2011 Regulation 2 Update
Regulation 2
Online Update for the 2011 Edition
Last Updated January 17, 2011
Items Updated Since Last Posting: B.2.
Section A: TEXT ERRATA
A.1.
Page R2-23, Item 4.a(3): “Mortgage Insurance Premiums”
The text indicates that there is pending legislation that may extend the deductibility of mortgage insurance premiums through 12/31/10. The legislation passed, and the deduction exists for the year 2010.
A.2.
Page R2-12, Item G.1: Moving Expenses—New Workplace
There is a typo in the middle of the paragraph. Please make the following manual correction to your textbook:
“………….Further, the distance between the taxpayer’s new residence and new place of work must generally be less than or equal to the distance from the old residence to the
new place of work.”
Stated another way: The Regulations state that the distance from the new home to the new job cannot be greater than the distance from the old home to the new job.
Section B: PASSMASTER/SIMULATIONS/QUIZZES ERRATA
B.1.
Passmaster Question CPA-02166
The answer to the question is correct as is indicated; however, there may be some confusion in the explanation to the question. The question indicates that a donation of stock to a church existed during the year. The rules are correct that the stock (short-term property) is donated at the lower of the cost amount or the AGI limited amount. However, the AGI limited amount is incorrect in this question. A church is a 50%-type charity; thus, the AGI limit would be 50% of $30,000, or $15,000, not the 30% amount shown in the question. The answer remains the same, however: $1,500 cost of the lower of the numbers in both cases.
B.2.
Passmaster Question CPA-06472
There is a typo in the explanation to this question. The dollar amount of the answer to the question and the calculation are correct, as they use the proper amount of $1,100 for the additional standard deduction; however, the first sentence of the answer should read as follows: “Because both Bob and Nancy are 65 or older, they are entitled to the additional standard deduction of $1,100 [NOT $1,050] each in additional to the regular amount.”
Section C: TEXT - ADDITIONAL OR ENHANCED INFORMATION
C.1.
Page R2-48, Item D.1. of “Tax Preference Items (Always Add-Backs)”
Private activity bond interest income is generally a tax preference item (an “add-back”) for alternative minimum taxation. The income is generally exempt from regular tax, but it is a preference for alternative minimum tax (the preference applies only to certain private activity bonds issued after 8/7/1986). However, for the years 2009 and 2010, there were some additional exemptions (beyond the scope of the CPA exam) that allowed for the interest on other private activity bonds (certain bonds issued in 2009 and 2010 that were used to refund bonds issued between the years 2003 and 2009) to be excluded from the alternative minimum tax preference.
C.2.
Page R2-11, Item F: “Health Savings Accounts”
The amounts and limits shown for the year 2010 also apply to the year 2011. For years beginning after December 31, 2010, distributions of qualified drugs include only those prescribed by a physician (this applies to MSAs as well).
C.3.
Page R2-13, Item H: “Tax on Self-Employment
For tax years 2010 and forward, a new tax law allows for self-employed health insurance premiums paid to reduce the base for the calculation of Social Security/Medicare tax paid in connection with self-employment income.
C.4.
Page R2-17, Item B.1: Limitation on Itemized Deductions
For the year 2010, as the text states, the previous AGI limitation on itemized deductions was eliminated. However, for 2011, unless the provisions of EGTTRA are extended to years after 2010, the phase-out rates from the year 2005 and prior return. Thus, the phase-out percentage for 2011 is 3% with a maximum phase-out of 80% of applicable itemized deductions.
C.5.
Page R2-29, Item 7.a(2): “Transportation Expenses”
For 2011, the standard mileage rate is 51 cents per mile.
C.6.
Page R2-20, Item d(5)(b): “Transportation to a medical facility”
For 2011, the standard medical mileage rate is 19 cents per mile.
C.7.
Page R2-23, Item 4.a(2) (b): Purpose of Loan
To add some clarification and enhanced information, the text could be manually edited to read as follows:
(b) Purpose of Loan
The proceeds of home equity loans may be used for any purpose (e.g., vacation,
medical expenses, etc.), but the interest is not deductible if the proceeds are
used to buy securities or certificates that produce tax-free income.
C.8.
Page R2-38, Item D.1: “The American Opportunity Credit”
For years 2011 and forward, it appears that this credit will again be referred to as the “Hope” credit. Further, the AGI phase-out rules will change for 2011. Instead of the joint return AGI phase-out of $160,000-$180,000 in 2010, the amounts go to $102,000-$122,000 for 2011. The AGI limits for 2011 for Single and Head of Household are $51,000-$61,000.
C.9.
Page R2-49, Alternative Minimum Tax
Stay tuned for more changes to this item………….we hope that an AMT patch is pending with the new law!
C.10.
Page R2-13, Item 3.a(1) Related to Travel Moving Costs
For 2011, the standard medical mileage rate is 19 cents per mile.
Section D: PASSMASTER/SIMULATIONS/QUIZZES
ADDITIONAL OR ENHANCED INFORMATION
NONE
NOTE from the Editors
Some of the Items above have come from our internal review process, some have come from questions and comments from Becker instructors around the world, and some have come from questions asked by various candidates, either from Becker Profhelp or in online or live classes. We wish to thank all of these individuals as a group for their efforts to improve our materials.