[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]

If a donor buys property with his or her own funds and the title to such property is held by the donor and the donee as joint tenants with right of survivorship and if either the donor or the donee may give up those rights by severing his or her interest, the donor has made a gift to the donee in the amount of half the value of the property.
If the donor creates a joint bank account for himself or herself and the donee (or a similar kind of ownership by which (s)he can get back the entire fund without the donee’s consent), the donor has made a gift to the donee when the donee draws on the account for his or her own benefit. The amount of the gift is the amount that the donee took out without any obligation to repay the donor. If the donor buys a U.S. savings bond registered as payable to himself, herself or the donee, there is a gift to the donee when (s)he cashes the bond without any obligation to account to the donor. Therefore, Sadie’s gross amount of gifts given is $80,000 ($75,000 + $5,000).

[jpowell31]

wait a minute i haven't seen that community crap before :(…where is that $5k nonsense coming from??

[jonm857]

why do you add $5,000?

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

[jpowell31]

RR Trust had a long-term capital gain of $3,000 (allocated to corpus), taxable interest of $2,000 and nontaxable interest of $2,000. The trustee's fee was $400. The trust distributed $1,600 to beneficiaries. RR Trust is a simple trust. The trust's taxable income is:
A.

$0.
B.

$3,000.
C.

$4,000.
D.

$3,700.

[jonm857]

A?

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

[sonja90]

hahahhah my reaction too 🙂 i just won't bother for that rule.

[jonm857]

An individual's losses on transactions entered into for personal purposes are deductible only if:

a. The losses do not exceed $3,000 ($6,000 on a joint return).

b. The losses qualify as casualty or theft losses.

c. The losses can be characterized as hobby losses.

d. No part of the transactions was entered into for profit.

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

[luisitotx]

I think you add the 5k because it was the amount the daughter withdrew as per sonja90 Q solution

AUD-82
BEC-Sept 4
REG-TBD
FAR-TBD

[jonm857]

This might sound like a dumb question, but……

If you buy 2 tickets at a charity event for $100 and the total ticket FMV is $50, that leaves you with a deductible contribution of $50. That's considered a cash contribution (not property), right?

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

[sonja90]

you right cash contribution

[jpowell31]

the answer to mine was D (and is why i need more estate and trust examples!! lol):

Simple trusts (1) distribute all trust income ($1,600 in this question), (2) do not deduct charitable contributions, and (3) do not distribute trust principal. In addition, a personal exemption is allowed of $300 for a trust that is required to distribute all of its income currently (i.e., simple trusts).

According to IRC Section 265, expenses that are not related to a particular type of income (indirect expenses) must be allocated proportionately between taxable and nontaxable income. The trustee fee allocation is ($2,000 ÷ $4,000) × $400 = $200. The numerator of $2,000 is the nontaxable income and the $4,000 denominator is the total income included in trust accounting income and excludes income allocated to corpus. Also, the denominator includes gross income (if the amount is given), such as gross rental income, and not net rental income.

The same allocation applies to the deduction for distributions to beneficiaries (IRC Section 662). Since the beneficiaries received $1,600, it is assumed that half ($2,000 ÷ $4,000) of the distribution or $800 is from nontaxable income. The trust gets a deduction for the amount that the beneficiaries include in income.

The trust's taxable income is computed as follows:

Capital gain $ 3,000
Taxable interest 2,000
Trustee fee (1/2) – 200
Distribution (1/2) – 800
Exemption – 300
Taxable income $ 3,700
=======

[jpowell31]

yes to your question of cash. was your other answer for theft?

[jonm857]

yes, casualty or theft

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

[Reg_Slayer]

@jon

yeah, cash, so 50% AGI limit ?

[Anonymous]

You guys are blowing up this topic!

I was going to start at the beginning once I finished 4 or 5 chapters in REG so that I understood more of the discussion, but whenever I log into another71, you guys have added like 50 more posts! Not sure if I am excited that there is so much activity (I mean, it is hard to get good participation sometimes) or scared that there is so much to cover.

I hope to add to the discussion, but I may run out of time. But I did want to post at least once and say hello!

[Author]

Replies