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Practice Test 12 - CPA Taxation & Regulation (REG)

20 questions. Answer them in any order, then submit to see your score and every explanation.

  1. Quazar Corp, a calendar-year C corporation, paid $120,000 in foreign income taxes on $600,000 of foreign-source income. Quazar's total pre-credit U.S. income tax was $840,000 on total worldwide income of $4,000,000. Which of the following correctly calculates the maximum foreign tax credit available to Quazar?
  2. In 2025, Reese (single) has $115,000 of taxable income before capital gains and losses. Reese sold corporate bonds held 2 years for a $4,500 gain and sold stock held 9 months for a $2,500 gain; Reese also sold investment land held 6 years for a $10,000 loss. What is Reese's net capital gain/loss for 2025?
  3. Under the throwback rules for certain foreign trusts, accumulated income that was not distributed in prior years but is later distributed is subject to special treatment. Which of the following correctly describes the basic concept of the throwback rule?
  4. For tax year 2024, Mark is single, age 30, not a full-time student, and contributes $2,000 to a traditional IRA. His AGI is $23,000 and he meets all other requirements for the Retirement Savings Contributions Credit (Saver's Credit). Calculate Mark's Saver's Credit for 2024.
  5. What is the most likely consequence for Innovate Corp. if this sale of stock to the trust occurs?
  6. A power of attorney is a written instrument by which a principal appoints an agent. What is a 'durable' power of attorney?
  7. An individual purchased a personal residence for $410,000 and later installed a swimming pool costing $35,000 as a capital improvement. The taxpayer sold the home for $495,000 and paid $29,000 in selling expenses. Based on the provided details, what is the taxpayer's gain or loss on disposition?
  8. Injunctive relief as a remedy for breach of contract is most appropriate in which of the following situations?
  9. A taxpayer purchases a building for $800,000. In connection with the purchase, the taxpayer pays $15,000 in legal fees, $5,000 in title insurance, and $2,000 in recording fees. What is the taxpayer's initial basis in the building?
  10. Section 501(c)(6) covers business leagues, chambers of commerce, real estate boards, and other trade associations. Which of the following is a requirement for qualification under Section 501(c)(6)?
  11. Which of the following correctly describes the duty of care owed by an agent to the principal?
  12. Under agency law, which of the following best describes 'actual authority'?
  13. In 2024, Maple Ridge LLC (taxed as an S corporation) purchases and places in service new 7-year MACRS manufacturing machinery costing $3,200,000 for use 100% in its trade or business. Total 2024 qualifying Section 179 property placed in service is $3,200,000, and the company's 2024 taxable income from the active conduct of the business (before any Section 179 deduction) is $900,000. Maple Ridge elects the maximum Section 179 deduction. Given the business income, what portion of the asset cost can be expensed under Section 179 for 2024?
  14. On April 10 of the current year, a calendar-year corporation purchased and placed in service new computer equipment for $80,000. The equipment is 5-year MACRS property. This was the only property the corporation placed in service during the year. The corporation did not elect Section 179 expensing or bonus depreciation. What is the amount of the MACRS depreciation deduction for the computer equipment for the current year?
  15. A trust receives $40,000 of qualified dividend income and $10,000 of interest income. The trust distributes $30,000 to the beneficiary. DNI equals $50,000. What is the character of the $30,000 distribution to the beneficiary?
  16. A contract is enforceable only if there is a valid offer and a valid acceptance forming a meeting of the minds. Which of the following illustrates a failure of mutual assent that could be raised as a defense?
  17. Alton's farm machinery (adjusted basis $13,000) was destroyed in a hailstorm. He received insurance proceeds of $25,000 and reinvested $22,000 in qualifying replacement machinery within the replacement period. Alton elects Section 1033. What is Alton's basis in the replacement machinery?
  18. Under Section 163(j), the business interest expense deduction is limited for C corporations. Which of the following correctly describes the general limitation?
  19. Which of the following is an example of a holder taking an instrument in circumstances that constitute 'bad faith,' preventing HDC status?
  20. Which of the following best illustrates implied actual authority in an agency relationship?

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