sartorialism
Distinguished Member
- Joined
- Jun 23, 2008
- Messages
- 1,249
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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!
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!
