CPA REG Practice Exam 2 Welcome to your CPA REG Practice Exam 2 This test is designed to prepare you mentally for the actual CPA REG Exam with the same number of (76 questions) and the same time allowed (90 minutes) as the actual exam. The CPA REG Exam is breakdown into five (5) Parts. Here are the Five (5) Domains of the CPA REG Exam with the weightage and number of questions in this practice exam: 1. Ethics, Professional Responsibilities and Federal Tax Procedures [12 Questions] - 10-20% 2. Business Law [12 Questions] - 10-20% 3. Federal Taxation of Property Transactions [12 Questions] - 12-22% 4. Federal Taxation of Individuals [15 Questions] - 15-25% 5. Federal Taxation of Entities [25 Questions] - 28-38% Please click NEXT to start your Free CPA REG Practice Exam right away. Best of Luck! 1. A company engaged a CPA to perform the annual audit of its financial statements. The audit failed to reveal an embezzlement scheme by one of the employees. Which of the following statements best describes the CPA's potential liability for this failure? The CPA's adherence to generally accepted auditing standards (GAAS) may prevent liability. The CPA will not be liable if care and skill of an ordinarily reasonable person was exercised. The CPA may be liable for punitive damages if due care was not exercised. The CPA is liable for any embezzlement losses that occurred before the scheme should have been detected. None 2. Which of the following defenses is likely to be successful in a suit alleging negligence by a CPA? Due care. Ignorance of the law. Lack of intent. Lack of mental capacity. None 3. Which of the following statements is correct regarding a CPA's working papers? Working papers need not be disclosed under a federal court subpoena. Working papers must be disclosed under an IRS administrative subpoena. Working papers must be disclosed to another accountant purchasing the CPA's practice. Working papers need not be disclosed to a state CPA society quality review team. None 4. Which of the following is the best defense a CPA firm can assert in defense to a suit for common law fraud based on their unmodified opinion of materially false financial statements? Lack of privity. Lack of scienter. Contributory negligence on the part of the client. A disclaimer contained in the engagement letter. None 5. Sun Corp. approved a merger plan with Cord Corp. One of the determining factors in approving the merger was the financial statements of Cord that were audited by Frank & Co., CPAs. Sun had engaged Frank to audit Cord's financial statements. While performing the audit, Frank failed to discover certain irregularities that later caused Sun to suffer substantial losses. For Frank to be liable under common law negligence, one element Sun must prove is that Frank Knew of the irregularities. Failed to exercise due care. Was reckless. Acted with scienter. None 6. To which of the following parties may a CPA partnership provide its working papers, without being lawfully subpoenaed or without the client's consent? The IRS. The FASB. Any surviving partner(s) on the death of a partner. An unrelated CPA before purchasing a partnership interest in the partnership None 7. Under Treasury Circular 230, which of the following actions of a CPA tax adviser is characteristic of a best practice in rendering tax advice? Requesting a review of a tax memorandum by an attorney who is familiar with the particular tax issues discussed in the memorandum. Requesting a review of a tax memorandum by an IRS advisory committee. Establishing relevant facts, evaluating the reasonableness of assumptions and representations, and arriving at a conclusion supported by the law and facts in a tax memorandum. Requiring a client to supply a written representation, signed under penalties of perjury, concerning the facts and statements provided to the CPA for preparing a tax memorandum. None 8. Kopel was engaged to prepare Raff's Year 9 federal income tax return. During the tax preparation interview, Raff told Kopel that he paid $3,000 in property taxes in Year 9. In fact, Raff's property taxes amounted to only $600. Based on Raff's word, Kopel deducted the $3,000 on Raff's return, resulting in an understatement of Raff's tax liability. Kopel had no reason to believe that the information was incorrect. Kopel did not request underlying documentation and was reasonably satisfied by Raff's representation that Raff had adequate records to support the deduction. Which of the following statements is correct? To avoid the preparer penalty for willful understatement of tax liability, Kopel was obligated to examine the underlying documentation for the deduction. To avoid the preparer penalty for willful understatement of tax liability, Kopel would be required to obtain Raff's representation in writing. Kopel is not subject to the preparer penalty for willful understatement of tax liability because the deduction that was claimed was more than 25% of the actual amount that should have been deducted. Kopel is not subject to the preparer penalty for willful understatement of tax liability because Kopel was justified in relying on Raff's representation. None 9. A tax return preparer is subject to a penalty for knowingly or recklessly disclosing corporate tax return information if the disclosure is made To a university to conduct tax research. To enable the tax processor to electronically compute the taxpayer's liability. For peer review. In response to an inquiry from a state board's ethics committee. None 10. In evaluating the hierarchy of authority in tax law, which of the following carries the greatest authoritative value for tax planning of transactions? Private letter ruling. IRS regulations. IRS publications. IRS agents' reports. None 11. When a taxpayer needs guidance with a specific tax issue related to a proposed transaction, the taxpayer can ask the IRS for A revenue ruling. A private letter ruling. An extension. A technical advice memorandum. None 12. A taxpayer's Year 2 taxable income was $175,000 with a corresponding tax liability of $30,000. For Year 3, the taxpayer expects taxable income of $250,000 and a tax liability of $50,000. In order to avoid a penalty for underpayment of estimated tax, what is the minimum amount of Year 3 estimated tax payments that the taxpayer can make? $30,000 $33,000 $45,000 $50,000 None 13. On September 27, Summers sent Fox a letter offering to sell Fox a vacation home for $150,000. On October 2, Fox replied by mail agreeing to buy the home for $145,000. Summers did not reply to Fox. Do Fox and Summers have a binding contract? No, because Fox failed to sign and return Summers' letter. No, because Fox's letter was a counteroffer. Yes, because Summers' offer was validly accepted. Yes, because Summers' silence is an implied acceptance of Fox's letter. None 14. In June, Mullin, a general contractor, contracted with a town to renovate the town square. The town council wanted the project done quickly and the parties placed a clause in the contract that for each day the project extended beyond 90 working days, Mullin would forfeit $100 of the contract price. In August, Mullin took a three-week vacation. The project was completed in October, 120 working days after it was begun. What type of damages may the town recover from Mullin? Punitive damages because taking a vacation in the middle of the project was irresponsible. Compensatory damages because of the delay in completing the project. Liquidated damages because of the $100 forfeiture clause in the contract. No damages because Mullin completed performance. None 15. Ordinarily, in an action for breach of a construction contract, the statute of limitations time period would be computed from the date the Contract is negotiated. Contract is breached. Construction is begun. Contract is signed. None 16. An appliance seller promised a restaurant owner that a home dishwasher would fulfill the dishwashing requirements of a large restaurant. The dishwasher was purchased, but it was not powerful enough for the restaurant. Under the Sales Article of the UCC, what warranty was violated? The implied warranty of marketability. The implied warranty of merchantability. The express warranty that the goods conform to the seller's promise. The express warranty against infringement. None 17. Under the Sales Article of the UCC, which of the following statements is correct regarding risk of loss and title to the goods under a sale on approval contract? Title and risk of loss are shared equally between the buyer and the seller. Title and risk of loss remain with the seller until the goods have been accepted by the buyer or the approval period has elapsed. Title and risk of loss remain with the seller until the buyer pays for the goods. Title remains with the seller until the buyer approves or accepts the goods, but risk of loss passes to the buyer immediately following delivery of the goods to the buyer. None 18. Under the UCC Sales Article, which of the following conditions will prevent the formation of an enforceable sale of goods requirements contract? Open price. Open delivery. Open quantity. Open acceptance. None 19. Simpson, Ogden Corp.'s agent, needs a written agency agreement to Enter into a series of sales contracts on Ogden's behalf. Hire an attorney to collect a business debt owed to Ogden. Purchase an interest in undeveloped land for Ogden. Retain an independent general contractor to renovate Ogden's office building. None 20. Which of the following acts, if committed by an agent, will cause a principal to be liable to a third party? A negligent act committed by an independent contractor, in performance of the contract, which results in injury to a third party. An intentional tort committed by an employee outside the scope of employment, which results in injury to a third party. An employee's failure to notify the employer of a dangerous condition that results in injury to a third party. A negligent act committed by an employee outside the scope of employment that results in injury to a third party. None 21. Able authorized Brown to enter contracts with third parties on Able's behalf. In which of the following situations must Able provide notice to these third parties to effectively terminate Brown's authority? When it has become impossible for Brown to lawfully perform Brown's duties. When war has broken out between Able's country and Brown's country. When Brown has been declared insane by a court of law. When Able has revoked Brown's authority. None 22. Which of the following requirements must be met for creditors to file an involuntary bankruptcy petition under Chapter 7 of the federal Bankruptcy Code? The debtor must owe one creditor more than $16,750. The debtor has not been paying its bona fide debts as they become due. There must not be more than 12 creditors. At least one fully secured creditor must join in the petition. None 23. Under the Secured Transactions Article of the UCC, all of the following are needed to create an enforceable security interest, except A security agreement must exist. The secured party must give value. The debtor must have rights in the collateral. A financing statement must be filed. None 24. Under the Secured Transactions Article of the UCC, a financing statement generally must contain The signature of a witness to the execution of the financing statement. The dollar amount of the consideration provided by the secured party. The date the underlying debt will be paid. The address of the debtor. None 25. A taxpayer placed in service a $3,100,000 piece of equipment during the year. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. Assume there is a Section 179 limit in the current year of $1,020,000 with a $2,550,000 threshold. What amount is the maximum allowable deduction related to property for the year if the taxpayer elects out of bonus depreciation? $442,990 $845,827 $1,020,000 $1,081,530 None 26. A taxpayer purchased a forklift for use in the taxpayer's business for $20,000 on January 1 of the current year. The taxpayer sold the forklift for $22,000 on June 1 of the current year. What is the taxpayer's Section 1231 gain as a result of the sale? $0 $2,000 $6,000 $22,000 None 27. On January 1, Fast, Inc. entered into a covenant not to compete with Swift, Inc. for a period of five years, with an option by Swift to extend it to seven years. What is the amortization period of the covenant for tax purposes? 5 years. 7 years. 15 years. 17 years. None 28. Bluff purchased equipment for business use for $35,000 and made $1,000 of improvements to the equipment. After deducting depreciation of $5,000, Bluff gave the equipment to Russett for business use. At the time the gift was made, the equipment had a fair market value of $32,000. Ignoring gift tax consequences, what is Russett's basis in the equipment? $31,000 $32,000 $35,000 $36,000 None 29. On February 1, Year 1, a taxpayer purchased an option to buy 1,000 shares of XYZ Co. for $200 per share. The taxpayer purchased the option for $50,000, which was to remain in effect for six months. The market declined, and the taxpayer let the option lapse on August 1, Year 1. What would the taxpayer report as a loss, if any, on the Year 1 income tax return? $0 $50,000 ordinary loss. $50,000 short-term capital loss. $150,000 ordinary loss. None 30. A single individual taxpayer inherited Bean Corp. common stock from the taxpayer's parents. Bean is a qualified small business corporation under Code Sec. 1244. The stock cost the taxpayer's parents $20,000 and had a fair market value of $25,000 at the parents' date of death. During the year, Bean declared bankruptcy and the taxpayer was informed that the stock was worthless. What amount may the taxpayer deduct as an ordinary loss in the current year? $0 $3,000 $20,000 $25,000 None 31. A sole proprietor owned an office building with a cost of $100,000 and accumulated depreciation of $28,000 using straight-line depreciation under modified accelerated cost recovery system. If the company sold the building for $110,000, what is the unrecaptured Code Section 1250 gain from this transaction? $10,000 $18,000 $28,000 $38,000 None 32. Mikhail owns real estate held for investment with a basis of $400,000 and a fair market value of $650,000. He exchanges it for other real estate with a fair market value of $480,000. In addition, Mikhail is relieved of a mortgage on the old property of $200,000, assumes a mortgage on the new property of $100,000, and receives $70,000 in cash. What is Mikhail's recognized gain on the exchange? $0 $70,000 $170,000 $250,000 None 33. Konrad, Van, and Star own a parcel of land as joint tenants with right of survivorship. Konrad's interest was sold to Dawson. As a result of the sale from Konrad to Dawson, Van and Star each own one-third of the land as tenants in common. Van, Star, and Dawson each own one-third of the land as joint tenants. Dawson owns one-third of the land as a joint tenant. Dawson owns one-third of the land as a tenant in common. None 34. Which of the following provisions must be included in a residential lease agreement? How long the property will be leased. Requirement that the landlord must give the tenant notice before entering the property. Description of how the property may be used. Requirement that the landlord will perform all structural repairs to the property. None 35. A method of transferring ownership of real property that most likely would be considered an arm's length transaction is transfer by Inheritance. Eminent domain. Adverse possession. Sale. None 36. Which of the following parties is (are) responsible for enforcing federal air and water quality standards? Both industry associations and political action groups. Industry associations, not political action groups. Political action groups, not industry associations. Neither industry associations nor political action groups. None 37. An individual starts paying student loan interest in the current year. How many years may the individual deduct a portion of the student loan interest? Current year only. Five years. Ten years. Duration of time that interest is paid. None 38. On February 15th of the current year Young received a $10,000 lump-sum payment from a qualified profit-sharing plan, the full amount of which Young rolled over into an IRA 46 days later. How much of this lump-sum payment may Young exclude from current year gross income? $0 $10,000 Depends on contribution limit $8,000 None 39. "Which of the following items are included in determining the total support of a dependent? Medical expenditures paid on behalf of the dependent Life insurance premiums paid on behalf of the dependent Fair rental value of dependent’s lodging" All of the above I and II only I and III only I only None 40. Norbert works in a beauty salon. He receives a 50% employee discount for salon services. In 20X4 he used his discount to pay $1,000 for services with a fair market value of $2,000. As a result of these bargain purchases, how much should Norbert include in 20X4 gross income? $1,000 $600 $2,000 $0 None 41. In Year 6, a taxpayer was granted an incentive stock option (ISO) by ABC, Corp. as part of an executive compensation package. The taxpayer exercised the ISO in Year 7 and sold the stock in Year 9 at a gain. The taxpayer was subject to regular tax for the year in which the ISO was granted. ISO was exercised. Stock was sold. Employer claimed a compensation deduction for the ISO. None 42. A taxpayer borrowed $45,000 secured by land with a basis of $20,000. The taxpayer could not pay the principal, so the bank foreclosed and sold the land for $35,000 as full settlement of the debt. What income should the taxpayer recognize? $10,000 $15,000 $25,000 $35,000 None 43. A dentist billed a carpenter $600 for dental services. The carpenter paid the dentist $200 cash and built a bookcase for the dentist's office in full settlement of the bill. The carpenter sells comparable bookcases for $350. What amount should the dentist include in taxable income as a result of this transaction? $50 $200 $550 $600 None 44. A taxpayer's spouse dies in August of the current year. Which of the following is the taxpayer's filing status for the current year? Single. Qualified widow(er). Head of household. Married filing jointly. None 45. A taxpayer made deductible contributions to a traditional IRA for many years. The taxpayer recently retired at age 60 and received a distribution of $150,000. In which way, if any, will the distribution be taxed? As a capital gain. As ordinary income. Subject to a 10% penalty. It will not be taxed. None 46. Evan, an individual, has a 40% interest in EF, an S corporation. At the beginning of the year, Evan's basis in EF was $2,000. During the year, EF distributed $100,000 and reported operating income of $200,000. What amount should Evan include in gross income? $38,000 $40,000 $80,000 $118,000 None 47. Four years ago, when Cox's spouse died, Cox filed a joint tax return for that year. Cox did not remarry, but continued to provide full support for a minor child who has been living with Cox. What is Cox's most advantageous filing status for the current year? Single. Married filing separate. Surviving spouse. Head of household. None 48. Under a divorce decree settlement, Joan transferred her 50% ownership of their personal residence to Jim. The joint basis of the residence was $200,000. At the time of the transfer, the property's fair market value was $300,000. What was Joan's recognized gain and Jim's basis for for the residence? Joan's recognized gain is $50,000 and Jim's basis is $250,000. Joan's recognized gain is $50,000 and Jim's basis is $300,000. Joan has no recognized gain and Jim's basis is $200,000. Joan has no recognized gain and Jim's basis is $300,000. None 49. "In 2019, Archer, a single individual, moved from Minneapolis to Phoenix to start a new job with InnoTech, which began February 1. Archer worked for Innotech until November 15, when Archer accepted a job offer from InnoTech’s Phoenix rival MegaTech. The following facts apply to Archer: $75,000 Income Expenses incurred during Minneapolis – Phoenix move: $1,000 Moving truck rental $1,000 Packing and unloading costs paid to moving company $1,500 Loss on sale of Minneapolis home $750 Lodging $250 Meals $100 Storage costs in Phoenix prior to move-in to new home Considering only the above facts, what is Archer’s 2019 adjusted gross income?" $70,475 $70,650 $75,000 $72,150 None 50. Which of the following can be subject to the net investment income tax? An individual who is a resident of the U.S. A domestic C corporation. A nonresident alien. A trust whose unexpired interests are devoted to a charitable purpose. None 51. Johnson worked for ABC Co. and earned a salary of $100,000. Johnson also received, as a fringe benefit, group term-life insurance at twice Johnson's salary. The annual IRS-established uniform cost of insurance is $2.76 per $1,000. What amount must Johnson include in gross income? $100,000 $100,276 $100,414 $100,552 None 52. Which of the following groups may elect to file a consolidated corporate return? A brother-sister controlled group. A parent corporation and all more-than-10%-controlled partnerships. A parent corporation and all more-than-50%-controlled subsidiaries. Members of an affiliated group. None 53. When a company is domiciled in one state but is subject to income tax in multiple states, business income is generally allocated under the Uniform Division of Income for Tax Purposes Act (UDITPA) on the basis of a combination of which of the following ratios? Average value of real and personal property, number of employees, and sales. Average value of real and personal property, compensation to employees, and sales. Fair market value of real and personal property, number of employees, and sales. Fair market value of real and personal property, compensation to employees, and sales. None 54. How does a shareholder treat the gain on a redemption of stock that qualifies as a redemption to pay death taxes under Section 303? Nontaxable gain. Tax deferred gain. Capital gain. Dividend income to the extent of positive earnings and profits. None 55. Simon, a C corporation, had a deficit in accumulated earnings and profits of $50,000 at the beginning of the year and had current earnings and profits of $10,000. At year end, Simon made a nonliquidating distribution of $15,000 to its sole shareholder. The shareholder's predistribution stock basis was $20,000. What amount of the distribution is reported as income to the shareholder? $0 $5,000 $10,000 $15,000 None 56. Ames and Roth formed Homerun Inc., a C corporation. Ames contributed several autographed baseballs to Homerun. Ames purchased the baseballs for $500, and they have a total fair market value of $1,000. Roth contributed several autographed baseball bats to Homerun. Roth purchased the bats for $5,000, and they have a fair market value of $7,000. What is Homerun's basis in the contributed bats and balls? $0 $5,500 $6,000 $8,000 None 57. An S corporation is not permitted to take a deduction for Compensation of officers. Interest paid to individuals who are not stockholders of the S corporation. Charitable contributions. Employee benefit programs established for individuals who are not stockholders of the S corporation. None 58. Which of the following statements about qualifying shareholders of an S corporation is correct? A general partnership may be a shareholder. Only individuals may be shareholders. Individuals, estates, and certain trusts may be shareholders. Nonresident aliens may be shareholders. None 59. The Hass Corp., a calendar year S corporation, has two equal shareholders. For the year ended December 31, 20X3, Haas had taxable income and current earnings and profits of $60,000, which included $50,000 from operations and $10,000 from investment interest income. There were no other transactions that year. Each shareholder's basis in the stock of Haas will increase by $50,000 $30,000 $25,000 $0 None 60. Monie, an individual taxpayer, owns 50% of Monie & Co, an S corporation. At the beginning of 20X4, Monie’s basis in Monie & Co was $55,000. During 20X4, Monie & Co realized ordinary loss in the amount of $45,000 and a short-term capital loss of $15,000. Monie & Co made total distributions of $70,000 to its shareholders during this taxable year. What is Monie’s resulting basis in Monie & Co after accounting for the above items? $0 $10,000 $55,000 $25,000 None 61. Graphite Corp. has been a calendar-year S corporation since its inception on January 2, Year 1. On January 1, Year 4, Smith and Tyler each owned 50% of Graphite stock in which their respective bases were $12,000 and $9,000. For the year ended December 31, Year 4, Graphite had $80,000 in ordinary business income and $6,000 in tax-exempt income. Graphite made a $53,000 cash distribution to each shareholder on December 31, Year 4. What total amount of income from Graphite is includible in Smith's Year 4 adjusted gross income? $96,000 $93,000 $43,000 $40,000 None 62. As a general partner in Greenland Associates, an individual's share of partnership income for the current tax year is $25,000 ordinary business income and a $10,000 guaranteed payment. The individual also received $5,000 in cash distributions from the partnership. What income should the individual report from the interest in Greenland? $5,000 $25,000 $35,000 $40,000 None 63. Anderson's basis in the SBF Partnership is $80,000. Anderson received a nonliquidating distribution of $50,000 cash, and land with an adjusted basis of $40,000 and a fair market value of $50,000. What is Anderson's basis in the land? $50,000 $40,000 $30,000 $20,000 None 64. An individual is a 50% partner who materially participates in Stone Partnership. The individual's adjusted basis at the beginning of the year was $0. Stone had a $70,000 loss from its business. Stone borrowed $30,000 from a bank, of which $20,000 remained unpaid at year end. What amount of loss is the individual allowed in the current year from Stone? $0 $10,000 $15,000 $35,000 None 65. Day's adjusted basis in LMN Partnership interest is $50,000. During the year, Day received a nonliquidating distribution of $25,000 cash plus land with an adjusted basis of $15,000 to LMN, and a fair market value of $20,000. How much is Day's basis in the land? $10,000 $15,000 $20,000 $25,000 None 66. Smith, a partner in Ridge Partnership, had a basis in the partnership interest of $100,000 at the time Smith received a nonliquidating distribution of land with an adjusted basis of $75,000 to Ridge and a fair market value of $135,000. Ridge had no unrealized receivables, appreciated inventory, or properties that had been contributed by its partners. Which of the following statements is correct regarding the distribution? Ridge recognizes a $60,000 capital gain from the distribution. Ridge recognizes $60,000 of ordinary income from the distribution. Smith's holding period for the land includes the time it was owned by Ridge. Smith's holding period for the land begins on the date distributed. None 67. Each of the following may qualify as a tax-exempt organization, except A community savings and loan association that has capital stock. A country club. An amateur sports association. A domestic fraternal society. None 68. During Year 3, Blake transferred a corporate bond with a face amount and fair market value of $20,000 to a trust for the benefit of her sixteen-year-old child. Annual interest on this bond is $2,000, which is to be accumulated in the trust and distributed to the child on reaching the age of twenty-one. The bond is then to be distributed to the donor or her successor-in-interest in liquidation of the trust. Present value of the total interest to be received by the child is $8,710. The amount of the gift that is excludable from taxable gifts is $20,000 $15,000 $8,710 $0 None 69. A husband and wife agree to split monetary gifts to their relatives. The husband gives his daughter $23,500, and the wife gives her niece $20,000. The annual exclusion is $15,000. What amount is the taxable gift for the husband and wife? $0 $13,500 $20,000 $43,500 None 70. Which of the following statements is correct regarding the unrelated business income of exempt organizations? If an exempt organization has any unrelated business income, it may result in the loss of the organization's exempt status. Unrelated business income relates to the performance of services but not to the sale of goods. An unrelated business does not include any activity where all the work is performed for the organization by unpaid volunteers. Unrelated business income tax will not be imposed if profits from the unrelated business are used to support the exempt organization's charitable activities. None 71. Which of the following activities regularly conducted by a tax-exempt organization will result in unrelated business income? Selling items made by persons with disabilities as part of their rehabilitation when the organization is involved exclusively in their rehabilitation. Operating a grocery store staffed almost entirely by persons with mental health conditions as part of a therapeutic program. Regularly holding a casino night fundraiser that is open to the public but staffed entirely by unpaid volunteers. Selling pet boarding and grooming services to the general public when the organization is involved in preventing cruelty to animals. None 72. Which of the following statements best describes an advantage of the corporate form of doing business? Day-to-day management is strictly the responsibility of the directors. Ownership is contractually restricted and is not transferable. The operation of the business may continue indefinitely. The business is free from state regulation. None 73. Which of the following is true regarding a general partnership? Partnership debt must be apportioned based on partnership percentages. The partnership must file a certificate of formation with its home state. Partners have unlimited liability for partnership debts. The partnership must remit federal income taxes on behalf of the partners. None 74. Which of the following statements is correct concerning the similarities between a limited partnership and a corporation? Each is created under a statute and must file a copy of its documentation with the proper state authorities. All corporate stockholders and all partners in a limited partnership have limited liability. Both are recognized for federal income tax purposes as taxable entities. Both are allowed statutorily to have perpetual existence. None 75. Terry recently started a new business and is trying to decide what type of entity to form. Terry is part owner and is active in running the business. What type of entity would best protect Terry, as one of the owners, from personal liability? General partnership Limited partnership Joint venture Limited liability company None 76. Which of the following partners of a limited liability partnership (LLP) may avoid personal liability when a partner commits a negligent act? All the partners The supervisor of the negligent partner All the partners other than the negligent partner All the partners other than the supervisor of and the negligent partner None 1 out of 76 Time is Up! Time's upTime is Up!
