[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/

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

8 is C – Trusts and Estates – I thought NFPs didn't pay taxes…

[MommyBear]

You're right. 🙁

[Anonymous]

9 – Jared purchases an apartment building on January 1, 2004 for $500,000. The building is depreciated using Modified Accelerated Cost-Recovery System (MACRS) straight-line depreciation. The apartment building is sold on December 31, 2014 for $620,000, when its adjusted tax basis is $320,000 (assume that $180,000 of depreciation has been claimed). How much gain from the sale of the building is subject to the 25% rate?

A. $0

B. $180,000

C. $300,000

D. $320,000

[MommyBear]

9–Ugg C?

[Anonymous]

9 is B $180,000 – Total gain on the sale is $300,000 ($620,000 – $320,000). Gain on the sale of realty is taxed at a 25% rate to the extent of the straight-line depreciation claimed on the asset. (Note that there is no Section 1250 recapture since straight-line depreciation was used for the asset.) The straight-line depreciation was $180,000 so the first $180,000 of gain is taxed at 25%. The remaining gain of $120,000 is taxed as Section 1231 gain.

I get 1231 stuff messed up all the time.

[MommyBear]

Me too. Definitely on my list to review.

[Anonymous]

10 – Farr, 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?

A. $0

B. $ 2,000

C. $11,000

D. $13,000

[MommyBear]

11-Queen paid Pax & Co. to become the surety on a loan which Queen obtained from Squire. The loan is due and Pax wishes to compel Queen to pay Squire. Pax has not made any payments to Squire in its capacity as Queen’s surety. Pax will be most successful if it exercises its right to:

A.reimbursement (indemnification).

B.contribution.

C.exoneration.

D.subrogation.

[MommyBear]

10–C

[Anonymous]

11 – This one is tough – C?

[MommyBear]

Correct!! Exoneration allows the sureties to sue the original debtor to pay the creditor. This will take the liability out of the sureties’ responsibilities.

Remedies of the guarantor or surety include the following:

Defense: Use a defense to avoid payment to the creditor.

Reimbursement or indemnity: Get the principal debtor to pay the guarantor or surety for the amount the guarantor or surety had to pay the creditor.

Subrogation: When the guarantor or surety discharges the principal debtor’s obligation to the creditor, the guarantor or surety gets all the creditor’s rights regarding the obligation.

Contribution: From co-guarantor or co-sureties for paying more than legally obligated.

It does not appear likely that any of these would be successful.

[Anonymous]

Correct! Home Mortgage Loan interest is allowed for AMT. That PANIC TIMME mnemonic is super helpful!

[Tax woman]

Can you guys see me? It's tax lady!

[MommyBear]

Now we can tax woman. So I'm not the only one that keeps getting locked out. Whew. I thought I was flagged for inappropriate conduct or something.

[MommyBear]

12–An employee who has had Social Security tax withheld in an amount greater than the maximum for a par­ticular year may claim:

A. such excess as either a credit or an itemized deduction, at the election of the employee, if that excess resulted from correct withholding by two or more employers.

B. reimbursement of such excess from her/his employers, if that excess resulted from correct withholding by two or more employers.

C. the excess as a credit against income tax, if that excess resulted from correct withholding by two or more employers.

D. the excess as a credit against income tax, if that excess was withheld by one employer.

[Author]

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