[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

[sonja90]

yes C is correct.

[CPA788]

Anyone using Becker and just get pushed to the new version for REG? I don't expect a huge difference but I hate that all of my MCQ gets wiped. I don't recall getting a breakdown per Becker of what course changes were, anyone know?

Also, why can't I find the spot to update my signature?? Yay for its return! – *UPDATE – jk…. 🙂

BEC - 74, 77
FAR - 72, 71 (retake 7/29)
REG - 69
AUD - Q4 '16

CA Candidate

[Porma Fierles]

Actually I do have an additional question. Why is it that seemingly whenever there is a related party transaction, even if the asset is sold off to an unrelated person, no gain or loss can be recognized? I have seen a few questions like the following, and to my memory they can never claim a gain or loss because at one point the asset was sold to a related party.

Conner purchased 300 shares of Zinco stock for $30,000 in Year 1. On May 23, Year 10, Conner sold all the stock to his daughter, Alice, for $20,000, its then fair market value. Conner realized no other gain or loss during Year 10. On July 26, Year 10, Alice sold the 300 shares of Zinco for $25,000.

What was Alice's recognized gain or loss on her sale?

Correct A.
$0

B.
$5,000 long-term gain

C.
$5,000 short-term loss

D.
$5,000 long-term loss

[jonm857]

A preliminary prospectus, permitted under SEC Regulations, is known as the:

A.

B. Qualified prospectus.

C. “Blue-sky” prospectus.

D. Unaudited prospectus.

Answer, A. Explanation: ‘Nuff said.

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

[sonja90]

There is disallowed loss of 10 which Ailice gets to utilize so she covered her 5k of gain.

[Porma Fierles]

Oh OK. What is a disallowed loss?

[jpowell31]

@porma — what sonja said. they would however recognize a gain if sold to a related party.

@jon A

[jpowell31]

the loss arising from seeling to a related party is disallowed (20-30 = 10k loss). when she sells it, she can use this previously disallowed loss to offset her gain of (25-20 = 5k) to zero

[jpowell31]

Mintee Corp., an accrual-basis calendar-year C corporation, had no corporate shareholders when it liquidated. Mintee Corporation distributed land held as an investment to its shareholders. At the time of the distribution, the land had an adjusted basis to the corporation of $300,000 and a fair market value of $400,000. The land was subject to a liability of $425,000. What is Mintee's gain or loss on the distribution of the land?
A. $0
B. $100,000 gain
C. $100,000 loss
Correct D. $125,000 gain

[sonja90]

loss between related parties not allowed

[jpowell31]

oops i left the answer there..don't want to edit now

[sonja90]

can someone explain shortly at-risk?

[Reg_Slayer]

a call it a “lingering loss” because it lingers until the property is sold to an unrelated party, when it will reduce any gain.

[Porma Fierles]

Thanks all. I will def be back tomorrow.

[jpowell31]

from my notes: The at-risk rules apply to all taxpayers (including partners) and encompass all business and investment activities, with a limited exception for certain types of real estate financing. The at-risk restrictions on deducting partnership losses provide that a partner may deduct his share of a loss from a partnership activity only to the extent to which he is at risk.

A partner may deduct his share of partnership losses subject to three levels of limitations:
• Level 1: Any deductible loss is limited to the adjusted basis of the partner’s interest in the partnership.
• Level 2: If there is enough adjusted basis to deduct a loss, then the partner is only allowed to deduct the amount of loss for which he is at risk.
• Level 3: If there is enough adjusted basis and enough at risk, then the partner applies the passive activity limits.

[Author]

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