[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 spent the entire night mattress shopping for my new apartment. What a waste of good study time 🙁

However, I'm now the proud owner of a very comfortable sleeping surface!

I was talking to my mom the other day about my studying. I compared my average of around 79% to maxing out at the gym. I am by no means a gym junkie but I feel like my scores are so consistent that I have hit my mental max. I can't bench any more tax or Blaw…

Did anybody figure out Spartans basis question? I got that question wrong today as well. I think that it is because corporate basis is the greater of fmv or liability assumed. There is no liability for either item so it has to be the fmv for both. Isn't that correct?

I was originally thinking basis but I don't think C-Corps use carryover basis. Ugh, idk…

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

[CPA2BEE]

@Just3 C Corps use carryover basis for contributed property for transfers that are from a controlled group, that being in exchange of 80% or more of the interest. FMV was used for Corley's transfer because it was in exchange of 10% interest. A prior poster explains this above.

80% or more interest exchanged = Carryover basis
Less than 80% = FMV

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Just3Letters]

Oh, duh. Thanks 🙂

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

[Just3Letters]

Oh, duh. Thanks 🙂

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

[csvirk]

I always get confused with Fraud in Inducement vs. Fraud in Execution. Any easier way to remember the difference? Thank You.

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

[csvirk]

Question to test your concepts.

During an audit of Trent Realty Corp.'s financial statements, Clark, CPA, reviewed the following instrument:

$300,000 Belle, MD
September 15, 20X1
For value received, ten years after date, I promise to pay to the
order of Dart Finance Co. Three Hundred Thousand and 00/100 dollars
with interest at 9% per annum compounded annually until fully paid.
This instrument arises out of the sale of land located in MD.
It is further agreed that:
1. Maker will pay all costs of collection including reasonable
attorney fees.
2. Maker may prepay the amount outstanding on any anniversary date
of this instrument.
(SIGNED) G. Evans
On March 15, 20X2, Dart indorsed the instrument in blank and sold it to Morton for $275,000. On July 10, 20X2, Evans informed Morton that Dart had fraudulently induced Evans into signing the instrument. On August 15, 20X2, Trent, which knew of Evans' claim against Dart, purchased the instrument from Morton for $50,000. Trent is considered a:

A.
holder.

B.
holder in due course.

C.
holder with rights of a holder in due course under the Shelter Provision.

D.
not a holder.

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

[Bear-Bear]

I have a question about exemption from corporate AMT:

I know that the first year is exempt no matter what, and that you can't average more that 7.5MM in gross receipts for the trailing three years…but where does the initial $5MM limit come in? For the first three years (except the exempt first year), can you not exceed $5MM at all? And then after three years, you can go over $5MM as long as iyour 3 year average doesnt exceed $7.5MM??

[csvirk]

Bear-Bear
since first year is exempt, for the 2nd year intial is 5mill and then 7.5 mill (average of three) as you have you stated.

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

[Just3Letters]

CSvirk,

It's C. HDC in due course. Even though Trent knew of the fraud, Morton was an HDC. When you buy from an HDC you have the power of an HDC.

Per your second question, Bear-Bear answered it perfectly. It only becomes 7.5 million once you have the three years (1st year exempt, 2nd 5M, after third year use 7.5 million)

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

[Spartans92]

Just3, what kind of mattress did you get? Leesa are quite comfy 🙂 Good luck to those taking REG this weekend!

Just3 I thought u were taking it July 5.. Best of luck!

BEC- PASS

[Just3Letters]

@Spartans,

I was originally going to test on the fifth. However, I didn't consider that there is a very loud holiday the day before July 5. I rescheduled a few weeks ago so that I can actually sleep the night before my test. I figure two days won't change much and sleep is super important. My neighborhood is INSANE with fireworks. I just never changed my little test date thing in my post until this morning.

Thanks for the well wishes Spartans 🙂 me and Bear-Bear are going to kill it this weekend!

I was actually thinking about Leesa originally but I got a Sealy Posterpedic. I had my last mattress for 8 years and I bought it at a garage sale 8 years ago so this is a huge upgrade!

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

[Just3Letters]

Anybody know why the correct answer is not $36,000. I thought it would be $40,000 – 40% of the mortgage (4,000) = $36,000. The correct answer is $30,000 which subtract the entire mortgage from the basis.

Lind and Post organized Ace Corp., which issued voting common stock with a fair market value of $120,000. They each transferred property in exchange for stock as follows:

Adjusted Fair Market Percentage of
Property Basis Value Ace Stock Acquired
Lind Building $40,000 $82,000 60%
Post Land 5,000 48,000 40%

The building was subject to a $10,000 mortgage that was assumed by Ace.

What was Lind’s basis in Ace stock?

A.
$82,000

B.
$40,000

Correct C.
$30,000

D.
$0

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

[csvirk]

@just3 I think you forgot to subtract the 6K which is amout of mortgage assumed by other shareholders.

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

[Anonymous]

i think only with partnerships do you subtract the liability assumed by other partners. for corporations, you subtract the entire liability

[CPA2BEE]

@Just – This question is for a Corporation. When Corps assume liability on transferred property, it is not distributed to the shareholders like it is to partners in partnerships. It is completely assumed by the Corp and therefore deducted from the contributing shareholder's basis in the Corp. Hence, 40,000 basis – 10,000 liab relief = 30,000.

FAR - 80
AUD - 82
BEC - 80
REG - 85

ETHICS - 90
EXPERIENCE - COMPLETE
Application for California license mailed 8/4/2016

[Author]

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