[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]

yes. well, you can deduct $5,000 and then amortize the rest over 180 months starting in the month of startup….. which reminds me. i kept seeing that organizational expenses are different from start-up expenses but haven't seen exactly what those differences are…. anyone?

[jonm857]

This one is so easy, but I always take the bait every time. #NeverAgain

———

The articles of organization for a limited liability company must contain everything, except the following:

a. The name of the entity that includes some indication it is a LLC.
b. Number of shares authorized and issued.
c. The name and address of the registered agent.
d. If the company is to be manager managed, a statement to that effect.

Explanation

Choice “b” is correct. Limited liability companies do not issue “shares” held by shareholders like in a corporation. Instead, members (the owners) are said to have “interests” in the LLC.

Choices “a”, “c”, and “d” are incorrect. These are all required to be included in the articles of organization.

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

[jpowell31]

ouf, good example.

[Reg_Slayer]

@jp:
May deduct up to $5,000 of organizational expenditures (reduced by excess of costs over $50,000) and amortize remaining costs over 180 months beginning with the month that business begins. Business investigation and start-up costs (advertising, employee training) are subject to same rule.

@jon:
ah yes. LLCs would not be issuing stock!

[Reg_Slayer]

Can you name the 3 categories for deductions from Hobby Income ?

[jpowell31]

3 categories of deductions??? why are you scaring me. i only know that deductions are allowable only to the extent of the gross income of the activity (misc subject to 2% AGI). Gains are taxable

[Reg_Slayer]

you are probably fine. But this came up in ninja sim #9. I guess use the AL in an emergency?

Hobby deductions are limited to the amount of hobby income of the tax year.

In addition, the deductions are taken in a prioritized order (category 1 is first, category 2 is second, and category 3 is last).

Category 1 deductions are those that a taxpayer can take for personal as well as business activities, such as mortgage interest and property taxes, and are allowed in full.

Category 2 deductions are those that do not result in a basis adjustment such as advertising, insurance premiums, interest, utilities, and wages. Again, these expenses are limited to the amount of income in excess of category 1 deductions.

Category 3 deductions are those that are basis adjustments such as depreciation. More importantly, these expenses are limited to the amount of income in excess of categories 1 and 2 deductions.

[jonm857]

It's like a staircase…

Partnership
Limited Partnership
Limited Liability Partnership
Limited Liability Limited Partnership

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

[jpowell31]

what the bleep…how are those expenses related to hobbies, though? maybe i haven't seen more examples but i do know the notes say it's not business related. how would anything related to hobbies also be a business activity? i'm going to ignore this lol. i'm doing SIMs between Sunday and Monday.

Slayer when do you sit your exam? Are you working and how many exams are you down for now?

[Reg_Slayer]

“part-time job” is “hobby” if income not high enough?

last exam, not yet scheduled. I am not working which is why i am always on here.

[jpowell31]

i GUESS So. a good nugget to have that will likely stick with me now, so thanks. i hope i need it.

ha @jon…good to know i'm not the only one losing my mind right now. i tried to lock my computer with my car key/remote earlier… i think i win (the competition i set up myself).

[jonm857]

I have no idea what these hobby deductions are all about. I really need to put on the tax-hat soon. Hopefully I time it right to where I can spend the last 5 days just pummeling tax. Only 10 days are left.

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

[jpowell31]

those types of things are useless to know because SIMs will always pull out something else completely useless and not studied for. i've got to try and leave 1.5 hours for SIMs this time (i left just over an hour last time) because i need to be able to use that AL!

i hope i've timed this right too. my internet is STILL out at home and that has thrown me for a loop. i'm lucky to have flexible hours while deliverables to clients are met (regardless of if/when i take/pass my exams) but now i'm studying at my desk in an open floor plan…it's hard to be completely focused and also for people to respect the fact that i'm studying. i feel guilty not working as it is so it's easy to get distracted. but i'll be putting in 12 hour days sat-wed. thursday i travel and will probably study about 9 hours. exam is friday. YIIIIIIIKEEEEESSSS BIKKKKESSSS.

[jonm857]

YIKES BIKES INDEED!!!!!!!!!

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

[Reg_Slayer]

yikes bikes sounds like some stupid mnemonic or something.

[Author]

Replies