Practice Test 1 - CPA Taxation & Regulation (REG)
20 questions. Answer them in any order, then submit to see your score and every explanation.
- A tax practitioner is approached by a former IRS revenue agent who wants to refer clients to the practitioner in exchange for a fee. Under Circular 230, which of the following is correct?
- Under the constructive receipt doctrine, when is income treated as received by a cash-method taxpayer even if not actually collected?
- Noble, Inc. is a C corporation with current and accumulated E&P of $110,000. Noble distributes $95,000 cash to its shareholder whose adjusted basis in Noble stock is $40,000. Under IRC §301, what portion of the distribution is treated as a return of capital?
- You are advising Juniper Consulting, Inc., a domestic corporation, which has 2 shareholders: an individual U.S. citizen and a revocable living trust treated as a grantor trust owned by that same individual. Under IRC §1361, which shareholder type is ineligible for S Corporation status?
- Under Section 501(c)(3), which of the following organizations would likely fail the organizational test?
- A purchaser of a note receives information that the payee obtained the note through fraudulent misrepresentation to the maker. If the purchaser takes the note despite this knowledge, can the purchaser qualify as an HDC?
- Under the perfect tender rule in UCC Article 2, a buyer may reject goods if the goods or tender of delivery fail in any respect to conform to the contract. Which of the following correctly identifies an exception to the perfect tender rule?
- A bank discounts a note at 85% of its face value, paying $8,500 for a $10,000 note. Has the bank given 'value' for purposes of HDC status?
- A hospital applies for Section 501(c)(3) status. Under the community benefit standard, which of the following activities would support the hospital's qualification?
- A cashier's check is drawn by a bank on itself and is payable to a designated payee. Which of the following correctly describes a cashier's check?
- Clarkfield Corp is a calendar-year C corporation. In Year 1, it pays $28,000 in qualifying employer-sponsored childcare facility costs and $5,000 in childcare resource and referral expenditures. The Section 45F employer-provided childcare credit is capped at $150,000. What is Clarkfield's Section 45F credit for Year 1?
- A practitioner issues a written tax opinion stating a transaction 'should' result in a specific tax outcome. After penalties are assessed, a client argues the practitioner was negligent for not clarifying the uncertainty 'should' conveys. Which Circular 230 analysis is most relevant?
- Under the shelter rule (UCC Section 3-203), a transferee who does not qualify as an HDC may nonetheless acquire the rights of an HDC. Which of the following correctly describes the shelter rule?
- A corporation disposes of one Section 197 intangible from a business acquisition for $25,000 when its adjusted basis is $40,000, a $15,000 loss. Several other Section 197 intangibles from the same acquisition are still held. Which analysis of the loss is most accurate?
- Under SSTS No. 1, a tax return position fails the realistic possibility standard but is not frivolous. Under what condition may the CPA still recommend the position?
- A CPA advises a client orally that a home office expense is deductible. The client relies on the advice, claims the deduction, and it is later disallowed. Under SSTS No. 7, which factor is most relevant to whether the CPA met the applicable standard?
- A corporation acquires the following intangibles as part of a business purchase on January 1, Year 1: goodwill $360,000, workforce in place $90,000, and a government-issued license $150,000. What is the total Year 1 amortization deduction for these Section 197 intangibles?
- Under the grantor trust rules (Sections 671-677), how is a grantor trust taxed?
- Under the Bankruptcy Code, which of the following debts is generally NOT dischargeable in a Chapter 7 bankruptcy?
- Under 11 U.S.C. Section 303, when may an involuntary bankruptcy petition be filed against a debtor?