[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

[Spartans92]

Hey guys, need some help on Ninja SIM #36.
For the “other deduction” Line 26 the explanation states that we multiply the org cost and start up cost by 12 months. My question is why do we do 12 months and not 2 since the company didnt start until November and ended in Dec.

Thanks! I really appreciate the help.

BEC- PASS

[Spartans92]

in case others dont have ninja SIMS. This was the explanation. Start up cost 60,000 /180 x 12 months = 4000. Org cost 50,000 – 5000 / 180 x 12 = 3000.

Note: the company commenced in november 1 year 4 and year ended dec. 31 year 4. Why multiply 12 months and not 2?

BEC- PASS

[GinjaNinja]

I compiled all of the numerical amounts for individual taxation (from Roger & Ninja Notes). Just thought I would share with those who are also studying for REG.

Individual Taxation:

0:
-Amount of net capital loss corporations can deduct
-Amount of active rental loss that is deductible if income is over $150,000
-Number of years charitable contributions, net capital losses, investment interest, net passive losses, and net gambling losses can be carried back

0.50%:
-Penalty percentage per month for late tax payment

1.45%:
-Medicare tax rate

3.80%:
-Percent of surtax on unearned income
-SE tax rate for individual taxpayers earning in excess of threshold levels:
-MFJ – $250,000, MFS – $125,000, Others – $200,000

6.20%:
-Social security tax rate

7.50%
-Percentage of AGI (must exceed) required to withdrawal from either types of IRA prior to age 59.5 to without penalty for medical expenses (> 65 years old)
-Percentage of AGI (must exceed) required to be able to deduct medical expenses for 65+ years old

15.30%:
-Self-employment tax on net profit

20%:
-Penalty percentage of tax underpayment for accuracy-related tax return attributable to negligence or disregard of rules

40%:
-Minimum percentage of purchases made in the 4th quarter requiring mid-quarter convention

85%:
-Percentage of Social Security benefits considered income if taxpayer earns about $60,000 or more

2:
-Percentage of AGI to deduct business expenses of employee, investment expenses, tax preparation fees, and attorney fees (must exceed)
-Maximum number of years since death of spouse that taxpayer (with dependent child) can be considered a qualifying widow
-Maximum number of years after tax payment to claim a refund
-Maximum number of years of post-secondary school that American Opportunity Credit (Home Credit) is allowed”

3:
-Net capital loss carryback years for corporations
-Number of years farmers can elect to average farm income
-Number of years after original due date or actual filing date for statute of limitations if caused by error or simple negligence
-Maximum number of years after the original tax return was due (including extensions) to claim refund

4:
-Maximum amount per promotional item that is deductible (business expense)
-Maximum number of years of post-secondary school that lifetime learning credit is allowed

5:
-Penalty percentage per month for late filing or not filing
-Net capital loss carryforward years for corporations
-Number of years contributions of property may be carried forward if contribution exceeds 50% of AGI
-Number of years contributions of property may be carried forward if contribution exceeds 10% of ATI for a corporation
-Number of months student must be in school during the year to be considered a full time student
-Adoption credit carryforward years

6:
-Number of months of extension for filing
-Minimum number of months a child must live with the taxpayer during the year to be considered a qualifying child (must exceed)
-Minimum number of months a taxpayer must maintain his/her home as a principal place of residence during the year in order to be considered head of household
-Percentage of costs a taxpayer must pay to maintain a household for either a qualifying relative/child or parent (who is a dependent) in order to be considered head of household (must exceed)
-Number of years after original due date or actual filing date for statute of limitations if caused by gross negligence or 25% or more of income not included in tax return (understated income)

10:
-Percentage of activity considered to be “”active”” partipation in rental activity
-Percentage of penalty for withdrawing from either type of IRA prior to age 59.5
-Federal penalty percentage if funds are withdrawn from Qualified Tuition Programs (QTP – 529 Plans) for non-educational purposes
-Maximum percentage of ATI for corporations for contributions of property
-Percentage of AGI to deduct medical expenses (must exceed)
-Percentage of AGI to deduct casualty losses (must exceed)
-Percentage of pay a taxpayer must provide if more than 1 person supports qualifying relative, but no one person pay >50%.
-If no deal is reached after appeal, number of days tax is due if no petition is filed

12:
-Number of months a person must live with taxpayer during the year in order to be considered a qualifying relative
15:
-Number of years leasehold improvements are depreciated using SL

16:
-Maximum age of child in order to receive child tax credit

18:
-Maximum age for qualifying child who is not a full-time student

20:
-Number of years net operating losses can be carried forward
-Minimum amount of tips per month requiring to be reported as income
-Penalty percentage for distributions from HSA for nonmedical expense

23:
-Maximum age for qualifying child who is a full-time student

24:
-Minimum age of buyer to qualify to be exempt from reporting interest income on Series EE bonds when used for higher education for self, spouse, or dependent

25:
-Maximum amount of gifts to customers that is deductible per recipient per year (business expense)
-Maximum percentage of net self-employment income (after Keogh deduction and 50% of self-employment tax is claimed) allowed to be contributed to Keogh Plans
-Penalty percentage for withdrawals from SIMPLE Plans within 2 years
-Maximum percentage of unpaid tax a taxpayer is required to pay for late filing penalty

30:
-Maximum percentage of AGI for long-term capital gain property deduction
-Maximum number of days for value of asset to drop in order to be considered a casualty loss
-Age of a beneficiary of a Coverdell Education Savings Account (ESA) when he/she will be taxed and incur penalties on withdrawals
-Maximum percentage of AGI to deduct contributions of LTCG property & property related to charity”

50:
-Minimum number of miles new work must be from home, each way, in order for moving expenses to be deductible
-Percentage of meals and entertainment that are deductible (business expense)
-Maximum percentage of AGI for contributions of STCG property & property not related to charity
-Percentage of support taxpayer must give to person in order for person to be considered qualifying relative (must exceed)
-Percentage of their own support that qualifying child may not exceed
-Maximum percentage of other farming income that prepaid feed costs for livestock can be deducted up to

59.5:
-Minimum age to qualify for being exempt from taxation when withdrawing from a Roth IRA, as long as IRA has been in effect at least 5 years

65:
-Minimum age of taxpayer to be exempt from penalty percentage for distributions from HSA for nonmedical expense
-Minimum age of taxpayer to receive additional standard deduction
-Minimum age of taxpayer to receive credit for elderly

90:
-Number of days that taxpayer has to petition the tax court if no deal is reached after appeal

100:
-Percent of medical insurance premiums paid by self-employed taxpayer for self & family that is able to be deducted (no member of family may have coverage through employer)
-Percentage of travel that is deductible (business expense)
-Maximum amount per event to reduce casualty loss

$250:
-Minimum amount of donation requiring written substantiation from donor organization

$400:
-Amount of self-employment earnings needed to be exceeded in order to be required to file a tax return
-Maximum amount of prizes and awards to not be considered income
-Maximum amount of deductible service awards

$1,000
-Amount of child tax credit per child
-Maximum amount of savers credit for single taxpayer
-Amount tax balance due must be under in order to be exempt from underpayment penalty

$1,050:
-Minimum amount of income requiring individuals claimed as dependents to file a tax return

$2,000:
-Maximum amount of contributions allowed per year on behalf of beneficiary under 18 years old to Coverdell Education Savings Account (ESA)
-Maximum lifetime learning credit per family (20% of first $10,000 paid on behalf of family members)
-Maximum amount of savers credit for MFJ

$2,500:
-Maximum amount of student loan interest for higher education able to be deducted (Adjustment “For/To” AGI)
-Maximum Hope Scholarship Credit (American Opportunity Tax Credit) per student (100% of first $2,000 & 25% of next $2,000 in payments)

$3,000:
-Amount of net capital loss that can be deducted against ordinary income
-Amount received for dependent care credit for one dependent (as long as the amount is smaller than actual care expenses and earned income)

$3,400:
-Maximum amount of investment income allowed in order to receive earned income credit

$4,000:
-Maximum deduction for tuition for Qualified Higher Education

$4,050:
-Amount of personal exemption

$5,000:
-Maximum amount of benefits under an employer dependent care assistance plan that can be excluded from an employee's taxable income
-Maximum amount of business start-up costs that are deductible

$6,000:
-Amount received for dependent care credit for multiple dependents (as long as the amount is smaller than actual care expenses and earned income)

$12,500:
-Maximum contribution to SIMPLE Plans per employee and by individual employer, up to 100% of income

$13,400:
-Maximum amount of adoption credit

$25,000:
-Maximum amount (about) earned by taxpayer to qualify Social Security benefits from not being considered income
-Maximum amount of active rental losses that is deductible (up to passive gains/ordinary income)”

$50,000:
-Maximum amount of group term life insurance coverage policy not considered income
-Minimum amount of business start up costs required to start deducting dollar-for-dollar

$100,000:
-Maximum amount allowed to be withdrawn from Roth IRA for first time home purchase to be excluded from withdrawal penalty
-Maximum amount of home equity loan (loan secured by equity in home regardless of how funds are used) for deduction of interest
-Maximum amount of debt to deduct mortgage refinance interest expense

$193,000:
-Maximum amount of joint AGI allowable for a married couple to deduct contributions for a non-participating spouse when one individual is not participating in another plan, but the individual's spouse is a participant

$500,000:
-Maximum amount of deduction for section 179 expenses

$1,000,000:
-Maximum amount of acquisition indebtedness (loan to acquire/construct home or add to existing home) for deduction of interest

$2,000,000:
-Maximum amount of equipment purchases to still receive section 179 expense deduction before phaseout

$5,000,000:
-Maximum amount of gross receipts prohibiting C Corps from using cash basis
-Amount of gross receipts prohibiting partnerships that have a C Corp partner from using cash basis

$10,000,000:
-Maximum amount of gross receipts for a service type businesses to use cash basis

Amended tax return due later of:
-3 years after original due date or
-2 years after tax payment

All itemized deductions are reduced by the smaller of:
-3% of amount AGI exceeds annual limit or
-80% of itemized deductions that are affected by the limit

Maximum amount of income for contribution limit for Roth IRAS to not apply:
-Single – $116,000
-MFJ – $183,000

Maximum amount of foreign tax credit:
-Single – $300
MFJ – $600

-Maximum amount of AGI allowable for contributions to a traditional IRA to be deductible in arriving at AGI:
-Single – $71,000
-MFJ – $118,000

-Dividend tax rates [Applies to dividends from domestic corp & certain qualified foreign corps, but must meet 60+ day holding policy; Does not apply to dividends from non-taxable entities (i.e. REITS) or that are deductible by the payer organization]; Long-term capital gain tax rates:
-0% tax rate for 10% or 15% tax bracket
-15% tax rate for 25%, 28%, 33%, or 35% tax bracket
-20% tax rate for 39.6% tax bracket

Statute of limitations:
-3 years after later of original due date or actual filing date (error/simple negligence)
-6 years if income understated by > 25%
-Unlimited for fraud/lie/failure to file

Surtax applied to the lessor of:
-Taxpayer's net investment income
-Excess of MAGI (income before foreign earned income exclusion), over threshold: MFJ – $250,000, MFS – $125,000, & Others – $200,000

Standard deduction if being claimed as a dependent is the greater of:
-$1,050 or
-Earned income + $350

Maximum contribution allowed to Keogh Plan is the lessor of:
-$53,000 or
-100% of earned income

Penalty for not having minimum essential coverage (Affordable Care Act “Obamacare”) is the greater of:
-$695 per person ($347.50 if under 18)
-2.5% of household income over threshold

Kiddie tax applies to child who is:
– < 18 or
-Student 18-24 w/ earned income < 50% of child's support

A dwelling unit is used as a home if personal use exceeds the greater of:
-14 days or
-10% of the number of days rented

Amount of Simplified Employee Pensions (SEPs) that may be deducted from gross income is the lessor of:
-25% of compensation
-$53,000

Tentative minimum tax equals the total of:
-26% of the first $185,400 (MFJ – $92,700) of AMT Base
-28% of the AMT Base above $185,400

Percentage of self-employment tax able to be deducted (Adjustment “For/To” AGI):
-50% of 15.3% (employer & employee) = 7.65%
-6.2% FICA
-1.45% Medicare

Estimated tax payments for an individual taxpayer is the lessor of:
-90% of current total tax
-100% of prior year's total tax
-110% of prior year's total tax if AGI is > $150,000

Amount of standard deduction:
-MFJ – $12,600
-Single – $6,300

Maximum amount of income allowed in order to receive savers credit
-MFJ – $61,000
-HOH – $45,750
-Single/MFS – $30,500

Minimum amount of deductible required for self-employed taxpayer or employees to deduct Contributions to Health Savings Account (HSA)
-Self – $1,350
-Family – $2,600

Contributions to HSA is limited to lessor of deductible or limit of:
-Self – $3,350 (+$1,000 for 55+)
-Family – $6,650

Maximum amount of AGI allowable to use Roth IRA:
-Single – $131,000
-MFJ – $193,000

Amount of AGI for personal exemption phaseout:
-Single – $259,400
-MFJ – $311,300

Maximum amount of IRA per year:
-Single – $5,500 (+$1,000 for 50+)
-MFJ – $11,000

Medicare tax rate for individual taxpayers earning in excess of threshold levels: MFJ – $250,000, MFS – $125,000, & Others – $200,000:
-2.35% (1.45% + .9%)

Number of years of no profit a business has in order to be considered a hobby loss (not a deductible business expense):
-3 out of 5 years

Minimum number of weeks employee must work at new job in order for moving expenses to be deductible:
-39 (9 months)

Percentage of Hope Scholarship Credit (American Opportunity Tax Credit) that is refundable:
-40% ($2500 X 40% = $1,000; up to $1,000)

Percentage of active rental losses that is deductible if income is between $100,000 – $150,000:
-50% x (150,000 – MAGI)

[A1lessio]

^looking that over just gave me an anxiety attack…

AUD (08/02/2016)

[GinjaNinja]

You and me both! I decided to start compiling the list, thinking it would not be so bad, but it just kept going and going. It really put it in perspective how much material we have to know! Its overwhelming, but I'm going to try to read this every day and hopefully I will have it memorized by the time I take my exam on January 9th.

[RE2PECT]

This is awesome! Going to print this out and look it over as much as I can. Thanks kelsey!

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[A1lessio]

exam day tomorrow and just finished Becker practice test number 2. If I take the total number correct / the total questions = 75.67%. I scored lower on both practice test for audit and ended up getting a passing grade so I hope the same applies here. I will let everyone know how it goes.

T1: 75%
T2: 75%
T3: 62%

SIMS
1. 3/3 100%
2. 13/14 92%
3. 6/6 100%
4. 6/8 75%
5. 2/5 40%
6. Research Tab 100%

AUD (08/02/2016)

[CPA788]

NINJA vs Becker question here. I use my Becker book to compliment. Becker specifically states that, included in ordinary income for PHC, are royalties (but not mineral, oil, gas, or copyright royalties).

NiNJA question:

All of the following can be considered personal holding company (PHC) income except:

A.
rents.

B.
gas royalties.

C.
estate and trust income.

D.
capital gains.

Capital gains seemed like a contender but gas royalties clearly is stated as not being included, so I chose B. NINJA says capital gains is not included in income, and that all royalties are. What is correct??

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

CA Candidate

[KJ]

Awesome compilation Kelsey, definitely printing it and will read everyday, Thanks for sharing!!

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

[RE2PECT]

Finally finished reading the book and watching all the lectures. Have a little over a month to crush mcq's and sims. Now on to the fun stuff!

FAR: 75 Roger & Ninja (notes/flashcards/audio/MCQ)
AUD: 73, 81
BEC: 71, retake 8/29
REG:

[Teal]

thanks Kelsey!!

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

[Teal]

@spartans92 I think it is because you can take each month that the organization costs started. IT doesn't matter when the business began. I can't really tell without reading the question, but it is probably because organization began at the beginning of the year.

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

[Teal]

@CPA788 I am pretty sure that rents, royalties and estate/trust income are PCH income and cap gains are not.

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

[Teal]

Can anyone explain the $3,000 deduction rule? It is for personal capital losses right? So like an automobile for example is not considered a capital asset, so you could not deduct any loss on a personal automobile?

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

[Teal]

@kelsey, I just read that they adjusted the 179 phaseout to $2,010,000 for 2016 to account for inflation on NINJA

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

[Author]

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