Becker CPA Review

Regulation Course Task Based Simul ations Errata/Clarifi cations

2013 Exam Edition

Date
Lecture
and Page
Reference
SIM
Number

Errata/Cl arifi cations
1/1/13
R1
Page 74
Item 2
Sim 1
Tab 6
Part 4
Following is the revised question and solution for this Task Based Simulation. In
the question, Bob should be a 5% shareholder (not a 7% shareholder) and the
option price should be $22 (not $19).

Question:

4. Bob, a 5% shareholder, received options to purchase 100 shares of stock, on
February 1, Year 1. On that date, the stock price was $25 per share and the
option price was $22 per share. Bob exercised the options on August 1, Year 1
when the stock FMV was $30 per share and sold them on J une 1, Year 3.

Solution:

4. Employee Stock Purchase Plan (ESPP). This option meets all of the
requirements of an ESPP. Bob is a not more than 5% shareholder. The option
price is not less than the lesser of 85% of the stock price when granted ($25) or
exercised ($30) (85% of $25 is $21.25; $22 i s not less than $21.25). The stock
was held at least two years from the date of grant and at least one year from the
exercise date. It is not an ISO because the option price is less than the FMV of
the stock on the date of grant.

1/31/13

R1
Sim 1
Task 4
Item #14

There has been some confusion with regard to the transaction identified in this
item. A total amount of proceeds of $500,000 was received in the transaction.
$40,000 of the proceeds was split-off from the like-kind exchange and applies to
personal property given up. This amount is taxable and reportable on the tax
return.

1/31/13 R1
Sim 1
Task 4
Item #22

The amount shown in the last column is a loss of $15,000, which is the realized
loss on the transaction for the brother. This amount will be reported on Schedule
D; however, it will be subject to the individual capital loss limitation rules and will
be incorporated to the calculation as it applies to the total capital gains and losses
on the brothers return. If there are no other capital transactions and no other
carry-over losses from prior years, the loss would be limited to $3,000 on the
brothers tax return with a carry-over short-term capital loss of $12,000 to be
considered in future years.

1/31/13 R3
Sim 1
Task 3
Cell C7
Mitchell

The following note should be added to the explanation for Cell C7 Mitchell:
Generally, the corporation takes the carryover basis from the transferor
shareholder. The rule that allows a corporation to take a higher amount of liability
assumed as the basis is a special rule that applies only if the shareholder
recognizes gain due to liabilities being in excess of the basis of all property
contributed. Mitchell contributed $20,000 in addition to the property. The
liabilities did not exceed the basis of the property contributed, including cash.
Therefore, Mitchell does not recognize any gain and the corporation takes the
carryover basis of $40,000 for the property.