[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

[Future Ninja]

@Ano – where did you get the usd500*51?

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
$500 weekly , there is 52 weeks in a year so I took 51 weeks and $500 per week.

[Future Ninja]

@Ano – thank you.

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

[Tncincy]

@amor d. thank you for the link….looking it over. any other tips are more than welcome and needed.

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

[Future Ninja]

On December 1, 2014, Michael, a self-employed cash-basis taxpayer, borrowed $100,000 to use in his business. The loan was to be repaid on November 30, 2015. Michael paid the entire interest of $12,000 on December 1, 2014. What amount of interest was deductible on Michael’s 2015 income tax return?
A. $12,000
B. $11,000
C. $1,000
D. $0

Answer (B) is correct. why not usd1,000?

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
for the year 2014, there is only one-month Dec, so for 2014 $1000 is deductible and for the year 2015 Jan – Nov 11 month so deduction would be $11,000 (1000*11).

[Future Ninja]

@Ano – Thank you for your reply. but they asked for an amount that we need to report on 2015 tax return. Isn't we will report 2014 amount using 2015 tax return form?

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

[Future Ninja]

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 2015, Optics had $350,000 in gross business receipts and its year-end inventory was not subject to the uniform capitalization rules. Baum’s 2015 adjusted gross income was $90,000 and Baum qualified to itemize deductions. During 2015, 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 2015, 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 2015, Baum collected $3,000 in insurance reimbursement and had no casualty gains during the year………..2,625

Qualified 2015 mortgage interest on a loan to acquire a personal residence…..52,500

Annual interest on a $70,000 5-year home equity loan. The loan was secured by Baum’s home, obtained on January 2, 2015. 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, 2015, to acquire the home equity loan….. 1,400

Real estate taxes on personal residence…..2,200

Estimated payments of 2015 federal income taxes……13,500

Local property taxes on the car value, used exclusively for personal use…..300
What amount should Baum report as 2015 net earnings from self-employment?
A. $243,250
B. $252,000
C. $273,000
D. $260,196

ANSWER: D

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
What amount of interest was deductible on Michael’s 2015 income tax return?
under taxation there is some exception in cash basis of accounting method
when interest is paid in advance then it should be allocated for the related period that why even though entire amount paid in 2014 but 11-month interest is related to the period 2015 so it will be deducting on 2015 return

[Blue.auditor]

Hi,

Q: Green sold 200 shares of Y Corp. stock at $14 per share. Green received the 200 shares as a gift from his brother, three years ago, at the time that the shares had a fair market value of $10 per share. Green's brother purchased the stock for $16 per share.

A: Green's basis in Y Corp. stock is the same as his brother's purchase price and basis of $16 per share. Since the stock sold at $14 per share, Green's gain is $0. Green is unable to deduct any loss associated with the sale.

Why can't he deduct any loss associated with the sale?

FAR 90 - 11/16/2015
BEC 81 - 2/14/2016
REG 87 - 5/23/2016
AUD - 8/8/2016

[EuroAddict]

@BLUE – related party sale

-----------------------------
BEC - 77, 03/2015 (first try)
FAR - 79, 05/2015 (second try)
REG - 83, 12/2015 (first try)
AUD - 84, 03/2015 (first try)

I got 99 problems but the CPA ain't one.

[Anonymous]

@Blue- It's a disallowed loss mostly because its related party and no gain/loss was taken at the time the stock was purchased from the brother. Best Way i do these kind of questions, is start with C/O basis (16) and write FMV (10) under it (dont write it above if FMV is greater than 16). If you sell it for more, its a gain calculated based on C/O vs Sale price. If you sell it for less than the FMV, its a loss and you calculate the loss based on FMV vs Sale price. If its in between, no gain or loss.

[Bnots]

@FutureNinja RE:Baum Here's my guess:

$350,000 in receipts
($35,000) CGS
($28,000) optics rent
($5,250) optics liability insurance
———————————————–
$281,750

$281,750 * .9235 = $260,196 net earnings from self-employment

Considerations:
1. Self-employment health insurance is deductible on your 1040, but it's not considered a business expense.
2. The .9235 factor is used to account for the business half of FICA taxes that a business that paid you as an employee would get to claim as an expense.

I don't know that I like this question though. AFAIK the $260,196 never shows up on a 1040. You report $281,750 on line 12, then take an above-the-line deduction equal to half of your self-employment taxes on line 27 and your self-employment health insurance on line 29. Your self-employment tax, which covers both the employer and employee portions of FICA, gets reported on line 57.

[Tncincy]

very good explanation…..This helps to sort out the problem and know how to use the formula without over thinking the problem…..I go through the what to do first…..great answer, if they didn't get i do……

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

[Martin]

Can someone tell me why Becker uses PANIC for AMTI adjustments (individuals), but according to Roger, you only need TIMME? Who is correct here? Bothe use TIMME for the AMTI calculations, but Becker adds also PANIC.

Passive activity losses
Accelerated Depreciation
Net Oper Losses
Installment Method
Contracts (long term)

Taxes
Interest
Medical
Miscellaneous Deductions
Excemptions

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

[Author]

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