[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

[jpowell31]

MISERABLE. about to post a separate thread for indiv tax cheat sheet (really just a bump and combo of others posted in this forum previously). then I'm going to do 100 MCQ.

[Reg_Slayer]

For AMT Individual AMT adjustments, i have:

Medical (10% not 7.5%)

but i don't quite understand how to apply. Normally we can itemize 10% AGI of medical, 7.5% of medical if taxpayer is above 65. So for AMT purposes, the limit is always 10%, so we would only be making an adjustment if the taxpayer had been old and we had used the 7.5% limit???

EDIT: I think I am getting confused in my calculations because Medical is a 10%/7.5% THRESHOLD, not an AGI limit. ?

also:

int on Home Equity (up to 100k) is a normal itemized deduction. It is only adjusted for AMT if NOT used to buy/build/maintain principal residence?

[jpowell31]

from having done this exam back in 2013, the medical expense AGI limit used to be 7.5% i think from what i can remember so there used to be a difference…what materials are you seeing this in and relative date of materials? i've noticed some of the BISK videos being posted are outdated when it comes to these sorts of things, which is tripping me up a bit. otherwise i'm guessing it would only create a difference if the taxpayer is over 65 as you mention.

[Reg_Slayer]

adjustment is only for taxpayers age 65 and over. Can confirm by finding “PANIC TIMME” in 2016 Becker Book.

[jpowell31]

i didn't buy them but when the Ninja MCQ was down i watched a couple since they were free to access and i didn't want to be twiddling my thumbs.

[jpowell31]

ok i don't know if my brain is fried or not but read this question and related explanation:

Porter, the sole shareholder of Preston Corp., transferred property to the corporation as a contribution to capital. Two years later, Corley transferred property to the corporation in exchange for a 10% interest in corporate stock. The property transferred was valued as follows:

Porter’s Transfer Corley’s Transfer
Basis $50,000 $250,000
Fair market value 200,000 500,000

What amount represents the corporation's basis in the property received?
A. $700,000
Correct B. $550,000
C. $450,000
D. $300,000

When property is transferred to a corporation, the basis of any property received is the fair market value (FMV) at the time of the transfer. Porter's transfer two years ago had an FMV of $50,000, but the current FMV does not have an impact on the corporation's basis in the property. The basis in Corley's contribution is the current FMV, and their basis in the property does not affect the corporation's basis. The total basis in property contributed to the corporation is the $50,000 original contribution (FMV) from Porter, plus the $500,000 current contribution (FMV) for Corley, which equals a total of $550,000.

Does that explanation make sense? Why is the $50k FMV – isn't the $50k just adjusted basis? How are we supposed to assume that the $200k is today's FMV and not the FMV at time of contribution? secondly jeff killed it dead in saying property contributed to a corp is the adjusted basis so i don't know why it starts out by saying it's at the FMV, when that is the exception to the rule. I need a better explanation for this in case the way i've been getting this answer right is WRONG and have just been lucky based on the facts of this particular question.

[Reg_Slayer]

you are not alone:
https://www.another71.com/cpa-exam-forum/topic/be-my-hero-explain-this-reg-question/
https://www.another71.com/cpa-exam-forum/topic/corporations-stock-basis-in-contributed-property-still-dont-get-it-help/
https://www.another71.com/cpa-exam-forum/…/please-tell-me-i-am-not-going-crazy

1. Porter transfers in property as “contribution of Capital”. Use 50 basis [also boot recieved]???
2. Corley transfers in property in exchange for a corporate interest. Use 500 FMV.

something about an 80% rule? let me know when you get it.

[jonm857]

@jpowell31

I remember this one!
Corley only got 10% with that contribution, so the 80% rule is not met for him so he recognizes that gain. There's the exception.

However, the question is asking what is the “corporation's” basis. So…

The corporation's basis is computed as:
$50,000 – – – – – Porter's NBV contribution (he was the sole shareholder)
$250,000 – – – – – Corley's NBV
$250,000 – – – – – Corley's recognized gain because he did not get 80% control
$550,000

B - 81
A - 87
R - 73
F - July 5th

[jpowell31]

ok i know the 80% rule so that's how i calculated it…

use Porters adjusted basis (no gain because 100%), $50,000
then use Corley's adjusted basis plus gain he recognized (because he only gets 10%) – his gain is FMV – adjusted basis which does = FMV…. $500,000
Total = $50k+500k = $550,000.

i just think the explanation is wrong or confusing right??

[jpowell31]

oh missed your post @Jon…so i'm understanding it correctly then, right? that explanation had me staring blank for way too long.

[jpowell31]

this one always gets me too. i WANT THIS to show up and give me all the points on my exam lol

Blake, a single individual age 67, had a 2016 adjusted gross income of $60,000 exclusive of Social Security benefits. Blake received Social Security benefits of $8,400 and interest of $1,000 on tax-exempt obligations during 2016. What amount of Social Security benefits is excludable from Blake's 2016 taxable income?
A. $0
B. $4,200
C. $4,700
D. $1,260

[jonm857]

Is the answer D?

B - 81
A - 87
R - 73
F - July 5th

[Anonymous]

The 80% rule is the cumulative of all shareholders that contributed cash or property and they would not record any gain or loss since it is considered an extension of them self. Since both Porter and Corley have control (both together have over 80% ) gain should not be recognized. Thats just my understanding

[Reg_Slayer]

@Jon, yeah i get D.

If AGI is high enough, you must include 85% SS recieved as income.
15% or 1260 of SS received would be excluded.

[jonm857]

@Cpamaster

The way I look at it, Porter still (by himself) has 90% control, so you cannot say that they have a “combined control” of 80%.

It would be different if Corley contributed for a 30% interest. Then you could say Corley's interest (30%) and Porter's interest (70%) is “cumulatively” at least 80%. That is a control group.

B - 81
A - 87
R - 73
F - July 5th

[Author]

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