REG Study Group 2020 - Page 23

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    How common is casualty losses for individuals tested? I just dont understand them at all and am thinking about giving up trying to understand it

    AUD - TBD

    BEC - TBD

    FAR - 42

    REG - Studying


    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!


    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!

    Tiramisu McNuggetsTiramisu McNuggets

    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 exchange

    AUD - 89

    BEC - 84

    FAR - 76

    REG - 86



    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).

    FAR - 80 (4/1/2019)

    BEC - 82 (9/7/2019)

    AUD - 81 (11/23/2019)

    REG - 94 (3/9/2020)


    I decided to resurrect the study groups. If you have a study strategy question for me, post it here. 🙂





    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.




    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 ___.
    A: $6,000
    can someone explain to me why she cannot deduct the loss $300 because she is electing standard deduction?


    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.

    It begins with a 75
    Been here too long as a cheerleader.....time to pass

    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.

    FAR - 80 (4/1/2019)

    BEC - 82 (9/7/2019)

    AUD - 81 (11/23/2019)

    REG - 94 (3/9/2020)


    thanks! Tncincy & lcarito…this question flew over my head…


    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.

    AUD - 93
    BEC - 82
    FAR - 76
    REG - 88
    AICPA Ethics 93
    Passed NASBA...On Montana agenda for March 31...
    Experience has been the worst part of the journey for me. You?
    How have you been?
    Ninja book and MCQs and the forum, all the way!
    If you want things to change you have to do something different.

    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?


    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?

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