Becker Professional Education

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1 1 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, 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, REGULATION 1 Lecture Page, Item Update R1 1-4, Chart Exemptions for 2016 are now $4,050. (bottom of chart) 1-5 and Form , 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. R-1 continued 1-10, I. Personal Exemptions 1-11, Item D, top of page Change item B. 2. b. from With either extension to Even with an extension For 2016 the amount is $4, amounts for Phase-out of Personal Exemptions are: J/SS = $311,300 HH = $285,350 S = $259,400 MFS = $155, Example box Change $321,900 to $323,300 in Change $309, lines on top of Pass Key box 1-13, Item 2. Under Exemption Amount to $311,300. Change exemption to $4,050 for In the first two lines under this heading, change exemption amount to $4,050 for 2016.

2 2 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. Add to the end of the last sentence: discussed in R-3 and R-4 lectures. Change $250 to $ , Item b, top of page 1-20, item (3), top of page 1-20, Item (4), top of page 1-20, Item i. (1), 2nd - line 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 item 3, 5 th line. 1-23, Child's Unearned Income table Change 2015 to , item (c) at top of page The tax rates presented in (i) (iii) are effective for both 2015 and and Schedule C 1-28, Item 2 The mileage rate (item 2.e.) is 54 cents per mile for Expenses 1-29, item 4.a.(2) (a) 1-29, item 4.a.(2) (c) 1-29, Item 4.a.(2) (d) Add; (d) The actual SE tax is calculated on 92.35% of selfemployment income and Schedule SE (Form 1040) Schedule F (Form 1040) 1-40 and Schedule E (Form 1040) 1-46, item P.7. Change $100,800 (2015) to $101,300 (2016) 1-46, box at bottom of page Change2015 to 2016.

3 3 REGULATION 2 Lecture Page, Item Update 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) Change 2015 to 2016 Excessive AGI 2-5, (2) (b) Phase-out is $184,000 - $194,000 for Example Change 2015 to 2016 box 2-6, d. (1) 2-6, d. (2) 2-6, table at bottom of page, Modified AGI column 4 th row: change to $118,000 - $184,000 5 th row: change to Over $194, , footnotes ** Change phase-out to $184,000 - $194,000 to Rules Summary table 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, , item e., (2) Change $183,000 to $184,000 Change $193,000 to $194, , 4. a. (1) 2-9, d. (2) (bottom of page) 2-10, (3) (top of page) 2-10, table under (4) 2-10, D , 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 Change 2014 to of page) 2-11, F. 1. Change $6,650 to $6, , Item F. 3.

4 4 2-11, Item F. 3. Change $6,450 to $6,550. Change $12,900 to $13,100. a. 2-12, 4.c. Change $3,300 / $6,650 to $3,350 / $6, , 4.d. 2-12, G.3.1 The rate for 2016 is 19 cents per mile. 2-13, item J , item J , 3., Example box 2-15, III. A Standard Deduction amounts are as follows: 2-16, Item 1 (top of page) Table 2-16, Example box 2-16, item 2, Standard Deduction S: $6,300. HH: $9,300. MFJ or SS: $12,600. MFS: $6,300. Change 2015 to 2016 in (1) and (2). Delete the last sentence. 2-16, item B.1. Delete the itemized deduction phase-out returns in Change $309,900 to $311,300. Change $284,050 to $285,350. Change $258,250 to $259,400. Change $154,950 to $155, Schedule A (Form 1040) 2-19, item d.(5)(b) 2-21, (4) Sales Tax (top of page) 2-22, (3) Mortgage Insurance Premiums Allowance is 19 cents per mile for Delete expired12/31/14, not yet extended as of the date of this publication. Delete (expired 12/31/14, not yet extended at the date of this publication.). Add (expires 12/31/16). Change 2014 to , b, (1), (c) Delete (c) Rents. Change (d) to (c). Change (e) to (d). 2-28, (2) Mileage allowance for 2016 is 54 cents per mile. Transportation Expenses (top of page)

5 5 2-31, Rate 2016 rate table replaces the 2015 table. Table at top of page 2-31, Pass Key Form 1040 Change 2015 to 2016 for Maximum Expenditures table. 2-33, B. Child and Dependent Care 2-34, 2. Earned (Work) Income Requirement, 5 th line 2-34, Example box 2-36, D. 1.a. (Amounts remain the same.) 2-37, 1. f. and g. 2-37, 2.e. Change $110,000 to $111,000. Change $130,000 to $131, , 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, , F. 1. and 2. Lifetime learning credit phase-outs: Change $110,000 to $111,000. Change $130,000 to $131,000. 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 $13,400 to $13,460. Change $201,010 - $241,010 to $201,920 - $241, , G. and G , table at Replace the first two columns with the following: top of page

6 6 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, , I.1.b. and b. Replace item in parenthesis with expires 12/31/19. d. Delete d. 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 , I. A. Change $185,400 to $186, and Form 6251 Alternative Minimum Tax-Individuals 2-48, Item B Replace B. Exemption Amounts with the following:

7 7 2-52, Item III A. 2-55, Item II.B. 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. In the last line on the page, change "accessed June 2015" to "accessed January 2016." REGULATION 3 Lecture Page, Item Update R3 3-8 through 3-14 Tax forms are updated to 2015 versions: Form 1120, Schedule M , c. Bonus Change last line to provided they are paid within 2 ½ Accruals 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/ , Item s. (1) (d) Delete he last sentence in the parenthesis. 3-22, Under the In the column headed IRC-Tax Return, the amount for heading Ordinary 2016 is $500,000.

8 8 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 The rates for 2016 remain unchanged from Rates 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 Schedule K-1 of Form 1120S. 3-56, Table at the top Form 990. In the first item under Treatment on the right, delete (already taxed). REGULATION 4 Lecture Page, Item Update R Schedule D (Form 1040) Capital Gains and Losses Form 8949 Sales and Other Dispositions of Capital Assets Form 8824 Like-Kind Exchanges Form 6252 Installment Sale Income 4-31, Item C.1. The rules in item 1 are for Delete all items in the parenthesis. Replace 25,000 with 500, , Item Change 200,000 to 2,010,000. C.1.a 4-31, Item C.1.d. Bonus depreciation is extended through 2019 at a decreasing rate.

9 9 4-31, Item C.1.d.(2) 4-31, Item C.1.d.(3) 4-35, at the very top 4-35, first Example box 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, The year 2014 should now be 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 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, , Item 3 In the third line of the second paragraph add straight-line before accumulated depreciation. 4-35, In the second line, add straight-line before accumulated second depreciation. In the second to last line, add straight-line before Example accumulated depreciation. 4-44, Item Change April to March. IV.A.1.(a) Form 1065 U.S. Return of Partnership Income 4-53, Item D Change April to March Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc 4-61, Item I, D.1.c. and 2.b and 66, Item E and 6, table. Use this table to replace the 2015 table. 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) Form 1041 U.S. Income Tax Return for Estates and Trusts 4-69, Item The amount for 2016 is $5,450,000. III, A

10 , Estate Transfer Tax chart 4-71, Item E , Items 2 and 3 at the top of the page 4-72, Example box is revised as shown. 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). Change $2,117,800 to $2,125,800 for Change $5,430,000 to $5,450,000. The amount $5,430,000 is now $5,450,000 for The amount $2,117,800 is now $2,125,800 for , item V, last paragraph on page revised as shown Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return Form 4797 Sales of Business Property Lecture Page, Item R Items D & E 5-7 Items F, G & H REGULATION 5 Update 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. Maximum penalties mentioned in D. and E. have changed from $25,000 to $25,500. Maximum penalties mentioned in these items have changed from $25,000 to $25, Penalties of $500 have changed to $510.

11 11 Items I & J , 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. Lecture Page, Item R Item B 1. b. Lecture Page, Item R Bottom of page 8-53 Item C 3. REGULATION 7 Update 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. REGULATION 8 Update 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. 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.