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1040 Exam Prep Newsletter
For tax preparers who are serious about becoming a Registered Tax Return Preparer |
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Greetings!
Congratulations!. You have completed the 1040 Exam Prep tax preparer articles series!
It is the end of January and the tax season is here! During the following weeks, until April 17, I will be delivering a weekly issue of this Newsletter, each Thursday.
For your convenience and just in case you want to reread an article, a practice or a concept presented in a previous number of the Newsletter, below is the link to our Newsletter archive where yu can find all previously published numbers.
1040examprep newsletter archive
Each number of this publication will continue bringing you the practice section that aims to expose you to questions in multiple choice and/or true/false format as a way to learn and practice for your exam. I hope the questions and answers are inspiring you to go deeper into your reviews and/or to feel more confident about your knowledge base.
Want to get it right inside the testing room? You should master the exam topics outside the room, first!! So, to get it right, you've got to get it!
In the "Grasping concepts" section in today's newsletter and in the numbers that will follow, the focus will be on definitions of terms from Circular 230. Today's term is "practice before the Internal Revenue Service". What does it mean?
Stay connected, and please, leave your comments and any concern you may have, related to the topics, in our blog.
I hope you enjoy this issue of 1040 Exam Prep Newsletter!
Cheers,
Norma Wahnon
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Newsletter Issue # 14: 3 Tips to Success in the Testing Room |
Registered tax return preparer exam candidates
I would like to thank all of you for the feedback I received from the previous numbers of this Newsletter. I am happy to know that this weekly publication is helping you with the information and resources provided. That is the intention of the Newsletter.
For those of you who have decided to become registered tax return preparers as soon as possible, you should be fully engaged in your preparation stage and I would like to bring to you some tips about what works for most successful exam takers. There are several steps you should take in your preparation that will significantly and favorably impact your final result. Three of those important steps require:
1) Commitment: wanting to pass the exam is not enough; you should make the decision of doing whatever is needed to pass at the first attempt. You should have a burning desire that you will not go through the process twice and will save time and money you would have to spend, otherwise;
2) A written plan: an inventory of your study material distributed over the weeks of preparation in a pre-scheduled study program is key, as is the commitment to follow the plan. This plan should include study hours, physical activities hours, recreation hours, time with the family, and time assigned to other responsibilities. Without a plan, you will tend to procrastinate.
3) Know yourself: don't go against your nature; know your daily energy cycles, your strengths and weaknesses, your preferences, your fears, your beliefs. Acknowledge them and work to potentiate what is beneficial but specially to neutralize what would prevent you from achieving your goal. The truth is that the more you focus on your strengths as an exam taker, the more your weaknesses dissolve by themselves.
1040examprep newsletter archive
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To get it right, you've got to get it! |
Practice, practice and more practice
Topic: Section 1245
Decker sold equipment for $200,000. The equipment was purchased for $160,000 and had accumulated depreciation of $60,000. What amount is reported as ordinary income under Code Sec. 1245?
a. $0
b. $40,000
c. $60,000
d. $100,000
Solution:
Choice "c" is correct. Under Sec. 1245, ordinary income is recognized on the gain to the extent of the accumulated depreciation. Any gain in excess of the original cost is capital gain.
Choice "a" is incorrect. The total gain is $100,000 which is the sales price ($200,000) in excess of cost ($160,000) less depreciation ($60,000). Under Sec. 1245, ordinary income is recognized on the gain to the extent of the accumulated depreciation. Any gain in excess of the original cost is capital gain.
Choice "b" is incorrect. Under Sec. 1245, ordinary income is recognized on the gain to the extent of the accumulated depreciation. Any gain in excess of the original cost is capital gain. The total gain is $100,000, but only $60,000 is ordinary income and $40,000 is capital gain income.
Choice "d" is incorrect. The total gain is $100,000, but only $60,000 is ordinary income and $40,000 is capital gain income
(Source: AICPA Newly-Released Regulation Questions) |
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Learning tax concepts: definitions from Circular 230
Meaning of "Practice before the Internal Revenue Service"
From the definitions in section 10.2 of Subpart A of Circular 230, practice before the Internal Revenue Service "....comprehends all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the Internal Revenue Service; rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings" |
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