[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

[CPA2BEE]

This group is grooving right now bouncing all kinds of information and knowledge around, I love it.

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

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

[Just3Letters]

Copied from IRS Website. https://www.irs.gov/publications/p946/ch04.html

5-year property.

Automobiles, taxis, buses, and trucks.

.Computers and peripheral equipment.

Office machinery (such as typewriters, calculators, and copiers).

.Any property used in research and experimentation.

.Breeding cattle and dairy cattle.

Appliances, carpets, furniture, etc., used in a residential rental real estate activity.

.Certain geothermal, solar, and wind energy property.

7-year property.

Office furniture and fixtures (such as desks, files, and safes).

Agricultural machinery and equipment.

Railroad track.

Any property that does not have a class life and has not been designated by law as being in any other class.

Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2017.

Any natural gas gathering line placed in service after April 11, 2005. See Natural gas gathering line and electric transmission property , later.

Note: I've always seen trucks/cars, and furniture the most tested at least on Ninja. I typically think about it as being “backwards”. Here is my logic: Vehicles are larger than furniture. They should have longer period. However, in reality, furniture is 7 year and vehicles are 5 year. So it's “backwards” in my weird brain. It helped me remember a few of the items. If this confuses you, just ignore 🙂

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

[CPA2BEE]

There is no 6-year. Generally think of 5-year as equipment and vehicles and 7-year as furniture, etc. Again, a lot of times they provide the depreciable life for the assets.

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

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

[Just3Letters]

So I'm second guessing myself on random things. If a C-Corp distributes property in a non-liquidating or liquidating distribution, what is the basis you take?

Ex. Say Land had basis to Corp of $50,000 and FMV of $100,000

You recognize gain of $50,000, I get that. But is basis to you carryover basis or FMV? Also, is this treatment the same for both liquidating and non-liquidating?

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

[csvirk]

I think for C corp in non liquidating they use FMV. As if they sold the property and distributed the cash.

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

[csvirk]

Can someone explain me Section 351 problem. Do we always add up 2 or more shareholders to see if they have more 80%? Thank you

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

[CPA2BEE]

@Just3

Non Liquidating C Corp basis to SH = FMV
Liquidating C Corp basis to SH = FMV
Non Liquidating Partnership basis to Partner = Adjusted Basis
Liquidating Partnership basis to Partner = FMV

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

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

[CPA2BEE]

@csvirk It must be a combined 80% or more interest acquired by the shareholders in the same transaction. For example, shareholders A & B contribute to acquire 40% and 50% interests in the Corp – no gain recognized for either of them. Two years later, shareholder C contributes to acquire 5% interest in the Corp – gain is recognized for shareholder C. But note that if shareholder C would have contributed at the same time as A & B, he would not have recognized a gain because at that time they would have been combined to acquire 95% interest.

Does that make sense?

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

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

[csvirk]

@CPA2BEE thank you. makes sense now.

Also here is the youtube video on sec 351, if someone is interested.

https://www.youtube.com/watch?v=AiB01z92Rc8

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

[CPA2BEE]

In light of what we've been going over today…

When comparing liquidating distributions of different entities, which of the following statements is incorrect?

Select an answer:
A.
If a partner receives cash in excess of the partner's adjusted basis, then gain is recognized on the excess.

B.
A C corporation will recognize a gain or loss when the corporation is liquidated.

C.
An S corporation will not recognize a gain or loss when the corporation is liquidated.

D.
In a partnership, if no cash equivalents are distributed, no gain is recognized.

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

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

[csvirk]

answer A.

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

[CPA2BEE]

@csvirk A is incorrect. Remember for partnerships cash and equivalents distributed in excess of partner basis is a gain, but not for property distributions….Any other takers?

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

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

[Bear-Bear]

It's C

[Tncincy]

Kari Corp., a manufacturing company, was organized on January 2, Year 0. Its Year 0 federal taxable income was $400,000 and its federal income tax was $100,000. What is the maximum amount of accu­mulated taxable income that may be subject to the accumulated earnings tax for Year 0 if Kari takes only the minimum accumulated earnings credit?

A.
$300,000

B.
$150,000

C.
$50,000

D.
$0
Taxable income is reduced by the federal income tax and the accumulated earnings credit prior to determine the accumulated taxable income (ATI). The ATI is $50,000 for Kari Corp., as computed below:

Taxable income $400,000
Less: Federal income tax (100,000)
Less: Minimum accumulated earnings credit (250,000)
———
Equals: Accumulated taxable income $ 50,000

Where did the min acc earning credit come from?

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

[Just3Letters]

Thanks for the help earlier CPA2BEE,

Per your new question,

I would have thought A as well. I really don't see how it could be anything else. Thanks for crushing my confidence :/

Example: If you have 10,000 basis before distribution. Distribution is 12,000 cash. Recognize 2,000 gain and basis is 0. How is that not correct?

@Tncincy,

Undistributed income has a lifetime credit of 250,000 so that it does not have to be taxed at the 20% tax rate. Because it is a lifetime credit, once you use it up (like in this problem), you can never have it again in any subsequent year. It's just one of those things you have to remember for this dumb test.

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

[Author]

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