[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

[jonm857]

@sonja

is the answer A?

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

[sonja90]

No it's C 🙁

It confuses me each time when there is C-corp conversion to S-corp

[jonm857]

Can you share the explanation

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

[sonja90]

@john
this is ninja explanation which i don't get it

S corporation distributions are (1) tax-free to the extent of the accumulated adjustments account (previously taxed to Paul), (2) taxable to the extent of accumulated earnings and profits (C corporation earnings), (3) any remaining distributions are a return of capital.

[sonja90]

Actually i just did with another question. When you convert to S-corp E&P are taxable. The other 9 of distribution is covered with 8 of AAA and S/H basis of 20

[jpowell31]

@sonja – Ninja 10 point combo. for my retake i've read the becker book and have the final review that i'll flick through the day before (although i've already done all the questions in it)

is your answer C? sorry my stuff seems to take longer than others to load.

[sonja90]

Paul Pappas owns all of the stock of an S corporation which had previously been a C corporation. The S corporation had the following balances at the beginning of its tax year:

Accumulated adjustments account $ 8,000
Accumulated earnings and profits 10,000

Paul's stock basis was $20,000 at the beginning of the tax year. The S corporation made a distribution of $19,000 to Paul during the year. What is Paul's stock basis at the end of the year?

A.
$1,000

B.
$2,000

C.
$11,000

D.
$12,000

[jonm857]

What is the math you used to arrive at C? Can you break it down for me.

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

[jpowell31]

and you're right sonja on the years 🙂

[jpowell31]

the distribution is $19k. bring down AAA first of $8k (non-taxable) then E&P which is taxable (19-8 = $11k available) $10k. orrr the other way around…the $1k Remainder is a return of capital.

[sonja90]

[jpowell31]

i shared that second example a week or so ago so i know that answer is C) $11k lol

[jpowell31]

AAA reductions and return of capital reduce basis so $20k – 8k – 1k = $11k

[sonja90]

return of capital in S-corp is taxable i thought? it's not taxable in C-corp someone correct me 😀 #confused

[jpowell31]

keeping it simple as it's easier to forget these tiny things closer to the test and we're focusing on calcs. (but please keep sharing them!!!)

how much UBI can a charity have without being taxed on it?

[Author]

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