[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

[MommyBear]

You're not losing it Zubairs. We all picked C. It's just a tricky one.

[MommyBear]

A

[Anonymous]

I really wish I could Hiya – I agree – those tricky ones get me. I'm trying to read through the explanations and copy/paste them so that I can review later.

[Anonymous]

It's C – A computer qualifies as listed property, and MACRS accelerated depreciation can be claimed for listed property only if the business use of the asset exceeds 50% of the total use. Since Kaitlin's business use is 45%, she does not meet the 50% test and must use straight-line (ADS) depreciation. However, she can depreciate both the business and investment use of the asset, so 75% of the asset's basis qualifies to be depreciated.

[MommyBear]

Dang–I was unsure about adding the investment use. Good to know!

[MommyBear]

5–Ridge Corp., a calendar-year C corporation, made a nonliquidating cash distribution to its shareholders of $1 million with respect to its stock. At that time, Ridge's current and accumulated earnings and profits totaled $750,000 and its total paid-in capital for tax purposes was $10 million. Ridge had no corporate shareholders. Ridge's cash distribution:

was taxable as $750,000 in ordinary dividend income to its shareholders.

reduced its shareholders' adjusted bases in Ridge stock by $250,000.

1 only

2 only

both

neither

[Anonymous]

6–The results of UNA Corporation's first six years of operations are presented below.

Year Results of Operations.

1 Section 1231 losses of $50,000.

2 Section 1231 losses of $30,000.

3 Section 1231 gains of $75,000

4 Section 1231 losses of $20,000

5 Section 1231 losses of $30,000

6 Section 1231 gain of $80,000

UNA corporation's year-six Section 1231 gain can best be characterized as

A. $80,000 Section 1231 gain.

B. $50,000 ordinary income; $30,000 Section 1231 gain.

C. $80,000 ordinary income.

D. $55,000 ordinary income; $25,000 Sec. 1231 gain.

[CPAfit]

@mommy C. both

[Anonymous]

5 – C – Both

[MommyBear]

YEP! C!

[Anonymous]

HOORAY!!!

[CPAfit]

@bucky A. $80,000 Section 1231 gain.

[MommyBear]

6-D

[Anonymous]

D is correct – The lookback provision states that the net Section 1231 gains must be offset by net Section 1231 losses from the five preceding tax years that have not previously been recaptured. To the extent of these losses, the net Section 1231 gain is treated as ordinary income. The $75,000 gain in Year 3 was recaptured as ordinary income by $50,000 of the Year 1 loss and $25,000 of the Year 2 loss. Note that $5,000 of the Year 2 loss remains unrecaptured. The $80,000 gain is recaptured as ordinary income to the extent of the $5,000 remaining Year 2 loss, $20,000 Year 4 loss, and $30,000 Year 5 loss for a total of $55,000. The remaining $25,000 gain is treated as a Sec. 1231 gain.

[MommyBear]

Thank goodness. I think that is the first 1231/1245/1250 question I got right. Hate those things.

[Author]

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