[jeff]

Welcome to the REG CPA Exam study group for July & August 2018 exams. 🙂

Please introduce yourself & when you’re taking your exam (approximate timeframe).

REG Study Group Links and Resources:

1. NINJA Monthly – Full REG Course for $67/mo
2. How to Study for REG with NINJA Only
3. How to Pass REG in 20 Days
4. How to Retake REG After Failing
5. Video: Study Advice for REG
6. CPA Reviewed Podcast
7. CPA Exam Score Release Dates
8. NINJA MCQ Trending vs Actual REG Scores
9. I Passed the CPA Exam!
10. I Passed REG!
11. NINJA REG SIMS List by Topic
12. Free Downloads: NINJA REG

[Anonymous]

Hi @Jane, I want to clarify your question about basis vs at-risk basis:

Partnerships: Get basis for capital + allocated liabilities. Only recourse and qualified non-recourse liabilities count as “at-risk”. Ie non-recourse liabilities count for basis, but not “at-risk” basis.

S-Corp: Do not get basis for liabilities (recourse or non-recourse). An exception is they get “debt basis” for loan made directly from shareholder to the corporation.

C-corp: No basis for liabilities, and the “at-risk” limits are for deducting pass-through losses. C-corps are not pass through entities, so this is not relevant.

Let me know if this makes sense or if you have questions.

Also, to address your questions on sims, no one knows for sure as the AICPA doesn't release exactly how they grade them. However, I believe partial credit is definitely given.

[Anonymous]

Similar to what I said ^ – @Chandler – When you say certain “qualified non-recourse loan” can you elaborate? I recall that any non-recourse loans would only affect the General Partners.

[hope4cpa2017]

I am taking REG on Aug 16 using Gleim and thinking to supplement with Flashcards. Recommendations?

[Anonymous]

Sure @Abi, qualified non-recourse loans are non-recourse loans secured by real estate. Although they are non-recourse, they still count for at-risk basis. This is done purely to encourage investment in real estate. Regarding actual allocation, there is a detailed process of allocating recourse and non-recourse liabilities involving a complex set of rules and processes. I can explain these to you in detail if you wish, but they are beyond the scope of the CPA exam.

Also, in regards to a limited partnership, generally liabilities are allocated to general partners under the assumption that all liabilities are considered recourse unless specifically identified otherwise. However, special rules apply for contributed property and loans personally guaranteed by limited partners. In addition, limited partners may be allocated non-recourse loans if they have a deficit restoration obligation. Again these rules are beyond the scope of the CPA exam.

For the CPA exam, assume all partners are general partners, and allocate liabilities in accordance with their capital ratios.

[Jane]

Thanks Chandler, I guess my follow up question is how do basis and at-risk basis actually effect taxes for each entity? When doing the problem in becker I am having no problem calculating basis' and how things are allocated, so I think I skipped the understanding of how basis and at-risk basis differ, and I'm just doing it without understanding the mechanisms.

Also maybe a silly question, but do you guys think it's worth paying the $35 fee to take your test 5 days earlier? It probably won't make much a difference but I'm scheduled for the 14th and I think I'll be ready by the end of this week. Just am worried that extra week might be TOO much time.

[Anonymous]

Sure, so I'll focus on partnerships since that is mostly where you will see at-risk limitations.

Assume I have a basis before losses of $50,000 in my partnership interest. Of this $50,000, $20,000 is non-recourse debt, $10,000 is recourse debt, and the remaining $20,000 is my tax capital account balance. For 2017, I have a loss of $40,000. To deduct this loss on my tax return, I must clear “3 hurdles”.

Hurdle 1: Basis limitation: I can't deduct losses in excess of my basis. Total basis is greater than the loss by $10,000 so this is no problem. The full $40,000 clears hurdle 1, reducing my partnership basis to $10,000.
Hurdle 2: At-risk limitation: Here, losses cannot exceed my “at-risk” basis. Non-recourse debt, does not count for this, so my “at-risk” basis is $30,000 (excludes the $20,000 non-recourse allocation). Only $30,000 clears this hurdle, and $10,000 is a suspended loss that I cannot take on my tax return this year.
Hurdle 3: Passive activity loss limit: Assuming this activity is one you materially participate in then this limit does not apply. If it is a passive activity, we can only take this loss to the extent of passive income. (see your review course or online for passive vs. active activities).

So let's assume that this partnership is an activity I materially participate in, and therefore hurdle 3 does not apply. I am only allowed to deduct $30,000 on my tax return this year, even though I had sufficient basis to absorb the entire loss. Because, $20,000 of my basis was not “at-risk”, I could not pass hurdle 2, and $10,000 of my loss is suspended.

At-risk limits are on the partner level, since they have no effect on the partnership itself.

As for your other question, I think its absolutely worth the $35 to take the exam early if you are ready. There is nothing worse to me than being 100% ready for the exam days before you can take it. $35 is a small amount considering the amount of time and financial resources you have invested in this process.

Maybe this explanation makes a little sense, if not let me know and I can try to clarify.

[sheskierk]

So I started REG this week. I am using Becker, and currently on R1 M4. I am already getting extremely overwhelmed with the amount of material given in the lectures. With all these phase outs, rules, and exceptions within exceptions. I am not really too sure how much of the details I should try to memorize, due to the amount of details covered with REG. I was able to pass FAR and AUD on first try, but I can tell from starting REG, that this section is going to be the hardest for me to pass. Any suggestions or insight would be greatly appreciated.

FAR – 76

AUD – 77

REG – Becker & Ninja in training

BEC – no schedule date

[murano]

Hi @Chandler,
it's me again:) are you sure that we don't take non recourse loan into consideration when calculating stock basis of an s-corp?
someone says that for an s-corp, a non recourse loan is not included in the at-risk amount but it is included in the stock basis, but I can't find that web.
maybe I got it wrong.

[Anonymous]

Hi again @murano, yes I am sure that non-recourse or recourse liabilities are NOT part of S-corp stock basis. Unlike partners in a partnership, shareholders in an s corp do not receive basis for debt allocation.

[lam2848]

So I just took my exam and I don’t have a good feeling about it. The exam didn’t feel like it was getting harder but it didn’t feel like it was getting easier either. I’m trying to stay positive but I just have this feeling I didn’t do well.

[Anonymous]

@Iam2848 – I'm sure you did fine. Just take a breather and take some time to regroup then jump right back on your next section!

[lam2848]

Thanks Bean! You’re right. I honestly don’t have time to sulk. Have to study for AUD now. I also have to keep remembering that it’s just a test.

[Jane]

Does anyone know if the research question is always the last question of testlet 5, or can it be anywhere in the sims? Last two tests I took (FAR and AUD), the research question was the last question, so I kind of regretted rushing through my earlier sims. What has been people's experiences?

[Brian Riley]

Do you think it would be worth knowing the calculation for Alimony Recapture?

[Anonymous]

Anybody using Wiley? Are you supplementing Wiley with any Ninja product? What is your strategy? I'm starting today.

[Author]

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