December 5, 2019 at 8:36 pm #2830848HannahParticipant
How common is casualty losses for individuals tested? I just dont understand them at all and am thinking about giving up trying to understand itDecember 6, 2019 at 2:21 am #2831226413cpaParticipant
The calculation is pretty simple actually. It is the number of steps that scare people off.
There are a maximum of 4 steps in any given example.
1) Find the loss in FMV and the decline in our adjusted basis (After the casualty), take the lower number.
2) Subtract any insurance proceeds that we have received .
3) Further subtract a flat $100.
4) Finally, subtract 10% of Our AGI.
This final number will be our Casualty Loss.
Note: The casualty has to be a “Federal Disaster”
Il demonstrate with a simple example.
1) The adjusted basis in the home was $100,000 (It is now destroyed and worth 0)
2) The FMV decline was $150,000
3) The taxpayer received $60,000 of insurance proceeds
4) The taxpayers AGI was $90,000 .
5) It was declared a federal disaster area.
1) The lesser of the decline in FMV and our adjusted basis loss is $100,000 (Per facts 1 and 2, $100,000 vs $150,000)
2) Take the $100,000 and subtract our insurance Proceeds of $60,000
– We are now left with $40,000
3) Subtract the flat amount of $100
– We are now left with $39,900
4) Subtract 10% of our AGI. the Subtraction will be $9,000 (($90,000 AGI x .10 = $9,000))
ANSWER – Our final number is $30,900 ($39,900 – $9,000)
I hope this helped. Good luck!December 10, 2019 at 12:05 pm #2838144AmberParticipant
For nonresidential building depreciation I assume it is a 39 year straight line. I'm trying to figure out, does mid month convention always apply to this? In the Becker book I see it comes right after and it makes it seem like that no matter when the building is purchased you use mid month for that initial month. The question I was looking at, the building was purchased February 1st. It also led me to wonder, the business the building was meant for, wasnt opened until year 3 (purchased in year 2). Do you go by the day the building was actually purchased? Or actually put in service?
Appreciate any help!February 9, 2020 at 8:46 pm #2925012limousine ridin’, jet flyin’ son of a gunParticipant
Why would the gain not be reduced by the nonqualified portion of use (time rented)
Chris and Jennifer purchased their home in California on January 15, Year 1, for $160,000. During their ownership they made no capital improvements. On August 1, Year 4, the couple moved to Virginia from California and rented out that home. On June 30, Year 6; the couple contracted to sell the California rental home for $437,500. For the calendar Year 6, the couple will file a joint tax return. Disregarding any depreciation recapture rules, how should they treat the sale of the home for tax purposes?
Answer: Realized gain of $277,500; not taxable due to the home exclusion. Disregarding any depreciation recapture, Chris and Jennifer have a realized gain of $277,500. For tax purposes, this gain will not be recognized on their Year 6 tax return as it is excludable under the Homeowner's Exclusion. To qualify for the full exclusion of $500,000 for a joint return, the taxpayers must own and use the home as the principal residence for two years out of the five- year period ending on the date of the sale or exchangeMarch 1, 2020 at 8:37 pm #2951186
I was wondering about this too. In Becker SIM R3/M2 SIM1, line 8 the portion of the gain not eligible for the exclusion is the 2 years of rental use before the 4 years of personal use. This made 33% (2/6) of the gain not eligible for the exclusion. How is Tiramisu's example different?
Bought 1/1/3 $200,000
Rented through 1/1/5 (2 full years) in which depreciation of $11,000 was taken – is this the key?
Sold 1/1/9 $410,000
The realized gain is $221,000, which is calculated as $410,000 less an adjusted basis of $189,000 ($200,000 – $11,000 depreciation taken). $11,000 of the gain is taxable as an unrecaptured Section 1250 gain at a maximum 25% tax rate. The remaining $210,000 gain is not totally excluded because there are 2 years of nonqualified use as rental property (note that it occurs before the property becomes a principal residence). The recognized gain from nonqualified use is $70,000, which is calculated as $210,000 × 2/6. The fraction's numerator is the period of nonqualifed use; the denominator is the total ownership period. The remaining $140,000 gain is excludable as it is under $250,000. The total recognized gain is $81,000 ($11,000 + $70,000).March 2, 2020 at 3:05 pm #2951906
I decided to resurrect the study groups. If you have a study strategy question for me, post it here. 🙂
JeffMarch 11, 2020 at 10:39 pm #2960381
FYI – due to legislation that was passed in December the new Medical Expense threshold is 7.5% and it's retroactive to 2019.
That's NOT the number you want for the CPA Exam, however – it's still 10% based on the policy on new pronouncements (6 months after effective date or enactment date, whichever is later), and I have confirmed this directly with the AICPA Examination Team.March 23, 2020 at 9:36 pm #2967863
In the current year, Jane won $6,000 in a state lottery. Jane also spent $300 on lottery tickets. Jane elected the standard deduction on her current year income tax return. The amount of lottery winnings that should be included in Jane’s current year taxable income is ___.
can someone explain to me why she cannot deduct the loss $300 because she is electing standard deduction?March 24, 2020 at 2:49 pm #2968364TncincyParticipant
The standard deduction amount is given. so if Jane is single, her standard deduction is 12,400 for example. Lottery winnings/ losses are itemized deductions.March 24, 2020 at 6:46 pm #2968508
The tickets aren’t a gambling loss.
If she had won $0, she wouldn’t be able to deduct the $300. Winning a gamble doesn’t change that.
If she played blackjack and lost $300, that could be deducted again the $6k.March 24, 2020 at 9:06 pm #2968586
thanks! Tncincy & lcarito…this question flew over my head…March 25, 2020 at 11:08 am #2968859monikerncParticipant
The price of the tickets can be claimed up to the amount of any winnings if the taxpayer itemizes deductions. All winnings must be reported as income whether the taxpayer itemizes or not.March 27, 2020 at 5:23 pm #2970122ssaeternParticipant
Is guaranteed payments to partners counted as ordinary income for the partnership? For example, if gross receipts was $50K; guaranteed payments was $30K and charitable contributions for the partnership and we're asked to calculate ordinary income for the partnership. Do we add the $50K?March 27, 2020 at 9:29 pm #2970305
Can someone clarify what the tax credits are under AMT? In NINJA, it states that there are 4: child & dep. care/ adoption/ child tax credit/ residential energy credit.
However, Becker 2018, has additional – foreign tax credit & contributions to retirement plans. Can someone confirm which credits are applicable to AMT?
Thanks!!March 30, 2020 at 7:37 pm #2970899SerenityNowParticipant
Is guaranteed payments to partners counted as ordinary income for the partnership? For example, if gross receipts was $50K; guaranteed payments was $30K and charitable contributions for the partnership and we're asked to calculate ordinary income for the partnership. Do we add the $50K?
The $50k is deducted from partnership income to arrive at ordinary partnership income. it is also included as oridnary income to the receiving partner.March 31, 2020 at 10:57 pm #2971850limousine ridin’, jet flyin’ son of a gunParticipant
@Ssaetern Guaranteed payments to partners are deductible to the partnership to arrive at ordinary income and is included as income for the individual partner on their K-1 flowing through to their individual 1040March 31, 2020 at 11:52 pm #2971877April94Participant
Can someone help me with the question below?
In 2019, Uriah Stone received the following interest payments:
Interest of $400 on refund of federal income tax for 2017
Interest of $300 on award for personal injuries sustained in an automobile accident during 2016
Interest of $1,500 on municipal bonds
Interest of $1,000 on United States savings bonds (Series HH)
What amount, if any, should Stone report as interest income on his 2019 tax return?
The answer is $1,700. I understand why $400 and $1,000 are included, but why is the $300 also included? My Roger book says damages for bodily injury/pain/suffering are not included in income.April 1, 2020 at 12:31 am #2971889HanParticipant
The damages is excludible, but the interest on the damages is not.April 1, 2020 at 9:39 pm #2972480April94Participant
Thank you!April 17, 2020 at 4:08 pm #2982317
Happy Friday! For accountability/motivation, post your weekend REG study goals below.
Everyone loves a little incentive, so one randomly-chosen person will win a month of NINJA CPA Review Monthly.
Feel free to invite your CPA-studying friends to join in.
One winner per study group (please only post in one forum study group)
Deadline to comment: Tonight @ 11:59pm (Pacific)
Another chance to win in the CPA Exam Review Facebook Group (yes, in theory, you could win twice):
https://www.facebook.com/groups/cpaexamreview/April 17, 2020 at 10:54 pm #2982488
Are you allowed to deduct $3k of capital loss from ordinary income? I thought the deductions were allowed for capital gains.April 17, 2020 at 11:13 pm #2982500AbeFromanParticipant
My weekend REG study goals are to (A) finally get started (now that April 15 has passed – yes, many clients still wanted theirs completed despite the pushed-back deadline) while being quarantined and (B) get through the first two sections of my review course – lectures, reading, and note-taking. I also would like to work at least 50 MCQs in each of those two sections.April 18, 2020 at 10:49 am #2982605April 19, 2020 at 5:40 pm #2983571monikerncParticipant
Se7…print out the forms so you can learn the answer to your questions while you study. Knowing the forms will help you a lot during the exam.
Your net capital losses are limited to $3000/year and deducted on line 6 as an above the line deduction to get to total income on line 7b and AGI on line 8b.April 24, 2020 at 3:59 am #2986055SuchParticipant
§ 448 – A corporation or partnership meets the gross receipts test of this subsection for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $26 million.
Q: If we are checking for Yr 6, will it be the average of Yr 6, 5 & 4 or 5,4&3. Pls help!
How is it calculated per CPA review material you all are using?April 26, 2020 at 12:32 am #2987240MIchelleParticipant
I believe it also includes the current year. Do you mind being specific as to what specific topic this relates to?May 7, 2020 at 12:42 am #2996345HannahParticipant
“Qualified stock options are taxable in the year in which the stock is sold, not either in the year of grant, nor in the year of exercise” this was part of the explanation to an answer for Roger. I thought stock options were taxable both at the exercise date and sales date. Which is correct?May 11, 2020 at 2:32 pm #2999796ssaeternParticipant
According to Roger “Because guaranteed payments represent ordinary business expenses of the partnership, they are included in the determination of the ordinary income of the partnership. They must also, however, be separately stated on the Schedule K-1 of each partner receiving such payments, so that the partner will include the income received on their individual tax return.”
Is this false? I thought guaranteed payments were deducted in calculation of ordinary income of a partnership???May 11, 2020 at 10:39 pm #3000153
That is correct. Deduction on page 1 of 1065 to get to ordinary income.
Also income on Sch. K of 1065 flowing to individual K-1 so partner picks up their GP on Sch. E of their 1040.June 20, 2020 at 2:38 pm #3031002EddieParticipant
I am joining today for additional accountability/motivation purposes. My weekend REG study goals are to study 2 modules and do all the quesions. Thanks guys
REG Study Group 2020 - Page 23
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