[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]

Can someone help w this problem? Why is $0 excluded from tax? Wouldn't at least $14,000 not be taxable and the rest of principle be taxed?

During 2014, Blake transferred a corporate bond with a face amount and fair market value of $20,000 to a trust for the benefit of her sixteen-year old child. Annual interest on this bond is $2,000, which is to be accumulated in the trust and distributed to the child on reaching the age of twenty-one. The bond is then to be distributed to the donor or her successor-in-interest in liquidation of the trust. Present value of the total interest to be received by the child is $8,710. The amount of the gift that is excludable from taxable gifts is: Answer $0.

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

[csvirk]

@caludia

it is not considered a complete gift, therefore you can't account for it as gift and take the deduction.

“the annual exclusion only applies to a “gift of a present interest.”A present interest gift is an unrestricted right to the immediate use, possession, or enjoyment of the property or of the related income.

There is an exception to the present interest rule. A transfer for the benefit of a person who has not attained age 21 is considered a gift of a present interest if all of the following conditions are satisfied:

Both the property and its income may be spent by or for the benefit of the minor before she or he reaches 21 years old.

Any portion of the property or its income not expended for the minor before reaching 21 years of age must go to the minor at 21 years of age.”

Principal will go back to donor once she reach 21. This would make a gift incomplete.

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

[Just3Letters]

Claudia,

I'm just accepting that I'll run out of new questions soon enough. I don't have too long till my exam so that's OK with me.

I've done 200 so far today. First set was with new and old questions, 91%. Second set… only new, 73%. UGH.

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

[Spartans92]

Just3, you are going to destroy REG come exam day! 🙂 I will need some advice from you later on how to balance work and studying Lol.

BEC- PASS

[Anonymous]

Burke stole several negotiable warehouse receipts from Grove Co. The receipts were deliverable to Grove's order. Burke indorsed Grove's name and sold the warehouse receipts to Federated Wholesalers, a bona fide purchaser. In an action by Federated against Grove:

I think the distinction is who can negotiate a fraudulent instrument, not whether Federated thought it was fraudulent.

Plus forgery is a real defense. There's some wiggle room there for the HDC, but not if they got the instrument directly from the forger.

“Forgery. Forgery is a real defense to an action by an HDC. As we have noted, though, negligence in the making or handling of a negotiable instrument may cut off this defense against an HDC—as, for example, when a drawer who uses a rubber signature stamp carelessly leaves it unattended.”

[Just3Letters]

Spartans, you will notice that I did all new questions and didn't get a passing percentage so I wouldn't ask me for advice lol

But yes, I'll give you all the advice I gain 🙂 It's going to be rough for sure. I'm currently planning on one hour before work, 30 minutes at lunch, and two hours at night. There is a three week period where I'll be working more than 40 in late july so that'll be rough.

We shall see!

CPA2021, thanks! I really need to get this negotiable stuff down. It seems like if you really know it there are only a few rules but to me it just seems like a foreign language no matter how much I study it!

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

[Anonymous]

Ace Rentals, Inc., an accrual-basis taxpayer, reported rent receivable of $35,000 and $25,000 in its Year 5 and Year 4 balance sheets, respectively. During Year 5, Ace received $50,000 in rent payments and $5,000 in nonrefundable rent deposits. In Ace's Year 5 corporate income tax return, what amount should Ace include as rent revenue?

REntal income is 65K because it's an accrual basis tax payer. I think the constructive receipt rule applies to cash basis.

[Just3Letters]

Thanks CPA2021, once again just got my rules mixed up. It WON'T happen exam day.

Note: You are definitely going to be a CPA before 2021 🙂

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

[Spartans92]

haha just3. sure does sound rough… over 40 hr work week (yikes!).


@CPA2021..how did you come with the username?

BEC- PASS

[Just3Letters]

Can somebody dumb this domestic services thing down for me? Sometimes the correct answer is over 1900, sometimes its over 1000 (as is true in this case), and sometimes it's “only if requested by employee”. I just don't understand the differences.

Here is proof that I actually tried to look up the answer. I just don't understand what they are getting at. https://www.irs.gov/publications/p926/ar02.html

Wages paid for domestic services are subject to special rules for determining whether they are subject to payroll taxes. When are domestic wages subject to federal unemployment tax?

A.
Over $1,500 to one employee in a year

B.
Over $2,000 total wages in a year

C.
Over $1,000 total wages in a quarter

Incorrect D.
Only if requested by employee

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

[Just3Letters]

Guys my motivation is dead today. 225 done and I think that might be all of it today 🙁

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

[Tncincy]

Mike and Jane Lewis, a married couple, file a joint 2016 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 2016 is $4,050. The standard deduction amount for married filing jointly is $12,600.

What is the Lewises' taxable income amount for 2016?

A.
$95,850

B.
$96,000

C.
$96,400

D.
$100,000

The answer is A. I understand the ira deduction of 4,000 and not the complete 8,000, but the itemized deduction is given so I assumed the expenses were not enough to itemize for a married couple.

The Lewises could not deduct their standard deduction amount since they itemized their deductions. Taxpayers cannot take the standard deduction amount if they itemize their deductions. Taxpayers can elect each year to itemize deductions or take the standard deduction. (stated in the explanation) :-/

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

[Tncincy]

Maybe I'm not completely reading the question….hmmmmm

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

[Just3Letters]

tncincy,

You are correct with everything you said. The only part you are missing is the three exemptions of $4050 each. One for Mike, one for Jane and one for their child 🙂

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

[Bear-Bear]

@Just3Letters – Yeah…I am pretty not happy about waiting a full month for scores. Three weeks for BEC almost drove me insane. I'm going to proceed to the next section (AUD), which with luck will be my LAST section. I seriously don't know how I'm supposed to keep from going crazy for a full month. 🙁

[Author]

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