[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/

[Evwy_Mom]

@Garion – Thanks, I really, really hope I pass it this time! I see you're testing next Friday. Good luck, I know you'll do great!

AUD = 85
FAR = 79
BEC = 79
REG = 65, 72, 75!

I AM DONE!!

[ronster]

Can anyone explain this rule in English…the wording of it is confusing:

For 2014, $2,081,800 unified estate & gift tax credit exempts from gift tax cumulative, nonexcluded gifts having value of $5,340,000.

A credit of 2,081,800 exempts $5,340,000???

AUD: PASS
FAR: PASS
BEC: PASS
REG: PASS

[rzrbkfaith]

Basically the tax on the $5,340,000 would have been $2,081,800. So you can look at it two ways. Either gifts up to $5,340,000 are exempt from tax or you can receive a tax credit for gifts up to $5,340,000 (the amount of the maximum tax credit is $2,081,800). Does that help?

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

[Anonymous]

@rzr do you do progress tests after each chapter?

[ronster]

@rzrbkfaith So tax on a gift of 5,340,000 would have been $2,081,800 but you're getting an exemption for that tax amount? Then what differentiates this from the $14,000 exemption on gifts? In multiple choice, I know I can knock these out, but it's simulations that kill where if you don't fully understand the concept, you're screwed.

AUD: PASS
FAR: PASS
BEC: PASS
REG: PASS

[rzrbkfaith]

@ronster – You can only give $14,000 to each individual each year and it be exempt from tax. So you couldn't gift the full $5,340,000 to one person in one year. But the TOTAL of all those gifts can equal $5,340,000. I believe that is a lifetime limit though. So if you gave $5,340,000, in $14,000 gifts to 381.43 people, then all of your gifts would be tax exempt, but you would have to pay tax on any future gifts, even if they are under $14,000. This isn't something that most people have to worry about but we have a few clients that have run up on their lifetime gift limit.

Most of us have to worry about the $14,000 limit to each individual. So if you gave $16,000 to someone this year, then $2,000 would be taxable to the giver, even though you have the $5M exemption. I hope that I have helped. It can be a little confusing. I think that we basically need to know that $14,000 is the limit for each individual, but that you can give up to $5M in $14,000 individual gifts and it still be tax exempt to the giver.

Don't forget that tuition payments and medical payments made directly to the doctor/hospital do not count toward the $14,000.

@aspiringcpa2014 – yes, although I must confess that I did not do one at the end of R7. But I have at the end of every other chapter, in order to keep ALL the material fresh.

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

[jeff]

Post by Another71.

[ronster]

@rzrbkfaith Thank you! That makes sense much more than Tim Gearty even bothered trying. He just recited the text which was just jargon that doesn't explain the concepts. So just so I have it correct. I'm allowed a total gift tax exemption of up to $5,340,000 on all gifts. But I'm allowed $14,000 exemption per individual. God, if they just said that it'd be so much easier to understand.

AUD: PASS
FAR: PASS
BEC: PASS
REG: PASS

[ronster]

I wish there were two summaries comparing all the different situations for basis' between corporations, shareholders, S Corp, and Partnerships and another summary for all the possible capital gain and loss treatments between individual, corp, and partnerships. I'm a bit scattered with what I know and retain. I'm using Becker and score pretty high on the multiple choice (upper 80s/low 90s) but then will forget them when I'm on another section. Mind you I'm retaking REG next Friday 🙁 I don't want to have a third go at this

AUD: PASS
FAR: PASS
BEC: PASS
REG: PASS

[rzrbkfaith]

@ronster – we are taking the exam the same day!!! You are correct on your summary of gift taxes. 🙂 I will see if I can work on a summary for basis between the different entities. It will be helpful for me too. I can try to post that tonight or Sunday during my review.

As far as capital losses go – those are easy. Basically with your C corps can offset gains and losses (both short term and long term). Individuals can deduct up to $3,000 capital losses greater than capital gains. The remainder is carried forwarded for up to 5 years (can carry back 3 I believe) for Corps, and carried forward (no carryback) indefinitely for individuals. When you apply capital losses to capital gains, you apply them in the following order – first, to the same type, then from the highest taxed (short term) to lowest taxed (long term). Remember that any capital loss carryovers in C corps are considered short term! Okay, so now partnership and S corp capital losses are carried through to the individual partner or shareholder and are reflected on the individual return and are treated under the individual capital gain/loss rules.

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

[Anonymous]

Under which of the following circumstances is trust property with an independent trustee includible in the grantor's gross estate?

A.

The trust is revocable.

Incorrect B.

The trust is established for a minor.

C.

The trustee has the power to distribute trust income.

D.

The income beneficiary disclaims the property, which then passes to the remainderman, the grantor's friend.

You answered B. The correct answer is A.

When a grantor makes a gift and sets up a trust that is revocable, the grantor has maintained too much power and control over the assets. Such a revocable trust must be included in the grantor's gross estate when the grantor dies.

can someone provide a better explanation?

[rzrbkfaith]

Basically if you say “I'm giving you $10,000 to put in an estate, BUT I have the right to take that money out and spend it” then you never really gave it to the estate in the first place. An estate has to be permanent, or irrevocable. It's “here's $10,000 for the estate.” Period. No “ifs” or “buts.” Because in a revocable trust, the person that put the money in the trust to begin with still has rights and power over the money (and can withdraw it) then it is still that person's money, not the trust's money, and therefore must be included in their estate when they die.

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

[ronster]

@rzrbkfaith You're the man! I get the individual capital losses deduction of $3,000 and corps only allowed to offset capital gains. Where it kind of gets hairy is section 1231, 1245, 1250 gains and losses. They are considered capital gains, but with 1245 (machinery & equipment) and 1250 (building) you're allowed to recapture and treat up to the depreciation as ordinary income and any excess as capital gain/loss. I think. Do you think everything you stated on capital losses/gains are the extent of what we should know, if that's permissible to discuss?

AUD: PASS
FAR: PASS
BEC: PASS
REG: PASS

[rzrbkfaith]

Well, I haven't taken this test yet, so I'm only speculating and that is totally permissible! Becker says you only need to know 1231 and not 1245 and 1250. I don't know that for sure. You are taxed at the ordinary rate for any depreciation recapture. It is capital gains after depreciation recapture. Basically if you have a fixed asset that you purchased for $100,000 and you have depreciated $50,000, but are selling for $70,000, you would be taxed at the ordinary rate for $50,000 (section 1231 recapture) and long term capital gains for the remaining $20,000. With a fixed asset, it will always be long term unless they specify that you held the asset less than a year. Remember all losses are ordinary. A sale of 1231 property cannot result in a capital loss, only an ordinary loss.

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

[Mary 2496]

I took reg once and taking it again in a few weeks.

— I would know the basics of 1245 and 1250, in case there's multiple choice questions about them.

[Author]

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