[jeff]

Welcome to the Q3 2016 CPA Exam Study Group for REG.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

[Anonymous]

Crossroads Co. chooses to report a financial asset at its fair value. The asset trades in two different markets; however, neither market is the principal market for the financial asset. In the first market, sales proceeds are $76, which is net of transaction costs of $6. In the second market, the sales proceeds are $80, which is net of transaction costs of $1. What amount should Crossroads report as the fair value of the asset?

a. $81
b. $82
c. $80
d. $76
I thought the answer should be $80 (80-1 = 79 vs 76-6=70)
The solutions says, $81

Any idea why?

[Anonymous]

Is anyone else in a state of panic waiting for the results tonight?! After the sims I had on the exam, I am not in the best of moods today! Good luck to everyone waiting for results!

[jr1751]

@big4dcguy – I totally agree with you. I am so nervous about this exam. The Sims on this exam were crazy. I thought I was in good shape going into the exam, but when I got to the Sims, I wanted to yell SERIOUSLY!!!!!!! Hope and pray we did well.

BEC - PASSED

REG - Praying I Passed

AUD - TBD

FAR - TBD

[tgs317]

I HAVE REG EXAM IN 9 DAYS AND STILL NEED TO GO THRU CH 7 & 8 (BOTH BUSINESS LAW). I HAVE PASSED ALL 3 OTHER EXAMS WITH ABOUT A WEEKS TIME OF REVIEW SO I AM NOT TOO WORRIED ABOUT THAT…

WHAT I WANT TO KNOW… THEY SAY THE 3 BIZ LAW CHAPTERS COMBINED ARE WORTH 20% OF YOUR GRADE. DOES THAT MEAN THAT ROUGHLY 24 MC QUESTIONS ARE BASED ON BUSINESS LAW SINCE MC TOTAL IS 60% AND THEY MAINLY GIVE SIMS BASED ON TAX?

THANKS

[Anonymous]

@jr1751 I know, the sims were unreal. I wanted to stand up and SCREAM when I opened the sims testlet! In fact, I did throw my arms up in the air in a “da fa*#” kind of fashion lol. I definitely felt pretty great going in, but leaving I felt pretty bad. I am crossing my fingers for you!

[Anonymous]

On October 1, 2012, Donald Anderson exchanged an apartment
building having an adjusted basis of $375,000 and subject
to a mortgage of $100,000 for $25,000 cash and another apartment
building with a fair market value of $550,000 and subject to
a mortgage of $125,000. The property transfers were made subject
to the outstanding mortgages. What amount of gain should
Anderson recognize in his tax return for 2012?
a. $0
b. $ 25,000
c. $125,000
d. $175,000

Answer is (B) 25,000

I thought the answer is 0. I thought with two mortgages, we take the mortgages relieved of (100,000) less mortgage assumed (125,000) to get gain recognized. Since its negative here, we would recognize 0.

What am I missing here?

[jar4989]

My understanding is that in a situation like this, the baseline is that there is gain recognized to the extent of boot received. Given that there is an exchange of boot, the gain recognized at present is limited to the net boot difference of 25,000, with the rest of the gain being deferred.

[jr1751]

Scores are up!!

BEC - PASSED

REG - Praying I Passed

AUD - TBD

FAR - TBD

[Jennifer]

arr, an unmarried taxpayer, had $70,000 of adjusted gross income and the following deductions for regular income tax purposes:

Home mortgage interest on a loan to acquire
a principal residence $11,000
Miscellaneous itemized deductions above the
threshold limitation 2,000

What are Farr's total allowable itemized deductions for computing alternative minimum taxable income?

Incorrect A.
$0

B.
$2,000

C.
$11,000

D.
$13,000

Miscellaneous itemized deductions are not deductible for AMT (alternative minimum tax) purposes. Home mortgage interest claimed as an itemized deduction is only deductible for AMT purposes if the loan was used to buy, build, or improve the taxpayer's home. Interest on home improvement loans is not allowed as a deduction in computing alternative minimum taxable income (AMTI). In this case, Farr may use only the home mortgage interest of $11,000 in computing AMTI.

why will they say the interest is deductible to improve the home and the say below again that interest on home improvement is not allowed as deduction. it get confusing. Please clarify.

Thank you

[Leena_1101]

Paul Pappas owns all of the stock of an S corporation which had previously been a C corporation. The S corporation had the following balances at the beginning of its tax year:

Accumulated adjustments account $ 8,000
Accumulated earnings and profits 10,000
Paul's stock basis was $20,000 at the beginning of the tax year. The S corporation made a distribution of $19,000 to Paul during the year. What amount of the distribution is taxable to Paul?

A.
$0

B.
$8,000

C.
$10,000

D.
$18,000

Correct answer C.
S corporation distributions are (1) tax-free to the extent of the accumulated adjustments account (previously taxed to Paul), (2) taxable to the extent of accumulated earnings and profits (C corporation earnings), (3) any remaining distributions are a return of capital.

Could someone please explain this one to me. Thanks

[jar4989]

The accumulated adjustments account (AAA) track undistributed earnings that have been taxed to shareholders previously. The only entity that has double taxation on dividend-like distributions are C corporations. S corps are treated like partnerships. Since these undistributed earnings have already been taxed to shareholders (not the S corp), they are tax free upon distribution. Distributions from an S corp are taxable to the extent of current and accumulated E and P. In this problem, they don't state any current E and P, so the taxable portion of the 19,000 distribution is the 10,000 of accumulated E and P.
As a side note,
If there was no AAA, the rest (9,000) would be considered a return of capital to the extent of basis – so in this case it would reduce his basis from 20,000 to 11,000.

[jar4989]

This is a typo to me. I wouldn't worry about it. This qualified mortgage expense is deductible for purposes of computing AMTI – thats the important takeaway. Misc itemized deductions, however, are added back.

[A1lessio]

hey everyone,

taking reg on Sept 7th and still have about half of the becker material to go through. I have the tax section pretty down packed. I wrote out all the chapters for 1-4, and completed all MCQ's and sims for chapters 1-3. I also work in tax and passed the enrolled agent exam 2 year ago (questions are very similar). What would you consider doing the next 2.5 weeks? How hard should I study the B. Law section?

AUD (08/02/2016)

[Anonymous]

I took REG for the third time in August, and I failed again. This is my last exam, and I am beyond frustrated. I got my score notification report back today, and by content area, I was weaker only in Taxation on Entities, comparable in Taxation on Individuals, and stronger on taxation on property transactions, federal tax process, and business law. However, by item type, I was stronger in multiple choice and weaker on the sims. I got a 73 on this exam, and my first and second exams I got 67 on each.

Obviously, the sims are my weakest point. I feel like the sims on the actual exam are much harder than the sims that Becker provides to study. Does anyone have any tips/tricks/anything to help study for the sims more?

Thanks,

Allison

FAR – 76
AUD – 74, 82
BEC – 80
REG – 67, 67, 73

[melody_pinaycpa]

@cpa1sttry – the 25K gain recognized is limited to the boot received which was the cash received the rest deferred. The difference of the 2 mortgages with mortgage assumed greater than mortgage relieved is net boot given.

@jennifer-my notes say that home equity interest NOT applied to acquisition of home are ADDED BACK to TI for AMT purposes. So if it is for home equity interest in relation to acquisition of home/principal residence then it is allowed itemized deduction for AMT purposes.

FAR (Apr 2015) - 88
AUD (July 2015) - 86
BEC (Oct 2015) - 82
REG - 73, 70, retake Sept 2016

[Author]

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