CPA REG Practice Exam 4 Welcome to your CPA REG Practice Exam 4 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 tax return preparer may disclose or use tax return information without the taxpayer's consent to Facilitate a lender's credit evaluation of the taxpayer after the lender signs a confidentiality agreement. Accommodate the request of a financial institution that needs to determine the amount of taxpayer's debt to it to be forgiven. Be evaluated by a quality or peer review. Help the taxpayer's family members with a tax issue. None 2. A CPA prepared a tax return that involved a tax shelter transaction that was disclosed on the return. In which of the following situations would a tax return preparer penalty not be applicable? There was substantial authority for the position. It is reasonable to believe that the position would more likely than not be upheld. There was a reasonable possibility of success for the position. There was a reasonable basis for the position None 3. In which of the following circumstances would a tax return preparer be allowed to disclose a client's tax return information without the client's permission? In response to an inquiry by another tax preparer in connection with the sale of a tax practice. To help a mortgage broker prepare a proposal for refinancing the client's mortgage. As evidence in a malpractice lawsuit where the client is the plaintiff. At the request of the client's fiancé to help with prenuptial agreement negotiations. None 4. Each of the following constitutes substantial authority for a taxpayer to take a tax position, except A determination letter conclusion in which the taxpayer is named. A technical advice memorandum conclusion in which the taxpayer is named. An affirmative statement in a revenue agent's report with respect to a prior year of the taxpayer. A private letter ruling in which the taxpayer is named and that is inconsistent with a subsequently issued Treasury Regulation. None 5. A taxpayer received a 90-day letter proposing a deficiency of $28,000. The taxpayer's CPA told the taxpayer that a client with similar circumstances successfully sustained such a position in the Small Claims Division of the U.S. Tax Court. If the taxpayer decides to file a petition with the U.S. Tax Court, what is the significance of the success of the CPA's other client in sustaining the position in the Small Claims Division? There is little significance since decisions in the Small Claims Division of the U.S. Tax Court lack precedential value. The decision is significant because it can be used as a precedent for other taxpayers' appeals to the Small Claims Division, but not to the formal U.S. Tax Court. The decision is significant because it can be used as a precedent in an appeal to the U.S. District Court, but only if a taxpayer pays the deficiency prior to commencing an appeal. The decision is significant because it can be used as a precedent for the taxpayer's appeal in any proceeding in the U.S. Tax Court provided that the taxpayer pays the deficiency prior to commencing an appeal. None 6. The Internal Revenue Code and the Regulations do not impose penalties on tax return preparers for which of the following? Failure to sign a prepared tax return as a tax preparer. Failure to provide a copy of a prepared tax return to the taxpayer. Failure to notify a taxpayer about an inadvertent error on a tax return filed 10 years ago. Failure to retain copies of prepared tax returns or a list of taxpayers for whom such returns were prepared for the last three years. None 7. A client suing a CPA for negligence must prove each of the following factors except Breach of duty of care. Proximate cause. Reliance. Injury. None 8. Under the common law, which of the following defenses, if used by a CPA, would best avoid liability in an action for negligence brought by a client? The client was contributorily negligent. The client was comparatively negligent. The accuracy of the CPA's report was not guaranteed. The accuracy of the CPA's report was not guaranteed. None 9. Able, CPA, was engaged by Wedge Corp. to audit Wedge's financial statements. Wedge intended to use the audit report to obtain a $10 million loan from Care Bank. Able and Wedge's president agreed that Able would give an unqualified opinion on Wedge's financial statements in the audit report even though there were material misstatements in the financial statements. Care refused to make the loan. Wedge then gave the audit report to Ranch to encourage Ranch to purchase $10 million worth of Wedge common stock. Ranch reviewed the audit report and relied on it to purchase the stock. After the purchase, Able's agreement with Wedge's president was revealed. As a result, Wedge stock lost half its value and Ranch sued Able for fraud. What will be the result of Ranch's suit? Ranch will win because Able intentionally gave an unqualified opinion on Wedge's materially misstated financial statements. Ranch will win because Able is strictly liable for errors made in auditing Wedge's financial statements. Ranch will lose because Ranch is not a foreseen user of Able's audit report. Ranch will lose because Ranch is not in privity with Able. None 10. Which of the following pairs of elements must a client prove to hold an accountant liable for common law negligence? Freedom from contributory negligence and privity. Breach of the accountant's duty of care and loss. Willful misrepresentation and breach of the accountant's duty of care. Scienter and a violation of GAAP. None 11. A CPA's duty of due care to a client most likely will be breached when a CPA Gives a client an oral instead of written report. Gives a client incorrect advice based on an honest error of judgment. Fails to give tax advice that saves the client money. Fails to follow generally accepted auditing standards. None 12. Which of the following statements is correct regarding the liability of a CPA for services performed? A CPA's work is not guaranteed to be accurate even though the CPA acted in a reasonably competent and professional manner. A CPA is negligent for exercising only that degree of care a reasonably competent CPA would exercise under the circumstances. A CPA's liability for negligence extends only to the client and no further. A CPA's liability for fraud extends only to the client and no further. None 13. Castle borrowed $5,000 from Nelson and executed and delivered to Nelson a promissory note for $5,000 due on April 30. On April 1 Castle offered, and Nelson accepted, $4,000 in full satisfaction of the note. On May 15, Nelson demanded that Castle pay the $1,000 balance on the note. Castle refused. If Nelson sued for the $1,000 balance, Castle would Win, because the acceptance by Nelson of the $4,000 constituted an accord and satisfaction. Win, because the debt was unliquidated. Lose, because the amount of the note was not in dispute. Lose, because no consideration was given to Nelson in exchange for accepting only $4,000. None 14. Which of the following statements is correct regarding the statute of limitations in an action for breach of contract? The statute requires that a legal action for breach of contract be commenced within a certain period of time after the breach occurs. The statute provides that only the party against whom enforcement is sought must have signed the breached contract. The statute limits the amount of damages an injured party may recover if the injured party fails to take steps to mitigate the loss after the breach. The statute prohibits the admission into evidence of oral statements that contradict the terms of a written contract that has been breached. None 15. Grove is seeking to avoid performing a promise to pay Brook $1,500. Grove is relying on lack of consideration on Brook's part. Grove will prevail if he can establish that Prior to Grove's promise, Brook had already performed the requested act. Brook's only claim of consideration was the relinquishment of a legal right. Brook's asserted consideration is only worth $400. The consideration to be performed by Brook will be performed by a third party. None 16. Under the Sales Article of the UCC, which of the following factors is most important in determining who bears the risk of loss in a sale of goods contract? The method of shipping the goods. The contract's shipping terms. Title to the goods. How the goods were lost. None 17. To establish a cause of action based on strict liability in tort for personal injuries that result from the use of a defective product, one of the elements the injured party must prove is that the seller Was aware of the defect in the product. Sold the product to the injured party. Failed to exercise due care Sold the product in a defective condition. None 18. On May 2, Mason orally contracted with Acme Appliances to buy for $480 a washer for household use. Mason and the Acme salesperson agreed on a July 10 delivery date. On May 5, Mason contacted Acme and requested that the delivery date be moved to June 2. The Acme salesperson agreed with this request. On June 2, Acme failed to deliver the washer to Mason because of an inventory shortage. Acme advised Mason that it would deliver the washer on July 10 as originally agreed. Mason believes that Acme has breached their agreement. Acme contends that its agreement to deliver on June 2 was not binding. Acme's contention is Correct, because Mason is not a merchant and was buying the appliance for household use. Correct, because the agreement to change the delivery date was not in writing. Incorrect, because the agreement to change the delivery date was binding. Incorrect, because Acme's agreement to change the delivery date is a firm offer that cannot be withdrawn by Acme. None 19. Which of the following statements is the most significant reason why a tenant's personal property will become a fixture and belong to the landlord? Removing the personal property will increase the value of the personal property. Removing the personal property will cause a material change to the personal property. Removing the personal property will result in substantial harm to the landlord's property. Removing the personal property will change the use of the landlord's property back to its prior use. None 20. A mortgage on real property must Be acknowledged by the mortgagee. State the exact amount of the debt. State the consideration given for the mortgage. Be delivered to the mortgagee. None 21. Workers' Compensation Acts require an employer to Provide coverage for all eligible employees. Withhold employee contributions from the wages of eligible employees. Pay an employee the difference between disability payments and full salary. Contribute to a federal insurance fund. None 22. Which one of the following statements concerning workers' compensation laws is generally correct? Employers are not liable to employees injured while commuting to work in a company car. Workers' compensation benefits are not available if the employee is negligent. Workers' compensation benefits are not available if the employee acknowledges the risks of the job and signs a waiver of liability. Employer is strictly liable, but the amount of damages will be reduced if the employee was negligent. None 23. Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal? Disclosure of the principal by the agent. Ratification of the contract by the principal. Performance of the contract by the agent. Election to void the contract after disclosure of the principal. None 24. Ace Corporation engaged Kosier, CPA, to perform a consulting engagement. While driving to Ace's office, Kosier was involved in an automobile accident in which Norton was injured. The accident was solely Kosier's fault. If Norton sues both Ace and Kosier for the injuries Norton sustained, what will be the result? Both Kosier and Ace will be liable. Kosier will be liable, and Ace will not be liable because Kosier is an independent contractor. Ace will be liable under the principle of respondeat superior, and Kosier will not be liable. Ace will be liable because of Kosier's actual authority, and Kosier will not be liable. None 25. A principal and agent relationship requires a Written agreement. Power of attorney. Meeting of the minds and consent to act. Specified consideration. None 26. Hall CPA, is an unsecured creditor of Tree Co. for $20,000. Tree has a total of 10 creditors, all of whom are unsecured. Tree has not paid any of the creditors for 3 months. Under Chapter 11 of the federal bankruptcy code, which of the following statements is correct? Hall and two other unsecured creditors must join in the involuntary petition in bankruptcy. Hall may file an involuntary petition in bankruptcy against Tree. Tree may not be petitioned involuntarily into bankruptcy under the provisions of Chapter 11. Tree may not be petitioned involuntarily into bankruptcy because there are less than 12 unsecured creditors. None 27. Which of the following bonds are an obligation of a surety? Convertible bonds. Debenture bonds. Municipal bonds. Public official bonds. None 28. Under the reorganization provisions of Chapter 11 of the Federal Bankruptcy Code, after a reorganization plan is confirmed and a final decree closing the proceedings entered, which of the following events usually occurs? A reorganized corporate debtor is required to liquidate unprofitable lines of business. A reorganized corporate debtor is discharged from all debts except as otherwise provided in the plan and applicable law. A trustee continues to operate the debtor's business for one year. A reorganized debtor is prohibited from making a public offering of debt securities for 180 days. None 29. An individual taxpayer purchased and placed into service five-year assets at a total cost of $2,800,000 when the Section 179 limit was $1,020,000 with a $2,550,000 phase-out threshold. If the taxpayer elects the Section 179 deduction but does not elect out of bonus depreciation, how much property-related expense can the taxpayer deduct for the current tax year? $1,020,000 $1,400,000 $2,030,000 $2,800,000 None 30. In Year 4, an individual taxpayer purchased qualifying depreciable property for $2,800,000 and is making an election under Section 179. Assume the statutory maximum Section 179 expense is $1,020,000 with a $2,550,000 phase-out threshold. What amount, if any, is the taxpayer's Section 179 expense for Year 4? $250,000 $520,000 $770,000 $1,020,000 None 31. In Year 4, a taxpayer gifted an undivided one-half interest in the taxpayer's farm to the taxpayer's child. Title to the farm was held by parent and child as tenants in common. In Year 10, the taxpayer died and the other one-half interest in the farm was left to the same child. The taxpayer paid $40,000 for the farm in Year 1, and the fair market value of the entire farm was $100,000 at the date of the taxpayer's death. An alternate valuation date was not elected. What is the child's basis in the farm after the taxpayer's death? $0 $40,000 $70,000 $100,000 None 32. An individual taxpayer sells residential rental property to their child for $100,000. The child gives the taxpayer $1,000 and an installment note for the balance of $99,000. The taxpayer's basis is $50,000. The child pays the taxpayer $4,000 in Year 1. In Year 2, after paying the taxpayer $5,000, the child sells the property for $70,000. Which of the following statements about this situation is correct? The taxpayer should report the entire gain of $50,000 in Year 1 because installment sales of depreciable property are not allowed between related parties. The taxpayer should report $2,500 gain in Year 1. The taxpayer should report the entire gain of $50,000 in Year 1 because the child disposed of the land within two years of purchase. The taxpayer should report a $49,000 gain in Year 2. None 33. IRC Section 263A requires the capitalization of certain indirect costs related to inventory when a qualifying business is manufacturing tangible personal property. Which of the following costs is not required to be capitalized as part of this adjustment? Marketing. Recruiting factory workers. Payroll. Plant security services. None 34. A corporation's capital loss carryback or carryover is Not allowable under current law. Limited to $3,000. Always treated as a long-term capital loss. Always treated as a short-term capital loss. None 35. A taxpayer's property with an adjusted basis of $75,000 and fair market value of $105,000 was condemned by the state. The taxpayer received $100,000 from the state as compensation for the property, and six months after the condemnation purchased a replacement property for $100,000. What are the tax consequences of this transaction? No gain is recognized, and the basis in the new property is $75,000. No gain is recognized, and the basis in the new property is $100,000. A gain of $25,000 is recognized, and the basis in the new property is $100,000. A gain of $30,000 is recognized, and the basis in the new property is $100,000. None 36. A parent purchased 100 shares of Bigco stock for $100,000 in Year 1. On June 1, Year 4, the parent sold all the stock to their child for its fair market value of $80,000. On October 15, Year 4, the child sold the 100 shares of Bigco for $70,000 to an unrelated party. What was the child's recognized loss on the stock sale? $0 $10,000 $20,000 $30,000 None 37. A teacher—a single taxpayer—volunteers eight hours per week at a school for high-risk children, a qualified organization. The taxpayer's normal rate for teaching is $30 per hour. During Year 4, the taxpayer incurred unreimbursed costs, including $250 for one year of supplies and $20 per week for transportation, as a result of volunteering. If the taxpayer volunteered all 52 weeks of the year and made no other charitable contributions, what is the maximum amount of charitable contribution the taxpayer may deduct as an itemized deduction for Year 4? $0 $250 $1,290 $13,770 None 38. Sandro turned 71 last year and made a $6,500 contribution to his Roth IRA His income for the year was $76,400. How much of the contribution can he deduct on his Form 1040? $6,500 $5,500 $0, because it should be deducted on Schedule A $0, because his contribution is non-deductible None 39. Which allowable deduction can be claimed in arriving at the individual’s adjusted gross income? Alimony payment relating to a 2017 divorce Unreimbursed medical expenses Personal casualty loss Unreimbursed employee business expenses None 40. A couple filed a joint return in prior tax years. During the current tax year, one spouse died. The couple has no dependent children. What is the filing status available to the surviving spouse for the first subsequent tax year? Surviving spouse. Married filing separately. Single. Head of household. None 41. Which expense, both incurred and paid during the year, can be claimed as an itemized deduction? Homeowner's payment of interest on a $250,000 acquisition mortgage. One-half of the self-employment tax. Employee's unreimbursed business car expense. Self-employed health insurance. None 42. A taxpayer and spouse, a calendar-year couple with two dependent children, filed a joint return for the prior year. In November of the current year, the couple decided to no longer live together and to maintain separate households. They will file for divorce in the subsequent year. Both children lived with the taxpayer for the remainder of the current year. Which of the following filing statuses is available to the taxpayer for the current year? Single. Married with children. Head of household. Married filing separately. None 43. Mosh, a sole proprietor, uses the cash basis of accounting. At the beginning of the current year, accounts receivable were $25,000. During the year, Mosh collected $100,000 from customers. At the end of the year, accounts receivable were $15,000. What was Mosh's gross taxable income for the current year? $75,000 $90,000 $100,000 $110,000 None 44. Which of the following would be subject to self-employment tax for a farmer? Gains on the sale of livestock held for breeding. Gains on the sale of farmland. Gains on the sale of livestock raised for sale. Gains on the sale of livestock raised for milking. None 45. A child, age five, is claimed as a dependent on the parents' tax return. The child has $3,000 of interest income, no earned income this year, and will file a tax return. Assuming the current applicable standard deduction is $1,100, how much of the child's income will be taxed at the parents' tax rates? $800 $1,900 $2,200 $3,000 None 46. A husband and wife can file a joint return even if The spouses have different tax years, provided that both spouses are alive at the end of the year. The spouses have different accounting methods. Either spouse was a nonresident alien at any time during the tax year, provided that at least one spouse makes the proper election. They were divorced before the end of the tax year. None 47. A single taxpayer has adjusted gross income of $40,000 in the current year. During the year, a hurricane causes $4,100 damage to the taxpayer's personal use car, on which the taxpayer has no damage insurance. The area in which the damage occurred was a federally declared disaster area. The taxpayer purchased the car for $20,000. Immediately before the hurricane, the car's fair market value was $11,000, and immediately after the hurricane its fair market value was $6,900. Assuming the taxpayer elects to itemize deductions, what amount should the taxpayer deduct as a casualty loss for the current year after all threshold limitations are applied? $4,100 $4,000 $100 $0 None 48. In year 4 Adams, an individual, changed residences and converted her former residence into a passive rental activity. In 20X14 Adams lived in the former residence for 60 days, incurred $7,000 in qualifying expenses preparing the property for rental, and rented it to a tenant for 90 days, receiving $3,000 in rent. Before considering the rental activity, Adams’ adjusted gross income for year 4 is $120,000. After considering the rental activity, what should Adams’ year 4 adjusted gross income be? $120,000 $116,000 $118,500 $123,000 None 49. A single taxpayer received $155,000 in salary, $15,000 in income from an S corporation in which the taxpayer does not materially participate, and a $35,000 passive loss from a real estate rental activity in which the taxpayer actively participated. What amount of the real estate rental activity loss is deductible? $0 $15,000 $25,000 $35,000 None 50. A taxpayer's house was damaged by a hurricane in Year 1. The area where the house was located was declared a federal disaster area. The fair value of the home before the hurricane was $150,000. After the hurricane, the fair value of the home was $125,000. The taxpayer's adjusted basis in the house was $100,000. The taxpayer received $10,000 in insurance reimbursements. If the taxpayer elects to itemize deductions and has adjusted gross income for Year 1 of $40,000, what is the taxpayer's casualty loss deduction for Year 1? $10,900 $11,000 $14,900 $15,000 None 51. With regard to the inclusion of social security benefits in gross income, which of the following statements is correct? The social security benefits in excess of modified adjusted gross income are included in gross income. The social security benefits in excess of one half the modified adjusted gross income are included in gross income. Eighty-five percent of the social security benefits is the maximum amount of benefits to be included in gross income. The social security benefits in excess of the modified adjusted gross income over $32,000 are included in gross income. None 52. Jagdon Corp.'s book income was $150,000 for the current year, including interest income from municipal bonds of $5,000 and excess capital losses over capital gains of $10,000. Federal income tax expense of $50,000 was also included in Jagdon's books. What amount represents Jagdon's taxable income for the current year? $185,000 $195,000 $205,000 $215,000 None 53. Rigg, Steele, and Urco, all accrual-basis, calendar-year C corporations, have only voting common stock outstanding. Rigg owns 85 percent of Steele and 40 percent of Urco. Steele owns 50 percent of Urco. Which group of corporations qualifies as an affiliated group and may join in the filing of a consolidated federal income tax return? Rigg and Urco. Urco and Steele. Rigg, Steele, and Urco. An affiliated group does not exist. None 54. Pinnacle Corporation's book income, before federal income taxes, was $500,000 for the current year. In calculating book income, Pinnacle deducted $2,500 for entertainment expense, $4,000 for business meals provided by a restaurant, and $20,000 for depreciation expense. For tax purposes, Pinnacle's deprecation deduction is $28,000. What is the net Schedule M-1 adjustment on Pinnacle's federal income tax return? $3,500 increase. $3,500 decrease. $5,500 increase. $5,500 decrease. None 55. In which of the following situations will a controlled foreign corporation located in Ireland be deemed to have Subpart F income? Services are provided by an Irish company in England under a contract entered into by its U.S. parent. Property is produced in Ireland by the Irish company and sold outside its country of incorporation. Services are performed in Ireland by the Irish company under a contract entered into by its U.S. parent. Property is bought from the controlled foreign corporation's U.S. parent and is sold by an Irish company for use in an Irish manufacturing plant. None 56. A corporation had $10,000 of earnings and profits (E&P) for the current year and accumulated negative E&P of $100,000. It paid a cash distribution of $30,000. What amount represents the taxable dividend to the shareholder for that year? $0 $10,000 $20,000 $30,000 None 57. Beech Corp., an accrual-basis, calendar-year S corporation, has been an S corporation since its inception. At the beginning of the current year, Gold owned 50% of the 100 issued shares of Beech stock, and had a $3,000 tax basis in the Beech stock. During the current year, Beech had $200,000 in net business income and $4,000 in Oak County municipal bond interest income. Beech made no distributions to its shareholders. What was Gold's tax basis in Beech stock at year end? $102,000 $103,000 $104,000 $105,000 None 58. The two equal shareholders of a C corporation are thinking of filing an election to have the company treated as an S corporation. Which of the following consequences is an advantage of this election? The corporation's net operating loss carryovers from prior years are immediately deductible by the shareholders. The shareholders of the S corporation will be taxed only on distributions from the corporation. The corporation's tax-free fringe benefits for the shareholders will be deductible by the corporation. The corporation's capital losses can be claimed on the tax returns of the shareholders. None 59. Azmi is single and the sole proprietor of a law practice. This year the law practice has qualified business income of $187,500. W-2 wages were $220,000 and the unadjusted basis of qualified property is $80,000. Assume Azmi has no other income or deductions. The Section 199A threshold amount for the year is $157,500. What is Azmi's QBI deduction? $37,500 $44,000 $22,800 $15,000 None 60. A corporation elected S corporation status. All shareholders gave their written consent, except for a missing shareholder who owns 1% of the outstanding stock. Which of the following statements about this situation is correct? The election is valid if the board of directors gives its written consent. The election is invalid because all shareholders must give their written consent. The election requires two-thirds of the shareholders' written consent to be valid. The election requires 51% of the shareholders to give their written consent to be valid. None 61. Dove and Eagle formed a business entity in which they are equal owners. Dove contributed cash of $100,000, and Eagle contributed land with a basis of $40,000 and fair market value of $100,000. For its first year of operations, the entity had taxable income of $60,000 and made no distributions. At year end it had outstanding recourse liabilities to third parties of $10,000. Eagle had a basis of $70,000 in the entity at the end of the first year of operations. What type of entity was formed? C corporation. S corporation. General partnership. Limited liability company (LLC) None 62. Strom acquired a 25%interest in Ace partnership by contributing land having an adjusted basis of $16,000 and a fair market value of $50,000. The land was subject to a $24,000 mortgage, which was assumed by Ace. No other liabilities existed at the time of the contribution. What was Strom's basis in Ace? $0 $16,000 $26,000 $32,000 None 63. In return for a 20% partnership interest, Skinner contributed $5,000 cash and land with a $12,000 basis and a $20,000 fair market value to the partnership. The land was subject to a $10,000 mortgage that the partnership assumed. Additionally, the partnership had $20,000 in recourse liabilities that would be shared by partners according to their partnership interests. What amount represents Skinner's basis in the partnership interest? $13,000 $19,000 $21,000 $27,000 None 64. Partner A's basis in partnership ABC is $5,000 at the beginning of the year. During the year, Partner A received a nonliquidating distribution of $3,000 cash and property with an adjusted basis of $4,000 and fair market value of $5,000. What was Partner A's basis in the property received? $2,000 $3,000 $4,000 $5,000 None 65. Abbott (an S Corporation), Bell, Costello, and Dilbertson form Best Partnership, an equally shared partnership. Each partner except Abbott has a December 31 tax year end; Abbott's is June 30. The partners would like to choose a partnership tax year other than one ending December 31, but they lack a valid business purpose for doing so. Which of the following is an acceptable tax year end for Best Partnership? May 31. June 30. August 31. September 30. None 66. Dean is a 25% partner in Target Partnership. Dean's tax basis in Target on January 1, Year 4, was $20,000. At the end of Year 4, Dean received nonliquidating distributions of $8,000 and property with an adjusted tax basis of $2,000 and fair market value of $6,000 from Target. For Year 4, Target reported ordinary business income of $40,000 and recourse debt of $12,000. What was Dean's tax basis in Target on December 31, Year 4? $16,000 $19,000 $20,000 $23,000 None 67. Brown transfers property to a trust. A local bank was named trustee. Brown retained no powers over the trust. The trust instrument provides that current income and $6,000 of principal must be distributed annually to the beneficiary. What type of trust was created? Simple. Grantor. Complex. Revocable. None 68. Which of the following types of organizations is considered a public charity for purposes of the charitable contribution deduction? Chambers of commerce. Supplemental unemployment benefit trusts. Cemetery companies. Religious organizations. None 69. Steve and Kay Briar, U.S. citizens, were married for the entire Year 4 calendar year. In Year 4, Steve gave a $40,000 cash gift to his sister. The Briars made no other gifts in Year 4. They each signed a timely election to treat the $40,000 gift as made one-half by each spouse. Assume that the gift tax annual exclusion is $15,000. Disregarding the unified credit and estate tax consequences, what amount of the Year 4 gift is taxable to the Briars? $40,000 $25,000 $10,000 $0 None 70. Husband and wife, U.S. citizens, were married for the entire Year 1 calendar year. In Year 1, the husband gave a $60,000 cash gift to his sister. The husband and wife made no other gifts in Year 1. They each signed a timely election to treat the $60,000 gift as one made by each spouse. Assume that the gift tax annual exclusion is $15,000. Disregarding the unified credit and estate tax consequences, what amount of the Year 1 gift is taxable to the husband and wife for gift tax purposes? $0 $30,000 $45,000 $60,000 None 71. Parents lend $2,000,000 to their child to start a business. The loan is interest-free and is payable on demand. The imputed interest is subject to The gift tax only in the year the parents lend the money. The generation-skipping transfer tax, but not the gift tax. The gift tax each year the loan is outstanding. An excise tax. None 72. A domestic limited liability company not classified as a corporation under IRS regulations is owned entirely by one individual taxpayer. Unless the taxpayer elects otherwise, the company will be taxed as A trust. A partnership. An S corporation. A disregarded entity. None 73. Davis, a director of Active Corp., is entitled to Serve on the board of a competing business. Take sole advantage of a business opportunity that would benefit Active. Rely on information provided by a corporate officer. Unilaterally grant a corporate loan to one of Active's shareholders. None 74. Acorn Corp. wants to acquire the entire business of Trend Corp. Which of the following methods of business combination will best satisfy Acorn's objectives without requiring the approval of the shareholders of either corporation? A merger of Trend into Acorn, whereby Trend shareholders receive cash or Acorn shares. A sale of all the assets of Trend, outside the regular course of business, to Acorn, for cash. An acquisition of all the shares of Trend through a compulsory share exchange for Acorn shares. A cash tender offer, whereby Acorn acquires at least 90% of Trend's shares, followed by a short-form merger of Trend into Acorn. None 75. A shareholder vote is required before a corporation can Declare dividends. Declare liquidating dividends. Issue stock. Acquire treasury stock. None 76. Case Corp. is incorporated in State A. Under the Revised Model Business Corporation Act, which of the following activities engaged in by Case requires that Case obtain a certificate of authority to do business in State B? Maintaining bank accounts in State B. Collecting corporate debts in State B. Hiring State B residents as employees to work in State A. Maintaining an office in State B to conduct intrastate business. None 1 out of 76 Time is Up! Time's upTime is Up!
