Becker Professional Education

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Becker Professional Education

Regulation Course – Updates Included in V 1-3 AND New Sims Added to REG, AUD and FAR The purpose of this document is to provide you with a list of the items that have been changed/updated in the May 2016 version of the Regulation textbook (V1-3). If you have a V1.2 REG textbook purchased between May 2015 and the end of April 2016, you can either purchase the new V1-3 textbook for $15 or use this document to update your V1.2 textbook.

Please note that the tax portion of the Regulation exam focuses primarily on principles and concepts, and not on year-specific amounts, thresholds and phase-outs. This document provides updates for year-specific amounts that changed as of January 1, 2016. New tax law is not testable until six months after the date passed by Congress. Therefore, to the extent you would see these new amounts on the CPA exam, they will be testable beginning July 1, 2016.

REGULATION 1

Lecture Page, Item Update

R1 1-4, Chart Exemptions for 2016 are now $4,050. (bottom of chart)

1-5 and 1-6 2015 Form 1040

1-7, I.A.2. Exceptions

New item b.:

b. Individuals who can be claimed as dependents on another taxpayer's return with

i. unearned income of more than $1,050 for 2015, ($1,050 for 2016),

ii. earned income of more than $6,300 for 2015 ($6,300 for 2016) or

iii. total income which exceeds the larger of $1,050 or earned income (up to $5,950 for 2015 or $$5,950 for 2016) plus $350.

Change item B. 2. b. from “With either extension” to “Even with an extension”

1-10, I. Personal Exemptions

For 2016 the amount is $4,050. 1-11, Item D, top of

page

2016 amounts for Phase-out of Personal Exemptions are: J/SS = $311,300

HH = $285,350 S = $259,400 MFS = $155,650

1-11 Example box Change $321,900 to $323,300 in 2016. Change $309,900 to $311,300.

1-11 2 lines on top of Pass Key box

Change exemption to $4,050 for 2016. R-1

continued

1-13, Item 2. Under Exemption Amount

In the first two lines under this heading, change exemption amount to $4,050 for 2016.

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of (Taxable) Gross Income 1-14, Item C. 2. Last two lines of this

paragraph.

(i.e., if notice is given in 2015 (change to 2016), the revocation is effective no earlier than 2016 (change to 2017)), and (2) a copy of Form 8322 (change to 8332) claiming the revocation is attached to the custodial parent's tax return.

1-17, Item b, top of page

Add to the end of the last sentence: discussed in R-3 and R-4 lectures.

1-20, item (3), top of page

Change 2015 to 2016. Change $250 to $255. 1-20, Item (4), top

of page

Change 2015 to 2016. 1-20, Item i. (1), 2nd

line

-Change 2015 to 2016.

1-21 2015 Schedule B – Interest and Ordinary Dividends

1-22 item 2.c.(2) Phase-outs for 2016 begin at $77,550 for single and HH and $116,300 for MFJ.

1-22 item 3, 5th_{line. Change 2015 to 2016.}

1-23, Child's Unearned Income

table

Change 2015 to 2016

1-24, item (c) at top of page

The tax rates presented in (i) – (iii) are effective for both 2015 and 2016.

1-26 and 1-27 2015 Schedule C 1-28, Item 2

Expenses

The mileage rate (item 2.e.) is 54 cents per mile for 2016. 1-29, item 4.a.(2)

(a)

Change 2015 to 2016. 1-29, item 4.a.(2) (c) Change 2015 to 2016.

1-29, Item 4.a.(2) (d)

Add; (d) The actual SE tax is calculated on 92.35% of self-employment income.

1-34 and 1-35 2015 Schedule SE (Form 1040)

1-37 2015 Schedule F (Form 1040)

1-40 and 1-41 2015 Schedule E (Form 1040)

1-46, item P.7. Change $100,800 (2015) to $101,300 (2016) 1-46, box at bottom

of page

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REGULATION 2

R2 2-3, A1 and A4 Delete(Expired 12/31/14) at A1 and change 2014 to 2016 at A4. 2-4, B. Educator

Expenses

Delete (Expired 12/31/14, not yet extended as of the date of this publication.) Add: (“increases in amounts for 2016 not released as of the date of this publication”).

2-5, c. (1) Excessive AGI

Change 2015 to 2016

2-5, (2) (b) Phase-out is $184,000 - $194,000 for 2016. 2-5 Example

box

Change 2015 to 2016 2-6, d. (1) Change 2015 to 2016. 2-6, d. (2) Change 2015 to 2016. 2-6, table at

bottom of page, Modified

AGI column

Change 2015 to 2016.

4th_{row: change to $118,000 - $184,000}

5th_{row: change to Over $194,000}

2-6, footnotes to Rules Summary table

** Change phase-out to $184,000 - $194,000

2-7, item g. (top of page)

and item d.

2-7, item e., (1) Change $116 ,000 to $117,000 Change $131,000 to $132,000 2-7, item e., (2) Change $183,000 to $184,000 Change $193,000 to $194,000 2-8, 4. a. (1) Change 2015 to 2016.

2-9, d. (2) (bottom of

page)

2-10, (3) (top of page)

Change 2015 to 2016. 2-10, table

under (4)

Change 2015 to 2016. 2-10, D. 2. Change 2015 to 2016. 2-11, E. (top of

page)

Delete (“expired 12/31/14”; not yet extended as of the date of this publication). Add “(expires 12/31/16)”

2-11, E. 1. (top of page)

2-11, F. 1. Change 2015 to 2016. Change $6,650 to $6,750. 2-11, Item F. 3. Change 2015 to 2016.

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2-11, Item F. 3. a.

Change $6,450 to $6,550. Change $12,900 to $13,100. 2-12, 4.c. Change $3,300 / $6,650 to $3,350 / $6,700.

2-12, 4.d. Change 2015 to 2016.

2-12, G.3.1 The rate for 2016 is 19 cents per mile. 2-13, item J.1. Change 2015 to 2016.

2-13, item J.2. Change 2015 to 2016. 2-14, 3.,

Example box

2-15, III. A. 2016 Standard Deduction amounts are as follows:

S: $6,300. HH: $9,300. MFJ or SS: $12,600. MFS: $6,300. 2-16, Item 1

(top of page) Table

2-16, Example box

Change 2015 to 2016 in (1) and (2). 2-16, item 2,

Standard Deduction

Change 2015 to 2016. Delete the last sentence.

2-16, item B.1. Delete “the itemized deduction phase-out returns in 2015.” Change 2015 to 2016.

Change $309,900 to $311,300. Change $284,050 to $285,350. Change $258,250 to $259,400. Change $154,950 to $155,650.

2-17 2015 Schedule A (Form 1040)

2-19, item d.(5)(b)

Allowance is 19 cents per mile for 2016. 2-21, (4) Sales

Tax (top of page)

Delete “expired12/31/14, not yet extended as of the date of this publication.”

2-22, (3) Mortgage Insurance Premiums

Delete “(expired 12/31/14, not yet extended at the date of this publication.). Add “(expires 12/31/16)”.

2-22, b, (1), (c) Delete (c) Rents. Change (d) to (c). Change (e) to (d). 2-28, (2)

Transportation Expenses (top

of page)

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2-31, Rate Table at top of

page

2016 rate table replaces the 2015 table.

2-31, Pass Key Change 2015 to 2016.

2-32 2015 Form 1040

2-33, B. Child and Dependent

Care

Change 2015 to 2016 for Maximum Expenditures table.

2-34, 2. Earned (Work) Income Requirement,

5th_line

2-34, Example box

2-36, D. 1.a. Change 2015 to 2016. (Amounts remain the same.) 2-37, 1. f. and

g.

Change 2015 to 2016. 2-37, 2.e. Change 2015 to 2016.

Change $110,000 to $111,000. Change $130,000 to $131,000.

2-38, Table at bottom of page

U.S. Savings Bond—Series EE phase-outs: Change $77,200 to $77,550.

Change $92,200 to $92,550. Change $115,750 to $116,300. Change $145,750 to $146,300. Lifetime learning credit phase-outs: Change $110,000 to $111,000. Change $130,000 to $131,000. 2-39, F. 1. and

2.

Limit for 2016 is $13,460 (up from $13,400.)

Phase-out for 2016 is $201,920 – $241,920 (up from $201,010 - $241,010).

2-39, F. 3.d. Change 2015 to 2016. Change $13,400 to $13,460. Change $201,010 - $241,010 to $201,920 - $241,920

2-39, G. and G.2.

Change 2015 to 2016. 2-40, table at

top of page

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Replace the footnote with the following:

*For 2016, full phase-out applies to AGI for MFJ over $61,500, to HH over $46,125, and to S and MFS over $30,750.

2-40, I.1.b. and d.

b. Replace item in parenthesis with “expires 12/31/19”. d. Delete item in parenthesis.

2-41, item J Work Opportunity Credit (expires as of 12/31/2019) 2-42, 4.

Refundable Limit, item b

2-43, top of page, item 4

Replace 4. Computing Basic Earned Income Credit section with the following:

2-43, item 5, Disqualified

Income

2-44, Q. Replace item in parenthesis with “expires 12/31/16”. Change 2014 to 2016.

2-45, I. A. Change $185,400 to $186,300.

2-46 and 47 2015 Form 6251 Alternative Minimum Tax-Individuals 2-48, Item B Replace B. Exemption Amounts with the following:

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2-52, Item III A.

For 2016, the amount of the tax is the lesser of $695 per person or 2.5 percent of family income, with a maximum of $2,085.

2-55, Item II.B.

In the last line on the page, change "accessed June 2015" to "accessed January 2016."

REGULATION 3

R3 3-8 through 3-14 Tax forms are updated to 2015 versions: Form 1120, Schedule M-3.

3-16, c. Bonus Accruals

Change last line to “provided they are paid within 2 ½ months or 3 ½ months (based on the filing requirements on page R3-26) after year-end.”

3-21, Item s. (1) (b) The work opportunity credit expires 12/31/2019. 3-21, Item s. (1) (d) Delete he last sentence in the parenthesis.

3-22, Under the heading Ordinary

In the column headed IRC-Tax Return, the amount for 2016 is $500,000.

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Expenses, Section 179 depreciation

3-26, III.A In the first sentence, replace “third” with “fourth” and replace March with April. Add the following passage at the end: For C Corporations with fiscal years ending on June 30, the new due dates will not apply until tax years beginning after 12/31/25. Until then, the tax return is due by the 15th day of the third month after the close of the tax year.

3-26, III.A.2 Change six to five. Add the following passage at the end: (six months after the year 2025). C Corporations with a June 30 year-end have a seven-month extension (six months after 12/31/25).

3-28, Item C, Tax Rates

The rates for 2016 remain unchanged from 2015. 3-30, 6 Replace “fifteenth day of the third month following the

close of the consolidated tax group’s tax year (March 15 for a calendar year group)” with “same dates as outlined above”.

3-47, E. Small Business Stock

In the second line, change 50 to 100. Delete the entire passage in the parenthesis.

3-47, E.1 Change 50 to 100. Delete the entire passage in the parenthesis.

3-47, E.3 Replace “28 percent tax rate” with “regular tax rates”.

3-53 – 3-54 2015 Schedule K-1 of Form 1120S.

3-56, Table at the top

In the first item under Treatment on the right, delete (already taxed).

3-61 2015 Form 990.

REGULATION 4

R-4 4-4 – 4-5 2015 Schedule D (Form 1040) Capital Gains and Losses

4-6 – 4-7 2015 Form 8949 Sales and Other Dispositions of Capital Assets 4-21 – 4-22 2015 Form 8824 Like-Kind Exchanges

4-24 2015 Form 6252 Installment Sale Income

4-31, Item C.1.

The rules in item 1 are for 2016. Delete all items in the parenthesis. Replace 25,000 with 500,000.

4-31, Item C.1.a

Change 200,000 to 2,010,000. 4-31, Item

C.1.d.

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4-31, Item C.1.d.(2)

Delete everything at the beginning though January 1, 2012 at the beginning of the fourth line. In the last sentence in (2) the date January 1, 2014, should now be January 1, 2018.

4-31, Item C.1.d.(3)

The year 2014 should now be 2019. 4-35, at the

very top

In the first line after “For corporations”, add “(in addition to Section 1250 recapture)”. In the second line, delete “20 percent of” in the middle and add “20 percent of” after the word “or” (at the end of the line). In the third line, add “straight-line” before “accumulated depreciation”. In the last line, delete “allowed capital gain treatment under” and add “gain” after Section 1231.

4-35, first Example

box

In the second line, add “straight-line” before “accumulated

depreciation”. In the fourth line, delete “20 percent of” in the middle and add “20 percent of” after the word “or” (at the end of the line). In the fifth line, change 10,000 to 15,000 and change 2,000 to 3,000. In the last line, change 8,000 to 7,000.

4-35, Item 3 In the third line of the second paragraph add “straight-line” before accumulated depreciation.

4-35, second Example

In the second line, add “straight-line” before accumulated

depreciation. In the second to last line, add “straight-line” before accumulated depreciation.

4-44, Item IV.A.1.(a)

Change April to March.

4-45 – 4-49 2015 Form 1065 U.S. Return of Partnership Income 4-53, Item D Change April to March.

4-54 2015 Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc

4-61, Item I, D.1.c. and

2.b.

For 2016 the unified estate and gift tax credit is $2,125,800 (changed from $2,117,800). The exemption from gift tax for 2015 is the cumulative, nonexcluded gifts of $5,450,000 (changed from $5,430,000).

4-64 and 66, Item E and

6, table. Use this table to replace the 2015 table.

4-67 – 4-68 2015 Form 1041 U.S. Income Tax Return for Estates and Trusts 4-69, Item

III, A

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4-70, Estate Transfer Tax

chart

At the bottom of the chart, the Applicable Credit amount for 2016 is $2,125,800 (up from $2,117,800) and the tentative tax base at death is $5,450,000 (up from $5,430,000).

4-71, Item E.1.

Change $2,117,800 to $2,125,800 for 2016. Change $5,430,000 to $5,450,000.

4-72, Items 2 and 3 at the top of the page

The amount $5,430,000 is now $5,450,000 for 2016. The amount $2,117,800 is now $2,125,800 for 2016.

4-72, Example

box is revised as

shown.

4-77, item V, last paragraph

on page revised as

shown.

4-78 – 4-82 2015 Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return

4-83 – 4-84 2015 Form 4797 Sales of Business Property

REGULATION 5 Lecture Page,

Item

Update

R5 5-48 –

5-50

Moved coverage of Regulation A to from page 48 to page 50, expanded coverage to include Reg. A+.

Click here to view the new pages.

5-6 Items D &

E

Maximum penalties mentioned in D. and E. have changed from $25,000 to $25,500.

5-7 Items F, G

& H

Maximum penalties mentioned in these items have changed from $25,000 to $25,500.

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Items I & J 1. 5-30, top

of page

New text at top of page; should say “exceeds 7.5 or 10 percent” rather than “7.5 percent”

Note: There were no revisions to REG 6.

Item

Update

R7 7-42

Item B 1. b.

2016 is the year these amounts will be adjusted for inflation. However, the new amounts are not available as of the publication date of R7.

Item

Update

R8 8-25

Bottom of page

A footnote was added at the bottom of the table. The footnote relates to the last row (Taxation) and reads: Default treatment, but entities may elect to be taxed differently under the “check the box” rules. 8-53 Item

C 3.

Add to end of paragraph: (increases in amounts for 2016 not yet released.)

Note: new Document Review Simulations have been added to REG, AUD and FAR. A list of those new items is included here: Click here to view the list of new DRSs.