NSA Enrolled Agent Course Preview June 2014

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NSA Enrolled Agent Course Preview June 2014

  1. 1. NSA Enrolled Agent Special Enrollment Exam Review Course Preview Part 1: Individuals
  2. 2. Two Cardinal Rules in Studying for the Enrolled Agents Exam •Rule 1 – There are absolutely NO shortcuts in studying for the EA Exam •Rule 2 – Refer to Rule 1
  3. 3. Pyramid Approach to Studying Final Review Cards PowerPoint Webinar Presentation NSA EA Exam Review Course IRS Publications
  4. 4. References Used in Slides •Color Code Description of Topic - Based on analysis of last 10 publicly-available exams: •Red [R] – Basic knowledge topic asked frequently •Blue [B] – Complex topic asked fairly frequently •Green [G] – Basic topic asked less frequently •Yellow [Y] – Complex topic seldom tested •* (asterisk) - Indicates at least 7 questions on the topic on last 10 publicly-available exams
  5. 5. Topic 30 Capital Gain & Loss Netting of Individuals
  6. 6. *30A Capital Gain and Loss Netting Process [R] • 3-Step Process – (1) Net all S/Ts, (2) Net all L/Ts, (3) if same sign, add separately to income; if opposite signs, add net difference to income (Note: LT > 1yr) • Final Result – 4 Basic Rules (for one transaction): • S/T Capital Gain – Treat as ordinary income • S/T Capital Loss - $3,000 offset against ordinary income • L/T Capital Gain – 15% max. rate (0% if 10% or15% ordinary income bracket, 20% if 39.6% ordinary bracket) • L/T Capital Loss - $3,000 offset against ordinary income • Figure 1-9 • Question 99
  7. 7. Figure 1-9
  8. 8. Question 99 During 2013, George sold the following shares of stock: • Stock Purchased Basis Sold Proceeds • V Corp. 5/18/08 $ 300 9/3/13 $1,000 • Q Corp. 8/16/12 $3,000 1/6/13 $2,500 • A Corp. 2/14/12 $1,200 1/9/13 $ 600 • J Corp. 3/27/13 $2,000 9/2/13 $3,500 What is George’s net capital gain or loss for 2013? a. $(1,100) b. $(1,200) c. $1,100 d. $1,200
  9. 9. Figure 1-10 All 28% 25% 15% Short-Term Long-Term* Long-Term Long-Term (4,000) (5,000) 14,000 (10,000) 9,000 4,000 6,000 (9,000) 12,000 1,000 (3,000) (4,000) 8,000 14,000 ** (3,000) | (3,000) <--------------------------v v--------- (4,000) 1,000 ** * Includes any long-term capital loss carryover ** Result - $1,000 taxed at a 28% rate, and $14,000 taxed at a 25% rate
  10. 10. Question 100 In December, Emily sold an antique rug for $4,100. She bought the rug two years ago for $1,100. What is her taxable gain and at what maximum rate will it be taxed? a. $3,000 long-term capital gain, taxed at regular rate b. $3,000 long-term capital gain, taxed at 28% rate c. $1,500 long-term capital gain, taxed at regular rate d. $1,500 long-term capital gain, taxed at 28% rate
  11. 11. *30C Tax Treatment of Net Capital Losses [R] • $3,000 – Maximum combined ordinary income offset for net S/T and net L/T losses each yr. (use S/T first) • $1,500 – Married – filing separately limit • If Taxable Income < Capital Loss – Full limit (up to $3,000) still assumed utilized in computing carryover • Capital Loss Carryover – Indefinite (retain character) • Decedent’s Return – No carryovers possible • Question 101 and Question 102
  12. 12. Question 101 During the current year, Nancy had the following transactions: • Short-term capital loss $(2,400) • Short-term capital gain 2,000 • Short-term capital loss carryover from 2012 (1,400) • Long-term capital gain 3,800 • Long-term capital loss (8,000) What is the amount of her capital loss deduction, and what is the amount and character of her capital loss carryover to the next year? Deduction Carryover a. $0 $6,000 long-term b. $3,000 $3,000 long-term c. $6,000 $-0- d. $3,000 $3,000 short-term
  13. 13. Question 102 Bob sold securities in 2013. The sales resulted in a capital loss of $7,000. He had no other capital transactions. He and his wife Gloria decide to file separate returns for 2013. His taxable income was $26,000. What amount of capital loss can he deduct on his 2013 return and what amount can he carry over to 2014? a. $7,000 in 2013 and $0 carryover b. $3,000 in 2013 and $4,000 carryover c. $4,000 in 2013 and $3,000 carryover d. $1,500 in 2013 and $5,500 carry over

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