[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

[Namstut]

@dtatham10 – your question regarding inherited property.

He inherited the property, and the inherited property is transferred to the beneficiary at FMV. He sold below the FMV, therefore, it's a loss from the transaction perspective.

But in actuality he walked away with $396k in his pocket, oh and a loss he gets to take on his tax return 😉

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

[MAHMOUD]

what's up everyone,
so my REG exam is on DEC. the 10'th and I just finish 4 chapters “Reading” I did not solve any questions yet, and still have 2 chapters to go ?? and not sure if I can make it “12 days left”
I need your advise guys.

[Namstut]

@MahmoudAnabtawi are you studying full time for the next 12 days? What study materials do you use? It all depends on how you learn and how you retain. I could never pull it off – I am putting 7 weeks into REG but I work full time and have kids, so it's different for everyone.
But good luck to you! Can't wait to hear how you did!

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

[LIZZ]

@mahmoudanabtawi

Ninja MCQ till your eyes bleed and listen to the last 4 chapters in Becker in your “down” time. There are 1800 questions in Ninja MCQ software do about 500 to find your weak areas and then go back and study those topics.

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

[HoosierCPA]

On December 1, Year 4, 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 Year 4?

A.$1,000 — CORRECT

B.$2,000

C.$4,000

D.$7,000

Explanation:

“First-year depreciation under MACRS is based on double declining balance. A 7-year life would yield depreciation of 2/7 the first year. Because the purchase was made in December, the mid-quarter convention is used and 1-1/2 months of depreciation is recorded. Depreciation is $1,000 ($28,000 × 2/7 × 1.5/12).”

Could someone explain this in another way, I just can't seem to grasp it…why 2/7ths??? I would think it would be more like (28,000 / (7*12) * 1.5)…however that only gets me to $500.

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

[HoosierCPA]

If nobody has noticed I tend to post in spurts. Here is another one:

Murry created a $1,000,000 trust that provided his brother with an income interest for 10 years, after which the remainder interest passes to Murry's sister. Murry retained the power to revoke the remainder interest at any time. The income interest was valued at $600,000.

The income interest:

A.is a gift of present interest. — CORRECT

B.is a gift of a future interest.

C.is not a completed gift.

D.is a present gift to the brother and a future gift to the sister.

How come D isn't correct?

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

[Namstut]

Depreciation – the problem states that he is using MACRS, under MACRS a double depreciation is taken in the first year, so you have 2 years out of 7 times 1.5 months out of a year.

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

[Namstut]

Income interest – the difference between the present income interest and the future income interest is that the present interest has mandatory payments and a future income interest is retained by the trust and is paid at some future time at the discretion of a trustee.

In your question interrst will be paid to a sister for 10 years and then payments will be transferred to her brother, which indicates that there are regular payouts making it a present interest.

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

[HoosierCPA]

Namstut, I'm reading it a little different. It sounds to me like it's paying the brother for the first 10 years THEN the interest is transferred to the sister. Since payments are made immediately to whomever, bro or sis, does that mean its a present interest gift? Is it possible to have both a present interest and future interest?

Thanks for the MACRS explanation–there are a handful of categories that I get to that automatically tie my brain in a knot and MACRS is definitely one of them!

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

[HoosierCPA]

Which of the following is correct concerning payments received on an inherited installment obligation?

A.It is taxable to the beneficiary at the same gross profit percentage used by the decedent. — CORRECT

B.It is taxable only to the estate.

C.It is taxable to the beneficiary and the estate upon receipt of the inherited obligation.

D.It is taxable to the estate in total upon receipt of the last installment payment.

This goes back to some of my prior questions about inheritance. Inheritance is typically a tax free collect from the recipient but in terms of installment all of a sudden they become taxable? Why doesn't the estate take on the tax like?

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

[HoosierCPA]

Namstut, ignore my present future interest question. I believe I have finally wrapped my brain around it.

What I was missing was REMAINDER INTEREST vs the INTEREST INCOME…the remainder interest is an uncompleted gift whereas the interest income of 600k is a present interest.

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

[HoosierCPA]

Jane and Jill are equal members in Duck, an LLC. Duck has elected not to be treated as an LLC. Duck has not elected to be taxed as a corporation. What is Duck not electing to do?

Select an answer:
A. Duck is electing to not be classified as a partnership.

B. Duck is electing to not enter income on a Form 1040.

C. Duck is electing to not be treated as an LLC or a corporation for federal tax purposes.

D.Duck is electing to not be taxed as an individual.

Can this go down as the most poorly worded question of all time? All those damn double negatives just confuse me. I still can't make sense of it.

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

[Namstut]

@dtatham10 – This one is twisted! I had to google, it looks like this one was already discussed earlier this year. I am not sure I am convinced that “C” is the answer.

https://www.another71.com/cpa-exam-forum/topic/reg-study-group-q2-2016/page/43/

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

[Namstut]

@dtatham10, I found something that might explain why the installment payment is taxable to the beneficiary of the inherited obligation.

For a beneficiary who is not the obligor, the decedent's estate is not charged with inclusion of the potential income from installment sale obligations as a result of distribution of the obligation that was entered into before the death of the decedent as seller. The income tax basis of the obligation in the hands of the beneficiary is the decedent's basis, adjusted for installments received by the estate (and the decedent) before distribution to the beneficiary. The beneficiary continues to report payments in the same manner as the decedent would have done had the decedent survived.

So if I understand this correctly, the value of future installments was not included in the distributed inheritance, therefore, any future collections should be taxable.

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

[debitcash]

Taylor, an unmarried taxpayer, had $90,000 in adjusted gross income for the current year. During the year, Taylor donated land to a church and made no other contributions. Taylor purchased the land 10 years ago as an investment for $14,000. The land's fair market value was $25,000 on the day of the donation. What is the maximum amount of charitable contribution that Taylor may deduct as an itemized deduction for the land donation for the current year?

A.
$25,000

B.
$14,000

C.
$11,000

D.
$0

Correct answer is A
I chose B — I get that its a LT asset but its not related to the church's activities per se, so why would it not be taken at NBV instead of FMV?

FAR:75!
AUD:69, 63, 73, TBD
BEC:76!
REG:71, TBD

BECKER + NINJA PRODUCTS

keep your cool

[Author]

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