[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

[539Mayor]

I got the mcq's, video, book review combo special. Also audio lectures for the car. It's tuff bc I want to include both Beck and ninja. I guess just spend a few days on each topic. One thing I am doing is I keep a journal each day to monitor eating exercising sleep and study goals.a little much but I can look back and figure out why one day was better than the other.

[NoCoast]

Hi Everyone, I found this question on the AICPA released questions for 2016, and I cannot figure out why I am calculating this wrong. Unfortunately for AICPA questions, there is no explanations, and I couldn't find the question on NINJA. Anyways, here it is…

On Year 1, Janice had the following transactions in Jacky, Inc. Common Stock

Jan 1 – Purchase 500 Shares $25
May 12 – Sale 500 Shares $23
May 28 – Purchase 250 Shares $22
Oct 15 – Sale 100 Shares $18

What is Janice's deductible capital loss?

A) 400
B) 700
C) 1,100 (correct)
D) 1,400

So here is my thinking. You bought the 500 shares, and then sold them. great, $1,000 deductible loss. You then bought 250 shares right back(Wash Sale within 30days), so half of that loss should be taken out, so you are at a $500 loss, then you sell 100 of those shares for $18, which would be a loss of $400 (100 shares X (22-18)) giving me a total balance of a $900 loss. I know this answer is wrong, but I cannot figure out where I am going about this calculation wrong.

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

[mtaylo24]

Tough question! You have to disallow 1/2 of the $1000 loss from the May 12 sale.

250 @ 22 (5/28) = 5500
5500 + 500 disallowed loss (5/12) = 6000 basis
6000/250 shares = $24
100*24 is basis = 2400
Selling 100 @ 18 = 1800, so your loss is 600 (2400-1800)
That 600 + the other 500 from 5/12 = 1100

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)

[mfbc23]

Can someone please help me understand this answer? I was under the impression that passive losses could not be applied to active income in arriving at AGI. Why then, were these losses deducted?

In the current year, a taxpayer reports the following items:

Salary $50,000
Income from Partnership A, in which the
taxpayer materially participates 20,000
Passive activity loss from Partnership B (40,000)
During the year, the taxpayer disposed of the interest in Partnership B, which had a suspended loss carryover of $10,000 from prior years. What is the taxpayer's adjusted gross income for the current year?

A.$20,000 = Correct Answer

B.$30,000

C.$60,000

D.$70,000

Adjusted gross income is calculated by subtracting business expenses and other deductions from gross income. The adjusted gross income is $20,000, calculated as follows:

Salary $50,000
Income from partnership 20,000
Passive loss from Partnership B (40,000)
Suspended loss carryover (10,000)
——–
Adjusted gross income $20,000
Because the taxpayer disposed of ownership in Partnership B during the year, he may take all of the loss up to the amount of his basis in the partnership.

Regulation Section 1.469

AUD: 83 (Aug. 2015)
FAR: 78 (Nov. 2015)
REG: TBA
BEC: TBA

[NoCoast]

@Mtaylo24, Thank you! That makes a lot of sense.

@mfbc23, I think since they are selling the partnership during the year that you are able to deduct the PAL from AGI. Someone please correct me if I am wrong.

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

[HoosierCPA]

It's amazing how much I've forgotten since July 1st!

======================================================================
Fraud Gross Simple
Negligence Negligence
———————————————————————-
False representation * * *

Awareness Knowledge Reckless Failure to
disregard exercise care

Intention to induce reliance * X X

Justifiable reliance * * *

Resultant damage * * *

What is the difference between “justifiable reliance” and “intention to induce reliance”

Like I said, I have forgotten a TON. But I thought ordinary negligence reliance is not required to prevail in court. For some reason I remember something like you must prove you purchased securities and suffered a loss…or something like that!

EDIT: the table did not copy over well at all! I apologize!

FAR - 78
REG - 72,74,71...please just go away REG nobody likes you!
BEC - 82
AUD - Aug 16

[CPA788]

@mfbc23 – @nocoast is correct – it's allowed in the year the partner is closing out their share in partnership.

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

CA Candidate

[KJ]

West, an Indiana real estate broker, misrepresented to Zimmer that West was licensed in Kansas under the Kansas statute that regulates real estate brokers and requires all brokers to be licensed. Zimmer signed a contract agreeing to pay West a 5% commission for selling Zimmer’s home in Kansas. West did not sign the contract. West sold Zimmer’s home. If West sued Zimmer for nonpayment of commission, Zimmer would be:

A.
liable to West only for the value of services rendered.

B.
liable to West for the full commission.

Incorrect C.
not liable to West for any amount because West did not sign the contract.

D.
not liable to West for any amount because West violated the Kansas licensing requirements.

Can someone tell me why C is not right? It says D is right.

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

[CPA788]

@kanwal78 – Since West misrepresented himself when he made the contract, it falls under the umbrella of fraudulent contracts. Fraud in the inducement I believe which makes the contract voidable. If the contract was never legit to begin with, Zimmer was never liable to West.

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

CA Candidate

[KJ]

@CPA788 thanks. I think then their explanation is wrong. It says, “a legally enforceable contract much have both offer and acceptance. Since Zimmer signed the contract, an enforceable acceptance would be for West to also sign the contract.”

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

[Teal]

I guess it is saying that West technically didn't accept the contract? But that's dumb because it was fraudulent as @CPA788 said….that is a poorly worded question/answer

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

[CPA788]

@kanwal78 – That was a very nice explanation of you saying “uh that is not what NINJA says” haha. I could have sworn I read something about the contract not being enforceable. The explanation you have doesn't seem to match up with answer D. If I had a pondering emoji stroking its chin I would use it. Sorta not helpful, I'm sorry :/

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

CA Candidate

[KJ]

@ Teal and CPA788 you both are right..I was debating between C & D, I believe D will have more weight as oppose to C due to fraud but it is a poor worded question/explanation.

In the book it says C is correct. So, I guess Jeff needs to fix this!!

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

[mfbc23]

Thank you @CPA788 and @nocoast. That makes sense.

AUD: 83 (Aug. 2015)
FAR: 78 (Nov. 2015)
REG: TBA
BEC: TBA

[mfbc23]

Is it necessary to memorize all the phase out thresholds under all different scenarios/circumstances?

AUD: 83 (Aug. 2015)
FAR: 78 (Nov. 2015)
REG: TBA
BEC: TBA

[Author]

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