[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

[Mamabear]

@CPA8488–Don't forget that there are great links to terms and textbook information for each Ninja MCQ. You can read those for the ones you get wrong instead of referring back to Becker to save time.

CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
AUD (08/24/13) 65 (11/13/13) 85
FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!

[jft]

Hi guys,

I'm having trouble with this NINJA question and my exam is this Saturday. Can someone please shed some light on why the answer is $130,174.

A taxpayer purchased and placed in service during the year a $761,000 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. There is an allowable Section 179 limit in 2014 of $25,000. What amount is the maximum allowable depreciation without using bonus depreciation? $130,174

The explanation says that $25K was subtracted from the $761K. I didn't do that because I thought that the $25K is phased out once the property purchased exceeds $200K.

Thanks guys

[leglock]

I believe someone else posted the same question, noting the same thing as you relative to the phase out. It seems to be an error in the problem, as you are definitely correct about the phaseout.

[jft]

ok thanks!

[Anonymous]

On December 1, 2014, Jim Miller placed in service office furniture (7-year life), which cost $28,000. Jim did not elect Section 179 expensing or bonus depreciation. The office furniture was the only asset purchased during the year. What amount can Jim claim as depreciation under MACRS for 2014?

A.

$1,000

B.

$2,000

Incorrect C.

$4,000

D.

$7,000

You answered C. The correct answer is A.

Can someone explain this I'm having a hard time with DDB. I understand if a purchase occurs in the last Q of the month you use Mid-month but I don't understand how to apply it.

[rzrbkfaith]

For DDB, you take the DB percentage (200% in this case) and divide it by the number of years in service (7). This gives you 28.57% depreciation in the first year. Because it was placed in service in December, and we are assuming this was the only asset placed in service, you would use mid-quarter convention, which means you would only take 12.5% of the depreciation available for the first year.

28,000 x 0.2857 = 8,000 first year depreciation (full year)

8,000 x .125 = 1,000 first year depreciation, mid-quarter convention

AUD - 99
BEC - 97
REG - 91
FAR - 1/8/16

[Anonymous]

@rzr thanks a lot. I don't know if I should be happy your in this forum or threatened that your going to destroy the curve for everyone taking it in this quarter lol jk

So looking at R4-30 we should know that 7 year furniture uses 200% because it wasn't given? Should we memorize types of property.

Second, 12.50% is coming from the little chart Tim said to write in the book correct? because I don't see where else I could have gotten that number from.

p.s. using the index was a genius idea 🙂

[rzrbkfaith]

@cpa8488 – Since it is MACRS 3 yr, 5 yr, 7 yr is double declining so you would use 200%. 15 year is 150%. 27.5 yr and 39 yr is straightline. There are more categories than that, but those are the ones we will be tested over. I have memorized the types of property, but only because I use it on a regular basis. Oh and no – Becker doesn't give you this info. I did use Tim's little graph for mid-quarter convention though.

You're too funny. I'm a little worried about all the little rules in this one. I am doing well on the MCQ but some of the SIMs for Becker are so hard and a little confusing. I do audit and tax work at my firm, so I am hoping that the experience will come in handy. My motivation has been lacking lately and I have to pick up the pace on R6-R8 so I can sit for the exam week after next!

AUD - 99
BEC - 97
REG - 91
FAR - 1/8/16

[JB2014]

I'm retaking REG, scored a 66 – third quarter 2014. Used Wiley and Becker previously & came out of the exam feeling as if I was well prepared. After going though all NINJA questions there is no comparison, NINJA is absolutely more difficult, currently trending 69%, with taxation topics being my lowest. How can I get my score up? Any suggestions?

In addition when I do sets of 30 MCQ, I'm on average scoring in the 80s. This makes no sense!!

In addition previous took BEC two years ago scoring 65 & 64. Seems to be that I am in the same range each time.

[Windel]

Can someone please explain why this answer is C. This totally threw me off.

Curry's adjusted basis in Vantage Partnership was $5,000 at the time he received a nonliquidating distribution of land. The land had an adjusted basis of $6,000 and a fair market value of $9,000 to Vantage. What was the amount of Curry's basis in the land?

A.

$9,000

B.

$6,000

C.

$5,000

Incorrect D.

$1,000

According to Ninja MCQ test bank “Curry's basis in the land is $5,000.”

Any time a partner receives a noncash, nonliquidating distribution (in this case it is land), there is no gain or loss recognized by the partnership or the partner. The basis Curry has in the partnership interest is assigned to the land up to his total basis. So $5,000 is assigned as the basis of the land, leaving Curry's basis in the partnership at zero.

I didn't think I was being asked what Curry's gain/loss was…the question asked what was the basis, where-in-which I thought that none of the answer choices were suitable. Can someone please clarify!

[rzrbkfaith]

Whether its a liquidating or nonliquidating distribution, in a partnership, you can't distribute more than the partner's basis in the partnership, therefore the basis in the property given would be equal to the partner's basis in this case.

If the distribution is greater than the partner's basis then the formula is Partnership Basis – cash received = basis in property received

If the distribution is less than the partner's basis (and is non-liquidating) then the basis is the NBV

If the distribution is less than the partner's basis and is a liquidating distribution then the formula is Partnership Basis – Cash received = Basis in property received (even if its more than the NBV)

AUD - 99
BEC - 97
REG - 91
FAR - 1/8/16

[yassy]

A distribution of property reduces the partner's basis in the partnership, *but not below zero!*

So when Curry has a $5,000 basis in the partnership, and receives a distribution of $6,000, it uses up all the basis he has left and the extra $1,000 is ignored.

Theoretically, when Curry sells the property, he will recognize the $1,000 gain that he didn't recognize at distribution. For example, if he later sells the property for $10,000, his gain will be $5,000 (10,000 selling price-5,000 basis). His gain would have only been $4,000 had he been able to take the full basis of $6,000.

FAR 75 (8/21/13)
AUD 72 (10/29/13) 74 (2/12/14) 84! (04/01/14)
BEC 75 (11/27/13)
REG 72 (05/29/14) 74 (07/10/14) 86 and DONE! (10/02/14)

[Anonymous]

Can someone clarify shareholder tax consequences when contributing property to a C-Corp?

Becker says no G/L when both conditions have been met:

1) 80% control of voting and nonvoting stock

2) boot not involved (not received) – cash, receipt of debt securities, COD

There's an example where Lind contributed property $40,000 basis , 82K FMV, and the C-Corp assumed $10,000 mortgage from the building.

the 80% test was met. The answer is 0 gain.

The corp assumed 10,000 mortgage – shouldn't this trigger gain?

[leglock]

only if debt assumed is in excess of book value. so in the above, book value is 40 and debt assumed is 10, so no gain recognized.

however if book value was 40 and debt assumed was 50, then you would recognize a gain of 10

with becker , if u look at top of r3 page 4, it sys the amount of liabilities assumed that exceeds adjusted basis of TOTAL assets transferred is not boot per se, but does generate gain. So the 2 important points are:

1. liabiolity assumed is gain only if it exceeds adjusted basis.

2. you compare the liability assumed to the basis of ALL assets you are giving to capitalize the corp. So if you give cash of 20 and a machine of 40 and the corp assumes your liability of 50, then you gave things with basis of 60 and the corp assumed liability of 50, so you do not recognize any gain. You do not just compare the basis of machine to liability assumed, you must include the basis of all things you gave.

[Windel]

@yassy

Thank you for that explanation, somehow logic and reasoning seem to escape me as nightfall approaches. I think sometimes I really just need to walk away from these NINJA MCQ's and come back later.

[Author]

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