[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

[Reg_Slayer]

AEP: 61
CEP: 24
total: 85

distribution 1 = 58
distribution 2 = 33
total = 91

distribution 2:
EXCESS distribution: 91 – 85 = 6 ✓
to CEP: 24 * (33/91) = 8.703 ✓
to AEP: 33 – 8.703 -6 = 18.297 ✓

so it makes sense to calculate the amount of the distribution allocated to A.E.P. LAST, because you must use your other answers to get this FINAL answer.

[SONA]

I completely disagree with step no 4. The formula is : 25000-50%(agi-100000)
Confused with step 2 Do we really calculate modified AGI for Step 4.

Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?
Incorrect A.

$0
B.

$15,000
C.

$25,000
D.

$35,000
You answered A. The correct answer is B.

Individuals may offset up to $25,000 ($50,000 if married filing jointly) of ordinary income with rental real estate activities. This deductible loss is reduced (but not below zero) by 50% of the amount by which the modified adjusted gross income of the taxpayer for the year exceeds $100,000.

First, the passive activities were netted $15,000 from the S corporation – $35,000 from the rental = $(20,000).
Second, the salary of $160,000 is decreased by the net $20,000 passive activity loss for a modified AGI before limitation of $140,000.
Third, the amount of $140,000 that exceeds $100,000 is multiplied by 50%, equaling $20,000.
Fourth, the rental loss of $35,000 is decreased by the $20,000 limitation, leaving an allowable deduction of $15,000.

[Reg_Slayer]

@SONA

I got 15, simply by remembering that Passive Losses can only be deucted to the extent of Passive Income.

[The.Underdog]

Quic Q on the SIMS part of reg will the research give us the rules for things like above (the limit of rental passive losses and you can deduct up to 25K

FAR - 86
AUD - 93
REG - 8/31/16
BEC -84

[Reg_Slayer]

@The.Underdog
it's available. But i think you will burn to much time if you dry to decipher the IRC during your exam

UNRELATED:

distributed to s/h * [(aep+cep)/all distributions by c-corp)
=
s/h's dividend income

EXCESS DISTRIBUTION is what gets allocated between return of capital, and capital gain.

[tjy49]

Has anyone used the REG Ninja Plus videos? If so, what did you think?

FAR-69, 65, 84 (Feb. 2016)
AUD-86 (May 2016)
BEC-TBD (Aug. 2016)
REG-TBD

Gleim didn't work for me, but Ninja did!

[jpowell31]

Good luck this week, guys!

[jonm857]

thanks. tomorrow is the big day. tonight is the long night.

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

[sonja90]

@SONA and @regslayer

Correct answer is correct because that was to the extent of their passive gains as regslayer said. However if they did not have any of those passive income they will not be able to deduct anything.

NINJA explanation is not very good for this example.
Also there is no 50k for MFJ (bellow is taken from IRS website) limit is 25k for single and MFJ and that's to extent of 100kMAGI. As you can see from bellow it's completely phased out at 150MAGI which is the case with your question.

Maximum special allowance. The maximum special allowance is:
$25,000 for single individuals and married individuals filing a joint return for the tax year,

$12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and

$25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified.
If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI.
Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance.

[jonm857]

Do liabilities increase an S-corp shareholder's basis or is that just for partnerships??

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

[jonm857]

Edit: that's just for partnerships.

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

[jonm857]

Need some help… how do you compute a partnership's basis at formation??

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

[SONA]

@jonm857

Liabilities only increase partner's basis. S corp and C corp rules are different for Basis calculations.

Partner's Basis
Cash
+Adjusted Basis of property contributed
– liabilities transferred
+ Partner's % of liability not assumed by other partners
= Partner's Basis

[Reg_Slayer]

would a liability assumed by the c-corp from property contributed by shareholder “A” have any effect on the BASIS of shareholder “B” ?

[jonm857]

@SONA

What about the partnership's basis? What formula do you use for that?

@Reg_slayer

No, that should not have any impact on Shareholder B.

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

[Author]

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