Becker CPA Review

Regulation Course Errata/Clarifications

2016 Exam Edition

Lecture Question
Date Errata/Clarifications
and Topic or Page #

Final Exam In the facts for this task-based simulation, the capital gain distribution of $10,000
REG #2 should be specified as long-term.
6/24/16 Testlet 4
Final Exam
Task 3 Capital gain distribution (long-term) $10,000

After 2016, medical expenses are only deductible if they exceed 10% of AGI for
both AMT and regular tax purposes. There wont be any AMT adjustment for
medical expenses after 2016

R2 R2-49 For 2016 only, taxpayers age 65 and over can deduct for regular tax purposes
6/24/16 Item C.8.
Topic 3 medical expenses in excess of 7.5% of AGI. For those taxpayers, there is an AMT
adjustment, and that adjustment is equal to the difference between medical
expenses deductible for regular tax purposes (i.e., medical expenses exceeding
7.5% of AGI) and medical expenses deductible for AMT purposes (i.e., medical
expenses exceeding 10% of AGI).

The explanation for pop-up 4 should be updated as follows:

Sam is a graduate student and, as such, qualifies for the lifetime learning credit,
but not the American opportunity tax credit. Sara, however, as an undergraduate
Sim 2
6/24/16 R2 Task 7 and a junior does qualify (presumably) and her maximum credit is $2,500 (10
percent of $1,000 plus 25 percent of the next $1,000) (100 percent of $2,000 of
qualifying expenses plus 25 percent of the next $2,000) after reducing the
expenses for the scholarship and the Coverdell distribution. Higher AGI limits
apply in the case of the AOTC, so her credit is not phased out.

R3 The filing date for corporations was changed from March 15 to April 15. Although
F3-24
6/24/16 Topic 1
F3-60
the date does not appear on the text on pages F3-24 and F3-60, the national
Topic 3 instructor incorrectly states the old corporate filing date of March 15.
 Becker CPA Review
Regulation Course Errata/Clarifications
2016 Exam Edition

This correction applies to V1.3 of the REG course released May 2016.

The flashcard incorrectly states that depreciation should be reported on an S

Corporation K-1. The corrected flashcard appears below.

Small Business Corporations (S Corporations)

What items must be separately listed on

an S corporation tax return (Schedule K)?

Some items that must be separately listed on an S corporation tax return include
the following:
Flashcard
5/31/16 R3 R3-27
Ordinary income
Rental income/loss
Portfolio income (including interest, dividends, royalties, and all capital
gains [losses])
Section 1231 gains and losses
Charitable contributions
Section 179 deduction
Depreciation
Foreign taxes
Tax-exempt interest

This correction applies to V1.3 of the REG course released May 2016.

The Section 291 rules for depreciation recapture for corporations are stated
incorrectly. The corrected text and subsequent example appear below.

For corporations, the total amount of the taxable recapture on real property as
ordinary income under Section 291 is equal to 20 percent of the lesser of the
recognized gain or the accumulated depreciation. Any gain in excess of the
amount recognized as ordinary income is allowed capital gain treatment under
Section 1231.
R4-35
5/31/16 R4 Item C.2.
EXAMPLE

Lancaster, Inc., a corporation, owned a building used in its business with an

original cost basis of $100,000 and accumulated depreciation of $15,000.
Lancaster sold the building for 95,000. Recognized gain on the sale of the build is
$10,000 (95,000 tax basis of $85,000). Of the $10,000 gain, the amount
recognized as ordinary income is 20 percent of the lesser of $10,000 (gain
recognized) or $15,000 (accumulated depreciation). Ordinary income will be: 20%
x $10,000 = $2,000. The remaining gain of $8,000 will be recognized as a Section
1231 gain.
 Becker CPA Review
Regulation Course Errata/Clarifications
2016 Exam Edition

This correction applies to V1.3 of the REG course released May 2016.

The answer choices and explanation for this question has been updated to reflect
current bankruptcy rules. The corrected question and explanation appears below.

A contested involuntary petition in bankruptcy will be dismissed if the debtor:

a. Owes unsecured obligations exceeding $14,425 $15,325 to less than

three creditors.
b. Had all its property taken to enforce a lien within 120 days of filing.
c. Is failing to pay undisputed debts as they become due.
d. Is an individual engaged in the business of farming.
R7 CPA-01842
5/31/16 Optional Question Explanation
Questions #19 of 45
Choice d is correct. An individual engaged in the business of farming cannot be
involuntarily petitioned into bankruptcy.

Choice a is incorrect. If a debtor has fewer than twelve creditors, any one or
more creditors who are owed at least $14,425 $15,325 in unsecured debt may
petition the debtor involuntarily into bankruptcy.

Choice b is incorrect. This answer is a distractor.

Choice c is incorrect. Just the opposite, because a debtor who is not paying
undisputed debts as they become due (i.e., bankruptcy in the equity sense) may
be involuntarily petitioned into bankruptcy.

This question has been corrected in V1.3 of the REG course released May 2016.

CPA-01375 The explanation has been updated as follows:

R7
3/11/16 Question
Topic 3
#18 of 32 The debtor must owe at least $14,425 $15,325 because the petition must be filed
by unsecured creditors owed at least that much, but creditors can aggregate their
clams.

This question has been corrected in V1.3 of the REG course released May 2016.

The explanation for this question has been updated to reflect current rules for
corporation estimated payments. The correct explanation appears below.

CPA-02083 A taxpayer does not extend the time for payment of tax be extending the filing
R3
3/11/16 Question deadline for the return. If there is tax owed when the return is filed, interest must
Topic 1
#31 of 144 be paid at the rate prescribed by IRC 6621; therefore, Bass was subject to pay
interest on the $400 tax payment made in Year 3. There is no delinquency
penalty if the taxpayer files its return, the amount owed on the return is not $500
or more pays at least 90% of the tax due by the due date, and the taxpayer pays
the balance due on or before the extended due date (all of which Bass Corp.
complied with).
 Becker CPA Review
Regulation Course Errata/Clarifications
2016 Exam Edition

This question has been corrected in V1.3 of the REG course released May 2016.

The text at the top of the task should be changed as follows:

For each item below from the current year of Glaxo, Inc., indicate the amount of a
Sim 1 deduction under the Section 179 election using 2014 rules. Assume that the
2/10/16 R4 Tab 8 Section 179 deduction limit is $500,000 and that businesses exceeding a total of
$2 million of purchases in qualifying equipment will have the Section 179
deduction phase-out dollar-for-dollar. Please treat each item separately.

On the CPA exam, candidates should be able to apply the Section 179 deduction
but will not be required to know the specific limits for any given year.

This question has been corrected in V1.3 of the REG course released May 2016.

The solution for question 7 should be $34,400 (Included $) and $0 (Excluded $)

calculated as follows:

Sim 1 Included $ = $50,000 $10,000 $1,000 $2,000 $2,600 = $34,400

2/5/16 R1 Tab 2
Note that only 50% of the $4,000 for meals can be deducted.

Excluded $ = $0

Salary to self is a draw, not a deduction.