[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

[Claudia408]

i hear lots of folks say if you know the concept you will be fine on the SIMs, others say practice them so you know the feel/format and sometimes things click better instead of doing an MCQ. but i think these days the format is different than the review courses. personally i will look at SIMs again and again.

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

[Bear-Bear]

Argh! I don't wanna do any more MCQS!!!

I am trending 87% right now, 3019 total attempts, and 71% through adaptive learning. I am so sick of MCQs. 🙁

[Tncincy]

Hang in there Bear-Bear….doing the ridiculous amount of mcq's will bring a huge smile on score release day when you get that 75 or greater. You're not alone. I think I like writing notes more than the mcq's, but according to so many that have passed, mcq is the way to go…..So I'm going. I need to start seeing a better trend though, at least you're answering more than a few correct. So have confidence and keep going……you got this.

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

[sancasuki]

Sometimes you wonder how old some of these AICPA MCQs are:

Mars, Inc., manufactures and sells VCRs on credit directly to wholesalers, retailers, and consumers. Mars can perfect its security interest in the VCRs it sells without having to file a financing statement or take possession of the VCRs if the sale is made to
A. Retailers.
B. Wholesalers that sell to distributors for resale.
C. Consumers.
D. Wholesalers that sell to buyers in the ordinary course of business.

[Anonymous]

Just 3 letters – I think you were correct with your first answer. You can't deduct accrued expenses for bad debt/warranty – only what was actually written off. I always do these like inventory questions

Beginning Reserve 120,000
Additions (Accrued) 16,000
Less: Warranty Expense X <=== actual expense, written off on tax return
Equals Ending Reserve 90,000

120+16-X=90
X=46,000

[Spartans92]

Robert had current-year adjusted gross income of $100,000 and potential itemized deductions as follows:
Medical expenses (before percentage limitations)
$ 12,000
State income taxes
4,000
Real estate taxes
3,500
Qualified housing and residence mortgage interest
10,000
Home equity mortgage interest (used to consolidate personal debts)
4,500
Charitable contributions (cash)
5,000

What are Robert's itemized deductions for alternative minimum tax?

a.
$19,500
b.
$21,500
c.
$17,000
d.
$25,500

I got the answer right based on guessing. But I thought Charitable contribution is NOT added back for AMT purposes.
Answer is 17,000. C

I am so lost with these AMT questions. ARRGHH

BEC- PASS

[mckan514w]

ha ha.. Spartan I heard your call…. Rogers gave a Mnemonic for AMT- but typically those things don't work for me but I will post it below: The BEST way to really understand AMT is to download the AMT form from the IRS website and go through it like you are filling it out for a client…. Essentially you are not allowed to deduct any item from schedule A that is subject to the 2% AGI floor (so business expenses, tax prep fees, business subscriptions etc…) you are also not allowed to take any of your schedule A state, local, federal tax exemptions.

You are allowed to take your Charitable contributions, and mortgage interest IF and only IF it was used to acquire, construct or improve existing property… so in the above question you can deduct the interest on the first trust mortgage (10,000) however you are not allowed to deduct the interest on the home equity line (second trust) because it was used to consolidate debt and not improve the property. You are allowed to deduct your medical expenses- to the same extent of Schedule A- so 10% of AGI.

It really is pretty much that simple…

The Rogers Mnemonic was PANIC TIME if you google it I am sure you can find out what each stand for- like I said Mnemonics do nothing for me except stick in my head but never help remember what each letter stand for– I am much more of long-hand type of person….

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

[mckan514w]

hope this helps!

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

[Spartans92]

Thanks mckan. That did help a bit. I was confused at the medical expenses because they are adjustments and are not deductible for AMT purposes..

BEC- PASS

[Anonymous]

Computation:
$2,000 Medical ($100,000 x 10% = $10,000 – $12,000 Actual)
$10,000 Qualified housing and residence mortgage interest
$5,000 CC
——————–
$17,000
===========
The problem is asking for the itemized deductions allowed for AMT.
If the problem had given you total itemized deductions of let’s say $70,000, then that’s the time you have to add back those tax preference items [PPP]* and common adjustments [+TIMME]** and increase/decrease other common adjustments [+/-PANIC]***

AND YOU WERE RIGHT, NOT TO ADD BACK CHARITABLE CONTRIBUTIONS FOR AMT PURPOSES.
PLEASE NOTE: CCs are one of the those tax items that regular tax and AMT agree, meaning they are allowed as itemized deductions both under regular tax and AMT.
Here’s one useful mnemonic I’d like to share with you:

Regular Tax and AMT Agree:
7 [CCHHTTS]
C – Charitable Contributions
C – Casualty losses
H – Home mortgage interest for qualified dwelling
H – Half (½) of the Self-Employment Tax
T – Traditional IRA Contributions
T – 10% AGI Medical Expense
S – 179 Expense

PPP*
P – Private activity bond interest income (on certain bonds) [PABII]
P – Percentage depletion the excess over adjusted basis of property
P – Pre-1987 accelerated depreciation [PNAD]

TIMME**
T – Tax “Deductions” => Taxable Refunds
I – Interest Deductions on some home “equity loans”
M – Medical Deductions (limited to excess over 10% AGI; Adjustment for TPs age 65 & over)
M – Miscellaneous Deductions not allowed
E – Exemptions (personal) and standard deduction

PANIC***
P – PAL => Passive Activity Losses
A – Accelerated Depreciation (Post-1986 Purchase)
N – NOL => Net Operating Loss of the individual TP
I – Installment Income of a Dealer
C – Contracts –Percentage Completion versus Completed Contract

[Anonymous]

Medical expenses are tricky for AMT computation.
10% AGI Medical Expense is allowed for AMT (for taxpayers below 65 years old)

But the 7.5% (for 65 years old and above) AGI Medical Expense is not allowed for AMT purposes. If it were included in the itemized deductions, we need to add this back to taxable income.

[Just3Letters]

Repost from Claudia way earlier in this thread. Hopefully this helps.

Roger has a good mnemonic

Gross Income
+/- adjustments – I EMBRACED EHF
AGI
Deductions – Itemized A – COMMITT or Std Deductions

Personal Exemptions
Taxable Income
* Tax Rate

Tax Liability
(Credits)
(W/H Tax)
(prepaid tax)
AMT – SIMPLE PIE

Tax Due

Mnemonic
I _EMBRACED EHF

Interest on Student loans (2,500 limit)
Employment Tax
Med Premium
Rent/Royalties/Flow through
Alimony – CANNOT
Contribution to Pension
Early Withdrawl
Duty – Jury

Education
Health Savings A.C
Farmers

COMMITT – Itemized Deductions

Charitable contributions
Other Mis
Misc -BITA
Medical 10% or 7.5% if 65 plus
Interest on Mortgage/Equity
Theft/Casualty
Taxes Paid

My addition:

Adjustments to get to AMT: PANIC TIMME (PANIC is add/subtract), (TIMME is only add back)

Passive Activity Losses
Accelerated Depreciation
Net Operating Loss
Installment Income
Completed Contract vs. % Completion

Taxes deductions
Interest on non-equity loans (not used for home purposes)
Medical Expenses >7.5%
Miscellaneous Not Allowed (BITA – 2%)
Exemptions and standard deduction

AMT Credits (You have to FACCE AMT on your exam)

Foregin Tax
Adoption
Child Tax
Contributions to Retirement Plan
Earned Income

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

[ineeda75please]

Ok I am really tripping over this. Can someone please help. In the ninja notes on page 53, it is talking about gifting appreciated property being worth 10k and basis of 1k, and the person dies and it passes back to you from their estate, normally your basis would be FMV at death of 10k but the IRS won't let you do that, your basis reverts back to 1k.
Ok so my problem is why would the IRS want to revert you back to a basis that is less? Wouldn't they want it to be higher for their benefit??

I am totally confused any help would be appreciated!

BEC - 71, 76 PASSED! Becker
FAR - 70, 08/2016 Becker and Ninja Notes (2nd)
REG - 7/2/2016 Becker and Ninja Notes
AUD - 7/27/2016 Becker and Ninja Notes

[Just3Letters]

Ineeda75,

Always think that the IRS wants to maximize gains and minimize losses. Therefore, with gifted property, if the fmv < basis on date of gift, you wait until the subsequent resale of that asset in order to determine the basis.

I think you are confused about basis. “Basis” of an asset is not what “is taxed”. The resulting gain/loss is the only thing with tax consequences in this situation. Therefore, if the IRS can give you a basis that results in a higher gain or lower loss… they will.

Does that make sense?

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

[ineeda75please]

Aha! Thank you very much just3letters.

Perfect sense now.

BEC - 71, 76 PASSED! Becker
FAR - 70, 08/2016 Becker and Ninja Notes (2nd)
REG - 7/2/2016 Becker and Ninja Notes
AUD - 7/27/2016 Becker and Ninja Notes

[Author]

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