[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]

Jad11,

The basis would be 10,000 because the corporation assumed a % of that liability. Does the question state what percentage of company the investor gets? I remember what you are saying about the “greater of liability or basis” thing. There is also a rule about subtracting out any percent of liability assumed by corporation.

All these different entities are So confusing. Anybody else want to help?

csvirk,

I probably wouldn't have chosen “D” which is why I hate Reg. I do remember Peter saying that if you don't have any idea of the answer, choose the one that doesn't seem to fit. That is the one that stands out to me. However, maybe it's because of the illegality would hold Pine liable directly rather than his employer. Does the answer have an explanation for us?

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

[csvirk]

@Just3 Here is the explanation:

Kent will not recover damages from Global if Pine's weapon was unlicensed and illegal. This question tests your knowledge of respondeat superior—a legal theory whereby an employer is liable to third parties for the acts of an employee. Pine is an employee of Global Messenger Service. In the course of delivering corporate documents, he shot an innocent third party. While this act was done in the scope of employment, if the weapon was unlicensed and illegal, Kent (the injured party) would not be able to recover from Pine's employer. The reason is that doing an illegal act would not be considered acting within the scope of his employment. The other alternatives would not prevent Kent from recovering damages from Global.

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

[Just3Letters]

Oh yeah I remember that! So many stupid rules :/

Makes sense though! Thank you!

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

[jad11]

@Just3letters,

It says he received 15%, but I don't think that has any effect. I don't recall the % of liability rule. Either I read it and completely forgot about it (wouldn't doubt it) or it is for a different section that I have not read yet. As I understand it, the corporation receives property and assumes the entire liability and the 15% ownership that the shareholder receives is irrelevant to their assumption of liability.

You are right, there are so many rules. I am having a real hard time with REG and ch3 is taking me forever!

[Spartans92]

Anyone know of any mnemonic or any way to differentiate adjustment to itemized deductions. For the chapter 2 Questions I always narrow down to two answer and I get caught up determining which one is which. For example, personal property taxes are itemized vs moving expenses (adjustments).

I second the rules part. This section sucks cuz of all the rules.

BEC- PASS

[Just3Letters]

Jad11,

don't listen to me. I'm going through my notes and the % liability thing is for partnerships in R4. It is the greater of liability or nbv asset. I don't know how they got that answer :/ Is there an explanation?

I'm struggling with Reg as well!

Spartans,

I struggle with differentiating them as well.

Mnumonic for Adjustments (deductions to arrive at AGI)

I EMBRACED HEF

I – Interest on Student Loans

E- 50% self-employment tax

M- Medical Insurance Premiums

B- Skip This one 🙂

R- Rent/Royalities

A- Alimony Paid

C- Contribution to Pension/IRA

E- Early Withdrawl Penalty

D- Jury “D”uty

H- Health Savings Plan

E- Education

F- Farmers

Mnemonic for itemized deductions (Deductions from AGI)

COMMITT

C- Charity

O- Other Miscellaneous

M- Miscellaneous

M- Medical > 10% AGI

I- Interest on Mortgage

T- Theft/Casualty loss

T- Taxes Paid

I have to give credit to Claudia for this one. It's from Roger apparently and she provided a while ago way back in this thread 🙂 Easy to memorize and super helpful!

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

[Spartans92]

HAHA thanks to you! and Claudia as well. I guess Im so use to Becker giving us a mnemonic and I was like WTF none for this.. You save me!

BEC- PASS

[Just3Letters]

haha I had the same issue. It's crazy Becker didn't create a mnemonic for this. If you go back to maybe somewhere around 13 or 14, Claudia posted a pretty boss post with a bunch of mnumonics

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

[Claudia408]

Can someone help with explain and calculate this Corporate distribution problem?

On December 31, a C corporation made a non-liquidating distribution of the following assets to its sole shareholder:
Land Fair market value $100,000
Adjusted basis 50,000
Patent Fair market value 25,000
Adjusted basis 0
Building Fair market value 50,000
Adjusted basis 150,000
What gain or loss should the corporation recognize as a result of the distribution?

Answer 75,000 gain

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

[Just3Letters]

For Basis formulas, how's this looking and any other basis formulas I'm forgetting? Are any of my formulas wrong?

Corporate Basis – Shareholder

NBV Property Contributed
+Recognized Gain
-Boot Received

Corproate Basis – Corporation

Greater of NBV or Debt assumed

Partnership basis – Partner (Same for S-Corp)

Cash Contributed
+ NBV Property Contributed
– % Liabilities contributed assumed by partnership
+FMV services contributed
+Liabilities from partnership we take on

Partnership Basis – Partnership (Same for S-Corp)

NBV Carryover
+ Gain recognized by contributing partner

Like-Kind Exchange Basis of Property Received

NBV Old Asset
+ Recognized Gain
-Boot Received
+Boot Paid

OR

NBV Old Asset
-Deferred Gain
+Deferred Loss

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

[Just3Letters]

Claudia, straight from Becker R3-44:

“When appreciated property is distributed, the corporation CANNOT recognized a loss” and “The Corporation recognized a gain as if the property had been sold (FMV less adjusted basis)”. Therefore, building which went down 100,000 in value is disregarded. The other two assets:

Land went up 50,000

Patent went up 25,00

=75,000

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

[Claudia408]

just3 – wow, thanks very simple! i got lost in all the details!

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

[Claudia408]

here's another one:

Dawson, Inc.'s warehouse (with an adjusted tax basis of $75,000) was destroyed by fire. The following
year, Dawson received insurance proceeds of $195,000 and acquired a new warehouse for $167,000.
Dawson elected to recognize the minimum gain possible. What is Dawson's basis in the new warehouse?

Answer: 75,000 (again)

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

[Just3Letters]

Claudia,

I just had to look that one up. Basis in new property after involuntary termination is:

Cost of new property – Deferred Gain

Realized Gain = 195-75= 120
Recognized Gain = 195 – 167 = 28
Deferred Gain = Realized Gain – Recognized Gain
Deferred Gain = 120 – 28 = 92

Cost of new property (167) – Deferred Gain (92) = 75

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

[Claudia408]

i'm lost on that one… deferred gain, like was that even covered in Roger…UGH!

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

[Author]

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