[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

[mtaylo24]

This redemption question gets me everytime and I've been staring at it for at least 20 mins. Can someone explain where 699 is coming from?

Mr. Oleaner owns 600 shares of the voting stock of Clarkson Corporation. The remaining 350 shares of the voting stock outstanding are held by persons unrelated to Mr. Oleaner. Mr. Oleaner wants a proposed redemption of part of the stock to qualify under IRC Sec. 302(b)(2). What is the maximum number of shares that Mr. Oleaner can own after the redemption to qualify as a sale or an exchange?

A. 300
B. 349
C. 479
D. None of the answers are correct.

Answer (B) is correct.
Sec. 302 determines whether a redemption is considered a distribution equivalent to a dividend or payment for the stock eligible for capital gain or loss treatment. Under Sec. 302(b)(2), a substantially disproportionate redemption qualifies for capital gain or loss treatment. For a redemption to be substantially disproportionate, the shareholder must own less than 50% of all outstanding voting stock immediately after the redemption, and his or her total percentage of ownership must be less than 80% of his or her ownership percentage immediately before the redemption. Mr. Oleaner holds approximately 63% (600 ÷ 950 shares) of the stock before the transfer and, if he holds 349 shares, he meets the 50%-ownership rule (349 ÷ 699 = 49.9%). The second requirement is also met because ownership after the redemption is less than 80% of the percentage ownership immediately before the redemption (80% × 63% = 50.4%; 49.9% < 50.4%). Thus, the redemption is substantially disproportionate and is considered a sale.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[A1lessio]

…I've never seen a redemption question in my life. Test in 3 days!

vorobjeva44 – of course it's enough to pass.

AUD (08/02/2016)

[mtaylo24]

@A1essio, I use Gleim. It is in our C-corp section near liquations and distributions.

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Spartans92]

699 = 349+350. You are trying to find one that gives you close to 50% ownership. Sorry my computer is super slowit takes forever to have the words come out. This topic was hardly covered in becker

BEC- PASS

[mtaylo24]

^^^^Wow! OK, I think that I follow…Is this a question where you have to play with the answer choices? Just to make sure I get this right, we are assuming that the 350 is untouched and we play with the choices to see which is closets to 50%?

AUD - 1st - 60 (12/12), 61 (2/13), 61 (8/13), 78! (11/15)
REG - 55 (2/16) 69 (5/16) Retake(8/16)
BEC - 71(5/16) Retake (9/16)
FAR - (8/16)

[Spartans92]

yep. I would say this question really needs the IRC cuz I don't know what qualifies for sale or exchange but based on the explanation it says less than 50% but both A and b gives you below 50 so I would say go with the closest.

BEC- PASS

[KJ]

I am starting studying for REG today (waiting for AUD score on 11/4). Anyone use/used ten-point combo, how do you best utilize of it? I have used it for AUD and was good. Any suggestions/tips to study would be appreciated?

FAR - August 2016
AUD - September 2016
REG - October 2016
BEC - November 2016

Remember: "Everything should be made as simple as possible, but not simpler." - Albert Einstein

[Spartans92]

So I just had one question on inheritance. Generally, we take the FMV at death unless the alternate valuation date Is elected. In Ninja it said we use that valuation date value as long as it is lower than the value at death..so to confirm if the valuation date value is higher we go with the fmv at death.

On December 1, Year 4, Jim Miller placed in service office furniture (7-year life), which cost $28,000. Jim did not elect Section 179 expensing or bonus depreciation. The office furniture was the only asset purchased during the year. What amount can Jim claim as depreciation under MACRS for Year 4?

For a question like that shouldn't we be given the table?? The explanation had some weird numbers 2/7 * 1.5/12 *28000. No idea, I just googled the MACRS and the factor was given. I'd hate to get this wrong because I need a table.

BEC- PASS

[Spartans92]

Ive done almost all of the REG SIMS on Ninja. Have 20 more to go.. Some of them I get and some I get wrong due to silly math errors. Overall, I feel much more prepared this round and I would not know what to do if I get a 74!! Down to the last 4 days of studying is really stressing me out

BEC- PASS

[NoCoast]

@spartans, for that one, I just think the answer doesn't do a good job of explaining where the numbers come from. I am not 100% sure on the exact rules of MACRS200, but the way I see it they are using 2/7 because straight line would be 1/7, and this is 200%, or double it to 2/7. Then the mid quarter convention is used for (1.5 months) * the cost of the material. Hope this clears it up for you.

FAR: 76
AUD: 75
BEC: 07/16
REG: TBD

[Spartans92]

@nocoast, that does make a little more sense. But how we I know its 200% Double declining.. it doesn't really say in the question? I guess I'm so use to the table that is always given on exam days I dont know what to do without the factors. I get that we use mid quarter (4th quarter). Thanks

BEC- PASS

[A1lessio]

Just took the first Becker practice test after work and I'm pretty happy with the results. I still have three days of studying so that should bump me up a few points (or burn me out). If I divide the total # of question/ #'s correct I got 72%

T 1: 67%
T 2: 75%
T 3: 79%
Sims between 70-80%, except Sim on casualty loss – 40%

Also, I am really struggling with the research questions on REG. On audit I would get it correct almost 100% of the time.

Anyone else take the practice exam?

AUD (08/02/2016)

[Spartans92]

Four years ago, a self-employed taxpayer purchased office furniture for $30,000. During the current tax year, the taxpayer sold the furniture for $37,000. At the time of the sale, the taxpayer's depreciation deductions totaled $20,700. What part of the gain is taxed as long-term capital gain?

A.
$0

B.
$7,000

C.
$20,700

D.
$27,700

BEC- PASS

[A1lessio]

The answer is (B)

a. Sales Price: 37,000
b. Basis 30,000
c. Depreciation (20,700)
d. Adj Basis 9,300 (b-c)

e. Total Gain: $27,700 (a-d)
F. Depreciation recapture (20,700) (c) – This is Section 1245 gain taxed at ordinary rates
Sec 1231 (Capital) $7,000 (e-f)

I really hope this is correct

AUD (08/02/2016)

[Teal]

I am starting in on REG again. I got a 70 last time. I have 3 weeks until the test, but does anyone have any suggestions when you are that close? Is it best to just do tons of questions, or would you re-read the material? It's only been a month or so since I took it last.

FAR (66,68) Aug 26
REG (66) July 25
AUD (66) December 1st
BEC - October 3rd

[Author]

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