[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

[rana_cali]

Does anyone know if surviving spouse is even a filing status? I remember seeing it in Ninja MCQ but can't find it now. Anyway, does anyone know the answer to the below?

Tim Smith's wife passed away in year 1 when their son was age 4. What is Tim's filing status for year 2 if he doesn't re-marry?

A. Single

B. Married filing jointly

C. Surviving spouse

D. Head of household

Why isn't Qualifying widower an option?

AUD: 84
FAR: 75
BEC: 78
REG: 75

DONE-ZO!!!!!!!!

REG: Used Becker 2014 book, NINJA MCQ, Ninja notes, ninja audio
_______________________________
CFE since Oct. 2013.

[Anonymous]

Answer C

Surviving Spouse and Widower with Dependent Child are used interchangeably. I'm not sure which is more common or used on the exam but just know that both mean the same thing.

[Anonymous]

@rana, I think the correct term would have been qualifying widower for year 2 and surviving spouse for year 1. That said, I'm with Angelwatch. C is the best answer available. You can't file a joint return but you get the same rates and standard deduction as if you had filed a joint return which is different than head of household. Still, wording isn't right. Where did you find that question?

[acctaks]

Yes qualifying widower is the official filing status but that doesn't mean surviving spouse couldn't be used in its place in a question. What bothers me about the exemption questions is how freaking ambiguous they are. They give part of the information but say that they qualify

F-Pass
A-Pass
R-Pass
B-Pass

I'm a CPA!

[Gabe]

you got this @angel! Look forward to your report back 🙂

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[Anonymous]

I think the reason for the confusion is that “Surviving Spouse” is for the year that your spouse died. But there is no box for “Suriviving Spouse.” You still claim Married: Filing Jointly. Surviving Spouse is more of a description than an actual title. Qualified Widower with Dependent is an actual filing status for following two years after the year of death.

But like I said, it seems that they are used interchangeably but I'd know it like this:

Year of Death = Surviving Spouse = Married: Filing Jointly

Following 2 years after death = Qualifiying Widower with Dependent

And finally things can make even that more complicated because if there are no children involved you may only qualify as Single.

Overall I don't think it's a hard concept. Just some of the terminology is a bit funky.

[acctaks]

bump

F-Pass
A-Pass
R-Pass
B-Pass

I'm a CPA!

[Anonymous]

So in the year of death it's still MFJ. 2 years after that it's surviving spouse (qualified widower). So in the 3rd year what would it be? Either single or H of H?

[Gabe]

@cpa yep

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[rana_cali]

Thank you guys!!

AUD: 84
FAR: 75
BEC: 78
REG: 75

DONE-ZO!!!!!!!!

REG: Used Becker 2014 book, NINJA MCQ, Ninja notes, ninja audio
_______________________________
CFE since Oct. 2013.

[julietul]

Clip-Joint, an S corporation hair salon, distributes land with an adjusted basis of $10,000 and a fair market value of $50,000 to its sole shareholder, Louise. Louise's basis in the corporate stock before distribution is $90,000. What is Louise's basis in the land after the distribution?

A.$90,000

B.$40,000

C.$10,000

D.$50,000

The correct answer is $50,000 because this is treated like a sale to the shareholder, where the corp will recognize a gain of $40,000 and the shareholder now has a basis of $50k. Why does this have NO effect on the “Louise's basis in the corporate stock before distribution is $90,000”

For example… with a non liquidating distribution, wouldn't this property distribution reduce the shareholder's basis??

Just when I think I am getting it….

FAR - pass (expires 7/31/15)
AUD - pass
BEC - pass
REG - April 20

[PasstheCPA7]

@ julie: Which question # is this S Corp question?

[acctaks]

It's treated like ordinary income to the person receiving it. It's not based on income or loss from the S Corp so basis was never adjusted for it in the first place. If someone contributed the land then the portion of built in gain would be shifted back to the original contributor and any excess gain would be picked up by the S Corp and change basis. If it were a liquidation they wouldn't treat it as income. Their basis in the land would be reduced by any cash received though. I think the main reason is because it's a related party sale.

F-Pass
A-Pass
R-Pass
B-Pass

I'm a CPA!

[PasstheCPA7]

@ julie: Which question # is this S Corp question?

[PasstheCPA7]

@ acctaks: What I don't understand is this: Whenever we talk about a non-liquidating or even a liquidating distribution, that distribution should always reduce the basis. This holds true if we’re talking about C-Corps, Partnerships, etc. Therefore, how is this S Corp non-liquidating distribution different (compared to a C-Corp or a Partnership)?

[Author]

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