[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

[Just3Letters]

I finished the tax section and I just want to make sure I have all the basis formulas I need. Please let me know if I'm missing anything here:

1. Basis to shareholder for contributing property to corp.
2. Basis to corp. of contributed property received
3. Basis to partner of interest in partnership for cash/property/services contributed
4. Basis to partnership of cash/property/services received
5. Basis of property in like-kind exchange

Anything else with basis? Thanks!

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Claudia408]

BondVillian – thanks great video… regarding liabilities that are contributed with property that do not have a business purpose are treated as boot… have you seen a question that actually says that business purpose part? usually the problem just lists prop basis, FMV and the liability…

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

[csvirk]

An individual taxpayer reports the following items for the current year:

– Ordinary income from Partnership A, operating a movie theater
in which the taxpayer materially participates: $70,000
– Net loss from Partnership B, operating an equipment rental
business in which the taxpayer does not materially participate: (9,000)
– Rental income from building rented to a third party: 7,000
– Short-term capital gain from sale of stock: 4,000

What is the taxpayer's adjusted gross income for the year?

A.
$70,000

Incorrect B.
$72,000

C.
$74,000

D.
$77,000

Coorect Answer is C. Why -9000 and +7000 is not part of AGI? Thank you

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

[Claudia408]

Rental income is part of income to arrive at AGI. Cap gains are netted against losses to arrive at AGI, but (9000)+4000=(5000) exceeds the max 3000 max loss. So 70000+7000-3000=74000. Is that what the explanation had?

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

[Anonymous]

technically the $7,000 rental income is in AGI, but it's offset by $7,000 of the $9,000 passive activity loss from Partnership B. The remaining $2,000 loss from Partnership B cannot be offset by ordinary income, so it is carryforward.

$70,000 active pship
$4,000 capital gain
$7,000 rental income
-$7,000 passive activity pship

$74,000 total AGI
$2,000 passive activity carryforward

but now you have to tell us what the explanation was. i thought partnership income was included with the rents/royalties/flow-thru passive activity stuff…and then if the partnership interest was sold it was considered personal property and cap gain. Yay/Nay?

[Just3Letters]

The Rites are married, file a joint income tax return, and qualify to itemize their deductions in the current year. Their adjusted gross income for the year was $55,000, and during the year they paid the following taxes:

Real estate tax on personal residence $2,000
Ad valorem tax on personal automobile 500
Current year state and city income taxes withheld from paycheck 1,000
What total amount of the expense should the Rites claim as an itemized deduction on their current year joint income tax return?
$1,000
$2,500
$3,000
$3,500

The correct answer is $3500. I thought that you couldn't deduct taxes on personal property? I thought correct answer was $1000. please help!

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Just3Letters]

The Rites are married, file a joint income tax return, and qualify to itemize their deductions in the current year. Their adjusted gross income for the year was $55,000, and during the year they paid the following taxes:

Real estate tax on personal residence $2,000
Ad valorem tax on personal automobile 500
Current year state and city income taxes withheld from paycheck 1,000
What total amount of the expense should the Rites claim as an itemized deduction on their current year joint income tax return?
$1,000
$2,500
$3,000
$3,500

The correct answer is $3500. I thought that you couldn't deduct taxes on personal property? I thought correct answer was $1000. please help!

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Anonymous]

Ninja told me you can deduct taxes from personal property as long as it is a value based tax. So I don't think the normal flat registration tax is deductible, but if it's ad valorem then it is (i think sales tax would fall in here).

and you definitely get the tax related to real estate. but the personal property always throws me off.

[atx15]

You can deduct taxes on personal property if the tax is based on the value of the property. Ad valorem is the fancy (aka latin) way of saying based on the value of the property. This is also why real estate taxes are deductible, because they are based on the value of your property. And then, state and city taxes withheld from your paycheck are deductible on Sch A. So, all three items in the questions would be deductible, so the answer would be $3500.

AUD - 72, 83
BEC - 71
REG - 74, 77
FAR - Aug 2016

[csvirk]

Thank you guys. Here is the explanation for the question above.

Items included in AGI: Ordinary income from Partnership A ($70,000) + Short-term capital gain from sale of stock ($4,000) = $74,000 AGI.

The passive activity amounts of $(9,000) and $7,000 are netted for a result of $(2,000). There can be no deduction for losses as a result of passive activities.

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

[Anonymous]

Claudia408 I haven't seen any questions that mention the “business purpose” in regards to loans/debt.

[Just3Letters]

Thanks Allaboard and ATX, great explanations! I'll make a notecard or something to remind myself of the ad valorem tax rule!

FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD

[Just_Trying_To_Pass]

edit.

BEC: 70, 83
REG: 8/13/16
FAR:
AUD:

[Anonymous]

@Just trying, is your question under BEC or REG?

[csvirk]

Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?

A.
$0

Correct B.
$15,000

C.
$25,000

D.
$35,000

Here is the explanation.

First, the passive activities were netted $15,000 from the S corporation – $35,000 from the rental = $(20,000).
Second, the salary of $160,000 is decreased by the net $20,000 passive activity loss for a modified AGI before limitation of $140,000.
Third, the amount of $140,000 that exceeds $100,000 is multiplied by 50%, equaling $20,000.
Fourth, the rental loss of $35,000 is decreased by the $20,000 limitation, leaving an allowable deduction of $15,000.

Why netting against the 15000 S corp Loss in step one? Can we treat Rental Loss separately and S corp Loss Separately to arrive at right answer?

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

[Author]

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