13

And let me add this note:

Accrual Basis vs. Cash Basis
Accrual Basis Method of Accounting is required for the following:
4 [FITC]
F – Farming Corporations (other farming or tree-raising businesses may generally use the cash basis)
I – Inventory => Accounting for purchases and sales of inventory
T – Tax shelters
C – [CTP] C Corporations, trusts with unrelated trade or business income, and partnerships having a C corporation as a partner provided the business has greater than $5 million of average annual gross receipts of the 3-year period ending with the tax year.

[monikernc]

ninja reg book question…

i have a question. in the individual tax book on schedule A it says state and local taxes do not apply for 2015. is this true? i reviewed a 2015 schedule A from IRS site and those are still listed. has there been a tax law change that expires this deduction for 2015 or 2016 and therefore the exam will exclude these as itemized deductions?

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

[mimic]

On January 4, Year 1, Smith and White contributed $4,000 and $6,000 in cash, respectively, and formed the Macro General Partnership. The partnership agreement allocated profits and losses 40% to Smith and 60% to White. In Year 1, Macro purchased property from an unrelated seller for $10,000 cash and a $40,000 mortgage note that was the general liability of the partnership. Macro's liability:

a. Increases Smith's partnership basis by $20,000.
b. Has no effect on Smith's partnership basis.
c. Increases Smith's partnership basis by $16,000.
d. Increases Smith's partnership basis by $24,000.
Explanation
Choice “c” is correct. A partner's basis in the partnership is increased by the partner's share of partnership liabilities (Smith is a 40% partner). Macro is obligated on the $40,000 mortgage; 40% x $40,000 = $16,000. Even though the partnership is obligated to repay the mortgage, as a partner Smith is jointly and severally liable on the debt.
Choices “a”, “d”, and “b” are incorrect. A partner's basis in the partnership is increased by the partner's share of partnership liabilities.

Could someone clarify why the question is assuming Smith's partnership allocation in arriving at the mortgage obligation? The question asks for Marco's liability.

Thanks!

[Anonymous]

@ mimic
An increase in partnership liabilities increases each partner's basis in the partnership by each partner share.
same way reduction of partnership liabilities reduces the partner's basis as per their respective share.

[Future Ninja]

Trish Durwood works for a small retail-clothing store. She earned $26,000 in wages during the year. Because of a cash flow problem in April, Trish did not receive her $500 weekly check but instead was given a credit of $500 toward clothing purchased for her family. How much income should be shown on her Form W-2 and reported on her Form 1040?
A. $26,000
B. $25,500
C. $26,500
D. $25,000

answer: A, 26,000 what happen to the usd500 additional clothing purchase benefit?

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[Anonymous]

@ future ninja
Trish did not receive her $500 weekly check but instead he got credit for clothing
so wages is $500*51=$25500 + $500 credit=$26000.

[Anonymous]

Thanks, Amor D, I really appreciate all yours help.
By looking into IRS site this is what I understand
A small corporation who has average gross receipt of $1 M or less can use the cash basis of accounting even though it has inventory.

[Author]

Replies