[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).

[demarcon]

@Hasy You use the ordinary income for the year to increase the Accumulated Adjustments Account. The account becomes $250,000 and AAA is NOT taxable. It was already taxed when the income was earned by the S-corporation.

The only part of that problem that is a taxable dividend is AEP. The steps for distributions in an S-corp that used to be a C-corp are:

1) Accumulated Adjustment Account – Not taxable
2) Accumulated Earnings and Profits – Taxable as dividend
3) Return of basis – Not taxable
4) Anything over and above basis is a Capital Gain.

So $310,000-$250,000 = $60,000 which is left to go against the $90,000 in AEP. You will have a taxable dividend of $60,000 and $30,000 remaining in AEP.

[Anonymous]

AUD-79
REG-12/9/2016
FAR-1/27/2017
BEC-Not Scheduled

In Sim 1 of Regulation 3 of Becker there is an answer explanation to a problem where you are required to calculate the corporate tax basis of the contributed property.

This specific problem is not a case where using the higher assumed debt as the basis is done. Becker provides this explanation, “The rule that allows a corporation to take a higher amount of liability assumed as the basis is a special rule that only applies if the shareholder recognizes gain due to liabilities being in excess of basis of all property contributed.”

From this explanation I understand the it’s only used when the debt exceeds the basis of ALL property contributed (cash etc.). I’m simply trying to understand when exactly when the assumed debt should be used as the basis instead of carryover NBV plus any recognized gain by SH. I appreciate any guidance you can give me.

[JMG]

Handy and Ram strike again!

On May 2, Handy Hardware sent Ram Industries a signed purchase order that stated, in part, as follows:

• Ship for May 8 delivery 300 Model A-X socket sets at current dealer price. Terms 2/10/net 30.

Ram received Handy's purchase order on May 4. On May 5, Ram discovered that it had only 200 Model A-X socket sets and 100 Model W-Z socket sets in stock. Ram shipped the Model A-X and Model W-Z sets to Handy without any explanation concerning the shipment. The socket sets were received by Handy on May 8.
Assuming that a contract exists between Handy and Ram, which of the following implied warranties would result?
I. Implied warranty of merchantability
II. Implied warranty of fitness for a particular purpose
III. Implied warranty of title

A. I only
B. III only
C. I and III only
D. I, II, and III

I was left a bit confused by the correct answer, so I'd like to know what others think.

[hasy]

@demarcon

Man, I love this forum. We ALL know who's going to set the curve!! 😀

Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved - Helen Keller

-

BEC 80 (10/23/15)
FAR 72 (4/2/15); 83 (7/11/16)
REG 52 (4/28/15)
AUD (9/9/16)

Roger + NINJA MCQ + WTB

[Anonymous]

Edit ninja

[alialzoubi]

Hi everyone

My exam will be on 8 Dec , please if completed the Reg exam during Nov or Dec let me know what are the simulation questions were. and what the area the the examiner focus on

Thanks
Ali Alzoubi

[HoosierCPA]

You guys may not be able to understand this without the full context of the SIM but don't these 2 statements sound like they conflict?

“The risk of loss for the 100 cabinets remained with Grand. In shipment contracts, the risk of loss for the goods passes to the buyer when the seller delivers the goods to the carrier. However, if the goods are nonconforming to such an extent that the buyer has the right to reject them, the risk of loss does not pass to the buyer until cure or acceptance. Even if the seller’s shipment of nonconforming goods is an accommodation, it is still a breach, and the seller retains the risk of loss for the entire shipment.”

“Had the cabinets been delivered, title would have transferred on delivery to the carrier. In a shipment contract, unless agreed otherwise, title passes when the seller completes the physical delivery of the goods to the carrier. This rule applies regardless of whether the goods are conforming. A rejection or a justified revocation of acceptance will then revest title in the seller (UCC 2-401).”

So when shipping non-conforming goods on a FOB Shipping Point contract does title transfer when delivered to the carrier or when the buyer has inspected it? The first statement sounds like after inspection then the 2nd statement sounds like it's transfer at shipping point regardless if they are conforming or not.

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

[JMG]

@dtatham10 I think the point here is that goods are not considered nonconforming until the buyer rejects them, so title resides with the buyer until the actual rejection of goods. At which point title returns to the seller until cure or acceptance.

[jeff]

[HoosierCPA]

@JMG alright I will probably go with that…this statement below is what seems to conflict with your statement though.

” However, if the goods are nonconforming to such an extent that the buyer has the right to reject them, the risk of loss does not pass to the buyer until cure or acceptance. Even if the seller’s shipment of nonconforming goods is an accommodation, it is still a breach, and the seller retains the risk of loss for the entire shipment”

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

[JMG]

@dtatham10 Oh I see, it's that last part about the accommodation that contradicts things. Maybe it's because with an accommodation the seller has knowledge of nonconforming goods prior to shipment?

[demarcon]

@dtatham10

You are confusing transfer of TITLE and the transfer of RISK OF LOSS. If the seller ships non-conforming goods in a shipment contract the TITLE transfers to the buyer. This means that the buyer can determine if they want to accept the non-conforming goods or not, if they don't the TITLE reverts back to the seller. If the seller ships non conforming goods the Risk of Loss stays with the seller the whole way. This means that if something happens to non-conforming goods during shipment it's the seller's problem, not the buyer's.

[HoosierCPA]

Ahhh ok. Need to pay attention to every word! Thanks!

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

[Namstut]

@Jeff-Another71.com the answer is D.

The guarantor's obligation is secondary (unlike surety's, whose is primary), therefore, Towns, Inc must make attempts to enforce the note against Pepper first before going after the guarantors.

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

[FARISFUN]

I just had a quick question with the authoritative literature for REG in Becker. when you click on the subtitle, it says wrong path below it rather than opening up other folders. Then it says this: The document you are looking for is not in this folder or any other subsequent folder. Please note this, this reminder will not appear on the exam.

Does this simply mean that on the actual exam they do not ask for you to find the answer in these given subtitles?

[Author]

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