[jeff]

Welcome to the Q4 2016 CPA Exam Study Group for REG.

If this is your first post in the study group – please post your target exam date (just the time frame to preserve your anonymity), and your past history with this exam (optional, of course).

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

[Determined24]

Is it still a Contract without term, if the seller change the offer and the buyer does NOT object to it ?

Bagels, Inc., offered to sell 30 dozen bagels to Store Co. for $15.00 per dozen. Store replied in writing that, “we accept your offer for 30 dozen at $15.00 each, dozen defined as baker's dozen (13 bagels per dozen).” Bagels did not object.

[HoosierCPA]

@determined24 In your example I would say they aren't really changing the terms as much as they are clarifying them. In that example yes I believe that's a valid acceptance without changing terms especially since it says they did not object. In other scenarios if the contract is materially changed and the buyer does not object by accepting the goods without rejecting them then that is also a valid contract as well. However sending non conforming goods is viewed as a counter offer and not an acceptance of the original offer. Hope this helps!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Anonymous]

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?

Can someone help me understand this? When these questions call for the itemized deductions, what exactly does that mean. I have memorized the “PANIC TIMME PPP” mnemonic, but still can't seem to get these types of questions correct. Medical expenses keep throwing me off too! Does anyone have any tips or tricks to help me understand how this process is different from “normal” itemized deductions?

[Namstut]

@dtatham. To answer your question regarding the deductible $5k. The threshold is $50k for organization and start up cost. If there is excess then you $5k is reduced for each dollar in excess of $50k.

Didn't go through all of the replies so I don't know if you got your answer.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[HoosierCPA]

@cpa the third so I've been tripped up on a question similar to yours so many times I stopped counting. Basically, the key word to look for with this question is what's STILL a deduction even when calculating AMT.

When looking at the PANIC TIMME mnemonic you predominantly look for the TIMME items (Tax, Interest, Medical, Misc Item 2%, Exemption)– all of these items are ADD BACKS — which means they are not allowable deductions for AMT. So looking back at the question its asking what is still an itemized deduction–you want to find items that are NOT in the mnemonic…misc item deduction of $2k is in the mnemonic so its not a deduction, it's an add back. Home mortgage interest of $11k is an allowable deduction (the interest in TIMME does not cover the home mortgage) so the answer would be $11k is still an allowable deduction even when covering AMT.

Your next question on Medical Expenses for AMT..this tripped me up a thousand times as well. Medical expenses when doing the add backs in AMT are only relevant for those over 65 qualifying for the 7.5% threshold. So if you are 65 and you have AGI of 100K and 20K in medical expenses. At 7.5% threshold you would normally be allowed 12.5K deduction, at the 10% threshold you would be allowed only 10K deduction…for AMT purposes you need to add back the difference between the 7.5% and 10% so in this example you would add back 2.5K (difference between the 12.5K and 10K).

I know this is long winded but I hope it helps!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[Namstut]

It's easy to remember some of the main add backs for the AMT. Think of the main items in your live:

W2 – state tax deduction not allowed
Home – interest on home equity loan (BUT NOT mortgage) not allowed
Car – personal property tax deduction not allowed

All these are adjustments (add backs) for AMT.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Namstut]

@dtatham10, the .08 rate is coming from the table referenced in the question.

Table I – Uniform Premiums for $1,000 of Group-Term Life Insurance Protection
5-year age bracket Cost per $1,000 of protection for one month
Under 25 $0.05
25 to 29 .06
30 to 34 .08
35 to 39 .09
40 to 44 .10
45 to 49 .15
50 to 54 .23
55 to 59 .43
60 to 64 .66
65 to 69 1.27
70 and above 2.06

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Namstut]

@JMG,

I think “D” is the correct answer. The vendor shipped nonconforming goods, that is a breach of contract since he did not notify the buyer in advance that 100 nonconforming items were being shipped.

D. Handy’s order can only be accepted by Ram shipping conforming goods.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Namstut]

@Determined24

Bagels, Inc., offered to sell 30 dozen bagels to Store Co. for $15.00 per dozen. Store replied in writing that, “we accept your offer for 30 dozen at $15.00 each, dozen defined as baker’s dozen (13 bagels per dozen).” Bagels did not object.

Under the Sales Article of the UCC (applies to purchase of goods) mirror image rule does not apply. The new or different terms will be ignored unless the contract is between merchants. Between merchants minor changes can generally be made in the acceptance. So in the example below this is still a valid contract.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Namstut]

If a Business is an S-Corporation the distributions of profits made to the shareholders are not subject to payroll taxes by default. The income earned by the owners (wages, salary, and compensation for services provided by the owners) is subject to payroll taxes.

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[JMG]

@Namstut @dtatham10

I also selected D. as the correct answer as I thought the different sockets constituted nonconforming goods. So I was shocked when the correct answer was A. Ram's shipment was acceptance of Handy's offer. ???? Very little explanation was given so I'm still scratching my head over it.

[HoosierCPA]

@jmg I think it's a trick question. It's an accepted contract followed by a breach of contract. That's my guess at least lol

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[HoosierCPA]

Can someone give me a refresher. I just did a sim on dividend received deductions. I thought if you had a net operating loss for the year that you could not take the DRD however in one of the questions i missed they did included the DRD.

“Calculate the allowed charitable contributions (CC) before the dividends-received deduction (DRD). A corporation cannot deduct CC that exceed 10% of its taxable income for the tax year. In this example the corporation has an operating loss. Therefore, none of the CC will be allowed as a deduction in this year.

The corporation can deduct 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend.

Preliminary Taxable Income $(40,000)
Plus Dividends Received 10,000
Minus DRD ($10,000 × 70%) (7,000)
Total Taxable Income $(37,000)”

So my question is–am I making this rule up or is there some truth to it but it just doesn't apply to this situation for whatever reason?????

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[RE2PECT]

I just did the 2016 AICPA released questions and now I'm a little worried since my exam is on Saturday. I only got 60% correct on the hard ones and a bunch of the questions seemed foreign and weren't addressed in any of the Ninja or Roger mcq's. I crushed the medium ones and got a 95% on those so that made me feel a little better.

Here's a couple of the harder ones that tripped me up. None of them have explanations so I can't figure out how they got these answers.

An individual is a 50% partner who materially participates in Stone Partnership. The individual’s adjusted
basis at the beginning of the year was $0. Stone had a $70,000 loss from its business. Stone borrowed
$30,000 from a bank of which $20,000 remained unpaid at year end. What amount of loss is the
individual allowed in the current year from Stone?
A. $35,000
B. $15,000
C. $10,000
D. $0

Filler-Up is an accrual-basis calendar-year C corporation. Filler-Up uses an allowance method for
accounting for bad debts. The allowance for bad debts was $20,000 at the beginning of the year and
$30,000 at the end of the year. During the year, Filler-Up wrote off $5,000 of uncollectible receivables and
accrued an additional $15,000 of expenses for accounts estimated to be uncollectible.

What is the Schedule M-1 adjustment on Filler-Up's federal income tax return?
A. $10,000 decrease in taxable income.
B. $10,000 increase in taxable income.
C. $5,000 decrease in taxable income.
D. $5,000 increase in taxable income.

On year 1, Janice had the following transactions in Jacky, Inc. common stock:
Shares Price
Jan. 01 – Purchase 500 $25
May 12 – Sale 500 $23
May 28 – Purchase 250 $22
Oct 15 – Sale 100 $18

What is Janice's deductible capital loss?
A. $400
B. $700
C. $1,100
D. $1,400

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[LIZZ]

@RE2PECT

those are tricky questions. I know i saw the 1st on in Ninja I cant find my notes but maybe you can search for it and find the answer explanations.

FAR - 05/2015
AUD - 75,11/2014
REG - 07/2015
BEC - 09/2015

[Author]

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