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Tax I (FML)

sartorialism

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I Took my tax final today. I'm miserable. Not because I wasn't prepared or the exam was too difficult"”to the contrary, the exam was pretty easy and I was well-prepared"”but because of simple, stupid mistakes I made, which probably earned me a B- (FML). Little things, things I was comfortable with, but which seemed to slip my mind under the pressure applied during a law school final. In one question I forgot to reduce basis in a property for cash received in connection with a lease termination on the property. Simple, right? You adjust basis by adding/subtracting any amount of gain or loss recognized. But I just completely forgot to reduce basis for the cash payment. AND I KNEW IT!

Next, and even more embarrassing, I screwed up by 1) again just forgetting to apply something I knew quite well, and 2) ignoring the fact that the answer made no sense! A guy sold his interest in a passive investment (which was losing lots of money). His investment was funded by both personal investments non-recourse debt. So on the one hand, with the sale of the stock he's able to recognize the losses. On the other hand, he has to recognize the gain of debt forgiveness, in that he now realizes income from the debt. But in my response, I forgot to factor for the personal losses, and while accounting the gain from the debt forgiveness, I forgot to account for the losses of his personal investments! I just completely FORGOT! And, in case it wasn't obvious enough, I should have realized that he couldn't have gained by selling a property that lost value. Anyways, I allowed him to realize gains from transferring the loan as well as from selling his own investment (despite the obvious fact that the FMV was less than his investment, which means he should recognize losses!). As if that isn't bad enough, this isn't just an error in getting the correct rate. Rather, it leads to a whole new issue, which I didn't even approach: clearly there was a capital loss and I should have gotten into the whole capital gains/loss structure. But I didn't, and instead I said he recognized a gain from the discharge of debt and applied the capital gains tax rate schedule against that gain.

As you see, these are two basic errors, and are in areas with which I'm relatively comfortable. yet they probably cost me a few grade points. I AM SO MAD! I wish I could say I screwed up on the alternative minimum tax, or in computing capital tax rates, but no: I forgot to deduct losses of investments and to include payments of cash.

Considering that I'm exhausted after staying up all of last night studying (the AMT, which wasn't even on the exam!!) and am burnt out by this experience, it's possible that what I just wrote makes no sense, or is flat-out wring. I'm too tired to make sure I wrote it down correctly. Just trust me: I screwed up in computing basis in both cases by forgetting to reduce basis for a cash payment in one case and in forgetting to to offset the capital gains resulting from debt discharge against the losses of his investments.

Finally, to make things that much worse, as soon as I left the exam, I realized how badly I screwed up. I felt miserable and didn't hesitate to throw away my tax notebooks (laptops aren't allowed in this class). After getting home today and switching gears to my other class, whose finals are quickly approaching, I remembered that about half of my tax notebooks were filled with my patent and securities notes (days when I forgot my computer or computer charger). And I haven't started outlining. And I don't even know which class notes to request from classmates, as I have no recollection whatsoever of the dates on which I hand-wrote my notes! So I just lost an half of my resources but I don't know which half!
 

clubbyjones

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At least you are selling nice things in you signature.
 

sartorialism

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scientific

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good job, not understanding taxes is essential to your future as a lawyer-turned-politician
 

sartorialism

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Originally Posted by clubbyjones
At least you are selling nice things in you signature.

Seriously. Cheer me up and buy something expensive. What do you say?


Originally Posted by matt22616
Hang in there bud. My Income Tax final is on Saturday. I feel more comfortable with this subject compared to my other courses. Which is always a bad omen.

Good luck! What sucks for me is that this is the class I relied on. It's a 4 credit class and definitely the class for which I was most prepared. I was counting on these 4 credits and was already mentally adjusting my GPA by giving myself an A in tax and B+'s in my other classes. But now I need to adjust downwards for all the classes, losing on tax for the reasons posted above and for my other classes for throwing away my goddamn notes! Do you think my tax professor will allow some carryovers from the questions I answered really well and apply the credit to the answers I screwed up?

Originally Posted by scientific
good job, not understanding taxes is essential to your future as a lawyer-turned-politician

*Sigh*

Originally Posted by indesertum
study like that 12 hours earlier and get a good night's sleep.

http://en.wikipedia.org/wiki/Effects...ve_performance


These slip ups might have been caused by my sleeplessness (I hadn't slept for three nights prior to the exam). But what was I to do? If the exam would have tested us on the AMT, those sleepless nights would have been crucial, as I finally mastered the subject at only about 5 AM Tuesday morning (my exam started 4 hours later).

The damage is done.

Let me ask you all for some advice: considering that I really enjoyed tax (everything but my performance on the final, that is), I thought of taking some more tax classes next semester, entertaining the possibility of maybe even practicing tax law. But is it hopeless now? Is a shitty grade in Tax 1 a death blow to my tax-lawyer resume? Do advise.
 

VaderDave

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Originally Posted by sartorialism

Let me ask you all for some advice: considering that I really enjoyed tax (everything but my performance on the final, that is), I thought of taking some more tax classes next semester, entertaining the possibility of maybe even practicing tax law. But is it hopeless now? Is a shitty grade in Tax 1 a death blow to my tax-lawyer resume? Do advise.


A lower-than-hoped-for grade in any law school class doesn't mean you won't do well in that particular area of law in actual practice. I was lucky and managed to do well in law school, but I don't think that was the reason I was able to do well in real-life practice. Many people I know who struggled in law school now do just fine as practicing attorneys.

Also: for me, the grind of Tax I paled in comparison to the monster that was Tax II (Taxation of Business Organizations). That was the hardest class I ever took.
 

sartorialism

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Originally Posted by VaderDave
A lower-than-hoped-for grade in any law school class doesn't mean you won't do well in that particular area of law in actual practice. I was lucky and managed to do well in law school, but I don't think that was the reason I was able to do well in real-life practice. Many people I know who struggled in law school now do just fine as practicing attorneys.

Also: for me, the grind of Tax I paled in comparison to the monster that was Tax II (Taxation of Business Organizations). That was the hardest class I ever took.


Grades might not affect performance, but they definitely affect [first] job prospects.
 

VaderDave

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Originally Posted by sartorialism
Grades might not affect performance, but they definitely affect [first] job prospects.

Perhaps, but it's not a death blow. It's just a setback.
 

sartorialism

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Originally Posted by VaderDave
Perhaps, but it's not a death blow. It's just a setback.

Thanks for the encouragement. In light of your previous comment, would it be a death blow to take Tax II P/F? Especially if the P follows an at best okay grade in Tax I?
 

VaderDave

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Originally Posted by sartorialism
Thanks for the encouragement. In light of your previous comment, would it be a death blow to take Tax II P/F? Especially if the P follows an at best okay grade in Tax I?

Well, you've got to learn that stuff somewhere. On the one hand, if you don't take it, then a recruiter might look at it and see it as a black hole on your transcript if you hope to practice in that area. On the other hand, if you do take it but don't do well, then it's also sort of a problem. The P/F option might be a good compromise.

One of the things someone told me years ago when I was interviewing was that they understood that the tax classes are generally quite difficult and that they give you a bit of leeway when looking at your grades. That may not be true for all recruiters, of course.
 

sartorialism

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VaderDave

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Originally Posted by sartorialism
Thanks! Do you practice tax law? Why were you discussing it with a recruiter? Or was it your grade that caught his attention?

I do some tax law, but mostly as part of my business practice and my estate planning practice.

I happened to discuss it with a recruiter during on-campus interviewing years and years ago. I was lucky and got good grades in all my tax classes, and he happened to mention it. He said that it was great that I had good grades there, but that even when people got middle-of-the-road grades in tax classes that wasn't necessarily a deal killer like it might be if you, for example, borked it in torts or real property.
 

sartorialism

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Originally Posted by VaderDave
even when people got middle-of-the-road grades in tax classes that wasn't necessarily a deal killer like it might be if you, for example, borked it in torts or real property.

 

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