REG Study Group Q1 2017

CPA Exam Forum REG REG Review REG Study Group Q1 2017

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    Sure I will do it tonight. For the old questions I posted yesterday right ?

    jack yassa
    jack yassa


    Ye's please!



    I just spent the last 7 days doing all the Becker MCQs, 1500 total. 76% on tax, 72% on ethics, 66% on law… combined 72%. Test in 3 days. Keep hitting all sections, or focus on my weaker areas that are in the low 60's? I figure I have time for about 500 more, or maybe read through ninja notes and do 400 MCQs. Thoughts?



    @ sweazy I'd say ninja notes. I have my test tomorrow, and all I did today was read through ninja notes. I think the notes are a good way to remind you of the main points in all 8 chapters without having to re-read the book – Good luck!



    Good luck @ all4inQ1 I have my test on the 25th. NINJA mcqs average is 80% trending at 84%. This could be my last test. During the next 7 days my plan is to answer and understand as many mcq as possible and read over my NINJA notes. Also, I've signed up for the 2 week free trial from Wiley to practice Sims. Any suggestions or other advice?



    @bravesfannc- I'm doing pretty much the same thing, but I'm using Gleim and Wiley since my Ninja access expired a couple weeks ago. I signed up for the Wiley trial and did all the sims and tax mcq's. Now I'm reworking Gleim sims and printing out mcq's that are giving me problems. Next weekend I plan on reading through Roger's book and reviewing the major topics and areas that are still giving me trouble. I'll probably reread the Ninja notes the day before my exam for a quick review. Hopefully this is it for me too! Good luck on your exam and to whoever else is taking it soon.



    Thank you @ Re2pect. This is my 3rd attempt at REG. First was a 73 in Sept and then a 74 in Dec. On my trouble spots I've watched a few of the Wiley videos and a light went off and I actually learned the concept. Sometimes it takes someone teaching the concept a different way. I'm doing whatever it takes to pass this one. Each evening after work my wife is quizzing me on important topics. She will ask how do you calculate personal and corp AMT and the adjustments and preferences, how to calculate tax due on a 1040, what are the separately stated items. The list goes on and on. I think my notes that she quizzes me on is 12 – 16 pages. Before we start our saying is “What ever it takes to pass this last one.” Keep up the good work and you will pass.



    Good luck to all of you guys. Keep us posted.



    Some more AMT which helps

    1.McRab Corp. has alternative minimum taxable income (AMTI) of $140,000. How much is McRab’s exemption for alternative minimum tax?
    a. $38,000
    b. $0
    c. $12,000
    d. $40,000

    Answer : D

    2.Chandler Inc. has regular taxable income of $123,000. Included in that calculation are the following items:
    Percentage depletion in excess of cost depletion
    Private activity bond interest income
    Charitable contributions
    Chandler had a long-term contract and reported no income during the current year under the completed contract method. Income reported under the percentage of completion method would have been $12,000. What is Chandler’s alternative minimum taxable income (AMTI)?
    a. $140,500
    b. $149,000
    c. $105,500
    d. $128,500

    Answer : A

    This one is little tricky

    Mark and Lucy owned two stocks, Tinker Inc. and Chance Inc., that became worthless during Year 8. The adjusted basis in Tinker was $300,000. Tinker was incorporated in Year 2, and Mark and Lucy purchased their stock in Year 4. Their adjusted basis in Chance was $200,000. Chance was incorporated in Year 2, and Mark and Lucy were original stockholders. Both stocks were purchased for cash, and each corporation had total capital of $500,000. How much ordinary loss can Mark and Lucy deduct on their joint Year 8 tax return as a result of these transactions?

    a. $200,000
    b. $300,000
    c. $0
    d. $100,000

    Answer : D

    3.Melanie is the sole stockholder of Machine Inc., an S corporation. Her basis in the stock as of the end of Year 4 is $43,400. During Year 5, Machine reported a loss of $19,000. During Year 5, Melanie received a distribution of $38,000 from Machine and guaranteed $11,000 of Machine’s corporate debt. What is Melanie’s total of stock and debt basis in Machine stock as of the end of Year 5?

    a. $35,400
    b. $0
    c. $24,400
    d. $54,400

    Answer : B

    4.XYZ Inc. was a C corporation through the end of Year 6. Starting at the beginning of Year 7, XYZ elected S corporation status. At the end of Year 6, XYZ had accumulated earnings and profits (E&P) of $55,000. At the end of Year 7, XYZ had a balance of $40,000 in its accumulated adjustments account (AAA). During Year 8, XYZ had ordinary income of $20,000 and made distributions of $100,000. Rob is a 50% shareholder in XYZ. He receives $50,000 (one half) of the distribution. His basis in the stock at the end of Year 8 is $18,000 before considering the distribution itself. What amount of the distribution to Rob will be a taxable dividend to Rob for Year 8?

    a. $30,000
    b. $18,000
    c. $50,000
    d. $20,000

    Answer : D

    5.Olinto Inc. has taxable income (before special deductions and net operating loss deduction) of $92,000. Included in that amount is $12,000 interest and dividends income. Forty percent of Olinto’s property, payroll, and sales are in its home state. What amount of this taxable income will be taxed by Olinto Inc.’s home state?

    a. $44,000
    b. $90,000
    c. $36,800
    d. $12,000

    Answer : A



    The Example : 3. Betty is age 74 and has AGI of $100,000. The following items may qualify as itemized deductions for Betty: Can you show how you came up with the answer. I must be missing something.




    I was just doing a Gleim sim for REG that dealt with pro rata distributions from E&P and I got half of it wrong because of rounding differences. Since most REG sims make you calculate the answer instead of giving a drop down menu, it worries me that I could get most of a sim wrong because of this.

    Does anyone know if an actual person reviews sims or is everything done by computer?



    Here you go.

    Example : 3

    Betty is age 74 and has AGI of $100,000. The following items may qualify as itemized deductions for Betty:
    Qualified medical expenses
    Real estate tax
    State income tax
    Charitable contributions
    Mortgage interest on acquisition indebtedness
    Home equity interest on a loan not used to improve the home
    Miscellaneous itemized deductions

    What is the itemized deduction add-back for AMT?

    a. $3,300
    b. $3,800
    c. $2,500
    d. $8,800

    Answer : A

    Itemized deduction Add Back :

    = Qualified medical expenses – 1000 ( 8500-7500(7.5% of AGI – AGI – 100,000) – So 1000 disallowed
    + Real Estate Tax – 1200
    + State Income Tax – 800
    + Home equity interest on a loan not used to improve the home
    $300 – ** Key word “NOT”

      – I keep missing this

      = 1000 + 1200 + 800 + 300
      = 3300

      * Above 65 yr old – AMT is allowed only above 10 % of AGI and regular tax it is 7.5% of AGI
      * Miscellaneous deductions allowed are above 2 % of AGI so it is 2000 in this case – so no add back

      OMG it hurts 71 and 74. I got 72 last time. I am sure you will come through with flying colors this time. All the best 🙂



    @re2pect – Becker is the same. Becker expects to round it off. Some SIMS if I enter the correct answer with 2 decimal places it grades as a wrong answer. I am not sure about the real exam. I read somewhere in this forum only BEC essays are graded by real person and all others are by computer. I am not sure though. All the best again 🙂



    I was missing the $1,000 disallowed medical expenses. Thank you. That could be just the information needed to pass this test.




    Most welcome:-)

    I think you will like the below ones .

    1.Harry has various items of income as follows:

    W-2 wages
    Interest and dividends
    Rental real estate on Schedule E
    Income from an S corporation from Schedule K-1
    Income from a general partnership from Schedule K-1

    For purposes of the self-employment tax, what are the net earnings from self-employment? (Note: Please answer before the required 92.35% calculation performed on Schedule SE.)

    a. $10,000
    b. $22,000
    c. $57,000
    d. $30,000

    Answer : A

    2.Anthony entered into a long-term construction contract in Year 3. The total profit of the contract is $80,000 and does not change over the life of the contract. The contract will be completed in Year 5. The contract is 20% and 70% complete at the end of Years 3 and 4, respectively. What is the alternative minimum tax adjustment required in Year 5?

    a. ($56,000)
    b. $24,000
    c. ($24,000)
    d. $56,000

    Answer : A

    3.Carol has taxable income before personal exemptions of $48,000. Included in that calculation are the following items:
    Real estate taxes on her home
    Mortgage interest on acquisition indebtedness
    Charitable contributions
    Carol also had excluded municipal bond interest income of $8,000, $3,000 of which was deemed to be private activity bond interest. What is Carol’s alternative minimum taxable income (AMTI)?

    a. $50,000
    b. $54,200
    c. $54,750
    d. $53,000

    Answer : D

    jack yassa
    jack yassa


    May you please post the full explanation as well!





    I like the below ones.

    1.Becky entered into an oral contract with Office, Inc., an office supplier, to buy 100 staplers for an upcoming back to school sale at Becky’s store. Office, Inc. agreed to deliver the staplers in two weeks at a cost of $4.00 per stapler. A week later, Becky phoned Office and asked if she could increase her order to 200 staplers. Office, Inc. agreed. Office, Inc. delivered the 200 staplers as promised, but Becky accepted 150 upon discovering that she lacked storage space for all 200. Under the Sales Article of the UCC, can Office, Inc. recover damages with respect to the 50 staplers that were not accepted?

    a. Yes, because Becky accepted $600 worth of staplers.
    b. Yes, because the modification was for less than $500.
    c. No, because Office, Inc. is a merchant with respect to staplers.
    d. No, because the contract as modified was for $800.

    Answer : D

    2.An endorsement on the back of a negotiable is as follows:
    “Pay John Smith
    /s/ Bob Anderson, without recourse”
    Under the Negotiable Instruments Article of the UCC, the endorsement can best be described as:
    a. Special, qualified, and nonrestrictive.
    b. Blank, qualified, and restrictive.
    c. Blank, qualified, and nonrestrictive.
    d. Special, unqualified, and restrictive.

    Answer : A

    3.Luke, Connor, and Jack have created a Limited Liability Company (LLC) and are all members. Luke contributes a building valued at $500,000, Connor contributes cash in the amount of $400,000 and Jack contributes a parcel of land valued at $100,000. Which of the following statements accurately describes the voting authority of the LLC members?

    a. Voting strength would be 50% Luke, 40% Connor, and 10% Jack because voting strength is proportional to contributions in an LLC.
    The members are not permitted to vote because LLCs must select a manager to vote on LLC matters.
    c.Regardless of the value of contributions, each member has equal voting strength in an LLC.
    d.Connor would be the only member entitled to vote on LLC matters because he is the only member contributing cash.

    Answer : A

    4.Which of the following oral agreements is enforceable without a writing under the statute of frauds?
    a. An agreement to employ a person for life.
    b. An agreement to employ a person for $450 a week for 18 months.
    c. An agreement to lease a house for $499 per month for two years.
    d. An agreement to give a couple $450 if they agree to marry within six months.

    Answer : A

    Alex, Becky, Callilla, and Danielle are partners. Alex contributed 35% of the firm’s capital, Becky contributed 30%, Callilla contributed 25%, and Danielle contributed 10%. Under the partnership agreement, Alex is entitled to 35% of the firm’s profits, Callilla is entitled to 25%, and Becky and Danielle are each entitled to 20% of the profits. Unless the partnership agreement provides otherwise, the vote of which of the following partners would be sufficient to make a management decision regarding ordinary business of the partnership?

    a. Alex and Becky together.
    b. Alex and Danielle together.
    c. Becky and Callilla together.
    d. Becky, Callilla, and Danielle together.

    Answer : D

    5.Simmons, an agent for Jensen, has the express authority to sell Jensen's goods. Simmons also has the express authority to grant discounts of up to 5% of list price. Simmons sold Hemple goods with a list price of $1,000 and granted Hemple a 10% discount. Hemple had not previously dealt with either Simmons or Jensen. Which of the following courses of action may Jensen properly take?

    a. Seek to void the sale to Hemple.
    b. Seek recovery of $50 from either Hemple or Simmons.
    c. Seek recovery of $50 from Hemple only.
    d. Seek recovery of $50 from Simmons only.

    Answer : D



    Going forward I will post the full explanation. Thanks:-)


    @esenthil – I appreciate you contributing to the study group, but please refrain from posting blocks of questions or study materials. They are a company's copyrighted work and I'm going to get nastigrams eventually from their counsel (it's happened before).

    Thank you for understanding.



    I am glad that I joined this community . I am planning to study for my Reg exam after a year that I took first time.Is there any good material anybody can suggest ?

    all the best to anyone taking the test soon !



    Hi Jeff,

    I am really sorry. I got excited and carried away. My apologies. I didn't realize it. I got it and won't happen gain.

    BTW thank you for maintaining an amazing forum and helping the community.

    Again sorry 🙁

    Thank you Sir


    No worries 🙂

    jack yassa
    jack yassa

    I know the guaranteed payment is taxable to the S/H, but does it increase his basis in the partnership?

    Thanks guys



    jack: if memory serves treat guaranteed payments like salary. They certainly wouldnt increase a basis, they do indirectly decrease it though. “indirectly” meaning that guaranteed payments are taken out of the partnership's income which then gets allocated to the partners accordingly.

    Note the distinction between a guaranteed payment (salary to partnership) and Distribution. Distributions are when a partner withdrawals a share of their own basis in the partisanship, reducing their basis and putting money in their pocket tax free.


    Just got back to the house after taking REG. Still waiting on my score for FAR. AUD scheduled in less than three weeks. . . No rest for the wicked. . . Or the aspiring CPA.



    Hello .. i took REG yesterday and seems i messed up on two sim questions, mcq i could go wrong on 15 questions max..any chance of passing for me..



    there's always a chance.

    don't lose hope



    taking this on Monday the 27th.

    what should I focus on?

    this is a retake due to expiration. got a 77 first time.



    As of the beginning of Year 3, Wolf, Inc. has a written accounting policy to expense amounts paid for tangible property costing up to $8,000. Wolf does not have an applicable financial statement for the year. During Year 3, Wolf pays $12,000 for three pieces of office furniture that cost $4,000 each and have an economic life of five years. Under the de minimis rule, how much can Wolf deduct for tax purposes in Year 3?

    Could someone help explain this? The answer states “Because they do not have an applicable financial statement, the de minimis rule allows the company to expense items costing up to $2,500 each. These three items cost $4,000 each, which is in excess of $2,500 each. Therefore, none of these costs can be expensed under the de minimis rule”

    However, my review material says no applicable financial statement for a company means de minimus max is 500. Any help? Thank you !




    If company does not an applicable financial statement, the maximum amount is $2,500 per asset after January 1, 2016(Prior to this date, the amount was $500 per asset)

    I found this from IRS website.

    Hopefully, this will help for you.

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