[jeff]

Welcome to the Q2 2015 CPA Exam Study Group for REG.

“Death and Taxes” – Individual Tax for the CPA Exam

Posted by Another71 on Monday, November 24, 2014

Free NINJA: https://www.another71.com/cpa-exam-study-plan/

AUD - 79
BEC - 80
FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[Gabe]

Here's an example

So, because this is formation, and they own >80%= non taxable= use NBV, yes?

In April, A and B formed X Corp. A contributed $50,000 cash and B contributed land worth $70,000 (with an adjusted basis of $40,000). B also received $20,000 cash from the corporation. A and B each received 50% of the corporation's stock. What is the tax basis of the land to X Corp.?

Answer: $60,000

CPA, CFE
CISA- Experience will be completed by August 2016

[Sandia]

@ Gabe – 80% or more is a control transaction so there is not gain or loss because the property never left the C corporation –

For the rest – @FMV because it is like sale.

by the way- thank you for your posting, I am learning a lot from them.

FAR - 77 x2 Wiley book & no test bank
AUD - 83 x3 NINJA Test bank 3 time
REG - 80 x1 NINJA Test bank
BEC - 78 X2 NINJA Test bank ..done!!promesa cumplida mama -que llege al cielo 🙂
Ethic 100% Licensed VA CPA

[Gabe]

Sandia- thanks! I'll post some more that I had problems with intially…

Brisk Corp. is an accrual-basis, calendar-year C corporation with one individual shareholder. At year-end, Brisk had $600,000 accumulated and current earnings and profits as it prepared to make its only dividend distribution for the year to its shareholder. Brisk could distribute either cash of $200,000 or land with an adjusted tax basis of $75,000 and a fair market value of $200,000. How would the taxable incomes of both Brisk and the shareholder change if land were distributed instead of cash?

A.

Brisk's taxable income: No change; Shareholder's taxable income: No change

B.

Brisk's taxable income: Increase; Shareholder's taxable income: No change

C.

Brisk's taxable income: No change; Shareholder's taxable income: Decrease

D.

Brisk's taxable income: Increase; Shareholder's taxable income: Decrease

Thinking: S/H owns 100%, so not taxable

Brisk would have to recognize a gain of $125k when they distribute the land, while the S/H would have no change because he would recognize $200k for cash and $200k for land. So..B is correct

Is my thinking correct on this?

CPA, CFE
CISA- Experience will be completed by August 2016

[Gabe]

The sole shareholder of an S corporation contributed equipment with a fair market value of $20,000 and a basis of $6,000 subject to $12,000 liability. What amount is the gain, if any, that the shareholder must recognize?

A.

$0

B.

$6,000

C.

$8,000

D.

$12,000

Since liability exceeds basis, recognize gain equal to AB-liab (12-6)= 6…B is correct

CPA, CFE
CISA- Experience will be completed by August 2016

[Gabe]

Lind and Post organized Ace Corp., which issued voting common stock with a fair market value of $120,000. They each transferred property in exchange for stock as follows:

Adjusted Fair Market Percentage of

Property Basis Value Ace Stock Acquired

---

---

---

---

Lind Building $40,000 $82,000 60%

Post Land 5,000 48,000 40%

The building was subject to a $10,000 mortgage that was assumed by Ace.

What was Ace’s basis in the building?

A.

$30,000

B.

$40,000

C.

$72,000

D.

$82,000

Since 100% owned, basis rolls over to Ace and no gain is recognized…answer is B $40k.

However, basis to Lind= $30k (AB-liab assumed by corp)

CPA, CFE
CISA- Experience will be completed by August 2016

[Holly]

Income in respect of a cash basis decedent:

A Covers income earned before the taxpayer's death but not collected until after death

B Must be included in the decedent's final income tax return

C Receives a stepped-up basis in the decedent's estate

D Cannot receive capital gain treatment

AUD - 76
BEC - 82
FAR - 82
REG - 86

Becker & Ninja MCQ

 

 

 

BEC - 79
REG - 85
AUD - 5/27/16

[Gabe]

@HR A? C and D are wrong and B is…hmmm

CPA, CFE
CISA- Experience will be completed by August 2016

[Anonymous]

Answer B?

Since income is earned as it is collected for a cash bassis individual, anything earned as income will have been collected prior to death. Thus it will be included in their final year's tax return.

[PasstheCPA7]

@ sandia: You mentioned that there is no gain or loss IF there is 80% or more control because the property never left the C Corp. However, if you own less than 80% or more – then, a gain or loss would be recognized (even IF the property never left the C Corp). So, I'm not sure what you mean “because the property never left the C Corp that no gain or loss would be recognized). Can you explain that?

[PasstheCPA7]

Question on Secured Transactions (Attachment): For those of you that use Becker, Becker says that there are 3 requisites for attachment: Having an agreement, value must be given, and debtor must have rights in the asset. My question is – do all 3 of these items need to happen in that same order in order for attachment to occur OR can these 3 things happen in any order? Can someone explain how that works?

[Holly]

The answer is A and all the explanation does is restate the answer.

AUD - 76
BEC - 82
FAR - 82
REG - 86

Becker & Ninja MCQ

 

 

 

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

I guess….income that was constructively received before date of death with a cash basis taxpayer would go on the 1040. Income that was earned and received after death is reported on the estate tax return??

AUD - 76
BEC - 82
FAR - 82
REG - 86

Becker & Ninja MCQ

 

 

 

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

Did y'all see the NINJA MCQ 500 challenge?

AUD - 76
BEC - 82
FAR - 82
REG - 86

Becker & Ninja MCQ

 

 

 

BEC - 79
REG - 85
AUD - 5/27/16

[Gabe]

@HR correct, but you can elect to have it reported on the individual's return if you wish.

CPA, CFE
CISA- Experience will be completed by August 2016

[Anonymous]

I remember running across the question a few times and I can never remember the answer. I always want to choose between A and B and I always end up going with B and getting it wrong.

As I said, I hate estate and trust accounting. But, more to the point, I also think it's just a very poorly worded question.

[Author]

Replies