2 tricky questions from the exam. Please help!

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  • #3303865
    Chloe
    Participant

    Hello all,
    I just got out from REG and had 2 tricky simulations.

    1. I had to calculate LTCL, LTCG, STCG, and STCL based on the questions provided.
    The questions were like
    “Sold land for $60,000 (deducted sales commission is 3%). The basis is $15,000.”
    —-> Do I have to include sales commission fee to the selling price?

    2. C-corporation liquidating problem.
    Each shareholders’ basis was provided.
    E&P of the current year was also given.
    —-> Should pro-rata E&P be allocated to each shareholders’ basis to calculate their liquidation gains or losses?

    Your help is much appreciated!

    #3303877
    CPAHOPE
    Participant

    1) no, you dont include it and heres the reason why. It should be expensed as sales commission.

    Lets say, you add sales commission to the selling price, this would increase the gain which means you need to pay higher taxes which
    isnt fair to the seller.

    61800- 15000 = 46800 gain
    60000 – 15000 = 45000 gain why would you pay higher taxes when you paid the commission to the sales person, right? Instead it should be expensed and deducted.

    2) yes, pro rata!

    AUD - 66
    BEC - 76
    FAR - 80
    REG - 77
    FAR 57,61,57,56,68, 80

    REG 53,49,69,66, 79*,77

    AUD 39,66,72,73,66😱

    BEC 64,60,50,70,67,71,76

    "Theres no limit unless you allow it"

    *expired

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