[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).

[Anonymous]

@demarcon Thank you, I understand that explanation. I was just wondering if only looking at Partner B, isn't it technically a wash because of business expense deduction for the guaranteed payment (lowering tax) and then reporting guaranteed payment as separate income (increasing tax).

While working a SIM in Becker on the topic of partnerships I ran into this issue. The goal of the problem was to calculate partner's A tax basis. There are 2 equal partners, A and B, and the problem lists a guaranteed payment as being made to Partner B of $10,000. The answer to the problem says that the $10,000 of guaranteed payment to B will not affect basis of A, rather only the basis of B. I understand that guaranteed payments do not directly affect basis, however, I would say that $5,000 of the partner would affect the basis of A as ordinary business net income (loss) affects the basis of A. Could you offer any advice on this problem? Thanks much

[demarcon]

No, that's not right. The capital loss is taken after any distributions on the K-1. He has a $26,000 basis, received $30,000 in cash. $4000 gain from that. The $3000 loss is disallowed and he can take it when he has more of a basis in the S-corp.

Gains first
Distributions second
Losses third

@carinita

I'm not sure what you're asking. It wouldn't be a wash. The ordinary business income deducts the guaranteed payment before it is split between the partners, so I guess partner A loses $5,000 in basis, but he also isn't being taxed on $5,000. Partner B is being taxed at $5,000 more than he would be if it weren't a guaranteed payment.

[HoosierCPA]

@demarcon you're ridiculous. Congrats on being prepared is all I can say. Go for that 99! lol

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

[RE2PECT]

I think it's safe to say that demarcon is going to crush REG tomorrow lol. Good luck and congrats on the new house!

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

[RE2PECT]

Now I'm gonna go get my ass handed to me by Mr. Gleim smh.

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

[HoosierCPA]

@re2pect Here I am 3 days before my exam asking simple questions and @demarcon can pretty much site the entire IRC lol.

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

[demarcon]

@dtatham10 I had to read that question like 4 times before I remembered the rule. Don't get discouraged lol. That one is a really tricky question.

[Namstut]

@demarcon,

I think this is actually different:

2. RECOGNIZED gain on transfer is to the extent the lesser of boot received or realized gain

3. Corporation’s basis in the property are Basis plus any cash (boot) paid.

It should read “Corporation’s basis in the property are Basis plus any gain recognized by the shareholder”

Changing 3 would cover both 3 and 4 on your list.

Thank you for the correction! Yes, I meant to say RECOGNIZED gain, not realized. Typed in a hurry. It's very similar to a like-kind exchange.

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

[Anonymous]

Thank you for all your assistance @demarcon, good luck on your exam!

[HoosierCPA]

@demarcon I have been so focused on my gleim that tonight I am working 100 ninja quesitions that are my “troubled question” its causing a mini panic attack. I'm probably sitting at 60% right now. To my defense Ninja has a TON of ridiculous questions like “whats the oldest legislative branch”–who cares should be the answer lol. Or there 10 billion questions on trusts. However, the questions that I miss and find relevant I have been going immediately here to take advantage of all the help!

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

[demarcon]

“whats the oldest legislative branch” House of ways and means? 😉

[Sticky Nicky]

def gunna get my ass handed to me tomm,,,i think its safe to say that I played too much MW remastered this past month

[HoosierCPA]

@demarcon thank you! I know that one by heart which should take me far on this exam! NOT. For some reason even though I've answered it correct probably 9 out of 10 times but they still love to put it in “troubled questions”

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

[HoosierCPA]

In April, A and B formed X Corp. A contributed $50,000 cash and B contributed land worth $70,000 (with an adjusted basis of $40,000). B also received $20,000 cash from the corporation. A and B each received 50% of the corporation's stock. What is the tax basis of the land to X Corp.?

A.$40,000

B.$50,000

C.$60,000 — CORRECT

D.$70,000

OK got all excited thinking I was going to apply my new found knowledge on the formation of a corp and whomp whomp. So less then 80% shareholder I thought you took on the FMV as the basis? On top of that, I don't see how the 20k in cash goes towards the basis in the “land”. Ninja says its the 40k basis in the land + 20k in cash.

**EDIT, I just realized the cash was received by the shareholder, not given**

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

[demarcon]

It only counts as less than 80% ownership if there are services involved. The TOTAL ownership received by people who contributed cash and property need to be greater than or equal to 80%. So if 10 people each get 8% and they gave property to get the stock it's not taxable and it's c/o basis and holding period.

[Author]

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