[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

[Troblin]

I haven't scheduled yet, just paid NASBA the other day. I'm thinking mid-May probably. I work as an auditor for the State, so I'm trying to pencil it in around my audit schedule as well.

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Gabe]

Nice! I'm taking mine at the beginning of the window (ugh) because I'll be out of town on an audit for the majority of May

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

[Holly]

What happens when you reach the review phase of ninja mcq?

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

Becker & Ninja MCQ

 

 

 

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

[Anonymous]

Jeff drives over to your house to shake your hand and offer his congratulations.

To be honest, no clue. For FAR I never got out of the Assessment stage. For BEC I was only 55% through the Adaptive Learning phase. Right now I'm 33% into REG's Adaptive Learning phase.

[Troblin]

@Gabe. I'm sure you'll do fine. You seem to have most of the topics down pat.

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Sandia]

Mary From, single, owned rental real estate which generated a tax loss of $60,000 for 2014. Mary materially participated in the rental activity. Mary's adjusted gross income before considering the 60,000 loss was $130,000. What amount of the loss can offset income from nonpassive sources?

A. $15,000

B. $10,000

C. $0

D. $60,000

B- Rental activities are considered passive activities even if the taxpayer materially participates. However, for rental real estate activities, a loss up to $25,000 may be deducted. However, the $25,000 loss must be reduced by half of the adjusted gross income (before the loss) in excess of $100,000. Thus, the deduction is $10,000 ($25,000 – (0.50 × $30,000)).

Any tip to remember passive loss – the 50% reduction AGI over $100,000?

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

[Anonymous]

Sandia: That's just one of those things you need to know. Work a few problems and after you see it in action a few times you'll get it.

Most people say that you don't need to remember specific phase outs (just that a phase out exists). However, I'd say rental activity is one of the exceptions where you want to know how it works.

[Sandia]

@Angel – Thank u!!!

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

[willpassby2014]

Benjamin Lee owns a large truck that he drives for his own personal use. The truck has a tax basis of $59,000 but a fair value of $64,000. As a result of a sudden hail storm, the truck is severely damaged so that its value drops to $37,000. His insurance company only pays him $16,000 because of several deductible clauses in the contract. Mr. Lee uses that money to repair the truck but it only has a value of $57,000 thereafter. If Mr. Lee reports an adjusted gross income of $50,000, what amount of this casualty loss can be included on his income tax return as an itemized deduction? Assume that he had no other casualties during the year.

A $1,900

B $5,900

C $7,000

D $11,000

I am surprised the answer is 5900. EXPENSES INCURRED TO REPAIR DAMAGED PERSONAL PROPERTY IS NOT ALLOWED. AM I MISSING SOMETHING

BEC Passed
FAR Passed
AUD Passed
REG Passed

[teamryan15]

Brand New, Inc., was organized and began active business on January 2, 2014. Brand New incurred the following expenses in connection with creating the business:

State incorporation fees $ 5,000

Legal fees for drafting the charter 35,000

Printing costs for stock certificates 10,000

Professional fees for issuance of stock 15,000

Broker's commission on sale of stock 25,000

Expense for the temporary directors 20,000

---

Total $110,000

What is the maximum amount of organization expense that Brand New may deduct on its 2014 tax return?

A. $4,000

B. $5,000

C. $8,667

D. $12,000

The correct answer is A.

Can someone explain this to me? I ve gotten all the other organizational expense questions correct and I think this may be an error in the ninja software. I chose C but that was wrong.

The explanation they give is below

Organization expenses are those expenses connected directly with the creation of the corporation. These include:

Expenses of temporary directors $20,000

Fees paid to a state for incorporation 5,000

Accounting and legal fees incident to organization 35,000

---

Total $60,000

=======

Total organization expense is over $55,000, so the entire amount must be capitalized and amortized over 180 months.

$60,000 × (12 ÷ 180) = $4,000

For organizational expenditures incurred after October 22, 2004, taxpayers may deduct up to $5,000 in the taxable year in which the business begins. The $5,000 amount is reduced by the amount by which the cumulative cost of organizational expenditures exceeds $50,000. Any remaining organizational expenditures not deducted are amortized over a 15-year period.

IRC Section 248(a)

[Anonymous]

A is correct per the explanation.

You have 60,000 of organization costs. If you have 50K or less, you can take 5K of it immediately and amortize the rest. This phases out, dollar for dollar, up to 55K. So at 60K we are completely phased out. So we take the whole 60K and divide by 180 (15 years) and get 333.33 a month. Take that and multiply by 12 for 4,000.

What aren't you understanding with it? If you need more help, post here.

[PasstheCPA7]

Hi guys,

I am working Secured Transactions. I need help with this question. I thought it was pretty tricky:

A party who filed a security interest in inventory on April 1 would have a superior interest to which of the following

parties?

a. A holder of a mechanic’s lien whose lien was filed on March 15.

b. A holder of a purchase money security interest in after acquired property filed on March 20.

c. A purchaser in the ordinary course of business who purchased on April 10.

d. A judgment lien creditor who filed its judgment on April 15.

Answer is D. My question is – why is a judgment lien creditor who filed its judgment on April 15 having higher priority than the mechanic lien whose lien was filed on March 15. March 15 comes BEFORE April 15, so, shouldn't the mechanic lien have higher priority. Can someone explain this? Makes no sense.

My second question is this: What is wrong with answer choice C? I thought a buyer in the ordinary course of business always has higher priority and is in 1st place?

Thanks.

[Sandia]

Quigley, Roberk, and Storm form a corporation. Quigley exchanges $25,000 of legal fees for 30 shares of stock. Roberk exchanges land with a basis of $10,000 and a fair market value of $100,000 for 60 shares of stock. Storm exchanges $10,000 cash for 10 shares of stock. What amount of income should each shareholder recognize?

A. Quigley $0, Roberk $0, and Storm $0

B. Quigley $25,000, Roberk $90,000, and Storm $0

C. Quigley $25,000, Roberk $90,000, and Storm $10,000

D. Quigley $0, Roberk $90,000, and Storm $0

Interesting the answer is B. Question to keep in mind for me

The general rule is that transfers of property to a corporation in exchange for stock will be tax-free as long as the transferors are in control of the corporation immediately after the exchange. Control is defined as 80% of both the voting power and number of shares of the stock.

Quigley contributed services, and services are not considered part of the 80% control group; therefore, he would have to include in income $25,000. Roberk and Storm are the only ones left to be included in the 80% control group; they do not add up to 80% either, so Roberk would include $90,000 in income ($100,000 – $10,000). Storm would include nothing in income as he contributed cash for the stock.

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]

@willpass for casualty losses that is correct. Otherwise, you'd be taking deductions to repair your water heater after every storm, for instance. It has to irrepairable damage.

@sandia- agree with angel…here are two examples where it is above $50k (and I hope they help)- it's tricky concept to grasp at first..just realize, if it's between $51 and $54k you're going to have to do the calculation below

$53k expenses, business began operations in October 1st

because the expenses exceed $50k, you have to reduce it $1 for $1 above $50k.

So the $5k deduction is reduced by $2k ($5-3K).

Her amortization is $51k (53k – 2k) /180 months= $283/month * 3 months= $850 .

Her full deduction for the year is $2k + $850= $2,849.

Assume the same facts above, but instead she incurrs $60k expenses

The $5k deduction must be reduced by $10k (60-50), which is not possible,

So (like in your example above), we amortize the entire amount over 180 months= $60k/180*12= $4k

@sandia correct. Qugiley would have to report the $25k no matter what, since it is services and those are regular income.

You know it is not over 80%, because the total amount, in the problem, is 100 shares. Roberk adn Storm only add up to 70 sahres, or 70%. Cash for stock is not reported, which leaves Roberk with the appreciated land to report (as if sold at FMV), so 100-10= 90k.

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

[Holly]

@Sandia thanks for posting that question. I needed to go reread that!!

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

Becker & Ninja MCQ

 

 

 

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

[Author]

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