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Practice Test 2 - CPA Taxation & Regulation (REG)

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

  1. Under the S corporation rules, what are the tax consequences when an S corporation distributes appreciated property (not cash) to a shareholder?
  2. A restrictive endorsement 'For Deposit Only - Jane Doe' is written on the back of a check. Which of the following correctly describes the effect of this endorsement?
  3. A single 40-year-old taxpayer with MAGI of $95,000 is an active participant in her employer's 401(k) plan. The 2024 IRA deduction phase-out range for single active participants is $77,000 to $87,000. She contributes $7,000 to a traditional IRA. What is her allowable IRA deduction?
  4. For tax year 2024, Taylor is single with one qualifying child and has AGI of $52,000, all from wages. Taylor meets all other Earned Income Credit requirements. Which factor would most affect whether Taylor can claim the Earned Income Credit for 2024?
  5. Merchant buyer's PO is silent on arbitration; seller's acknowledgment adds it. Both merchants; no objection. Result?
  6. What is the general period within which a taxpayer must file a claim for refund of an overpayment of federal income tax?
  7. In 2025, Casey (married filing jointly) has $210,000 of taxable income before capital gains and losses. Casey sold stock held 7 months for a $4,000 gain and sold stock held 20 months for a $9,000 gain; Casey also sold investment land held 3 years for a $6,000 loss. What is Casey's net capital gain/loss for 2025?
  8. Form 1040-X is the form used to amend an individual federal income tax return. Which statement about Form 1040-X is most accurate?
  9. Which of the following nonrefundable credits may generally be used to offset the AMT (in addition to offsetting regular tax) under current law?
  10. A perfected inventory lender's debtor sells in ordinary course under loan terms; buyer knows of the lien.
  11. For tax year 2024, Henry is head of household, age 67, contributes $1,000 to a Roth IRA, and has AGI of $38,000. He is not a full-time student and cannot be claimed as a dependent. Which statement is correct regarding Henry's eligibility for the Saver's Credit for 2024?
  12. A taxpayer exchanges an investment office building for an investment warehouse in an IRC Section 1031 exchange. As part of the transaction, the other party assumes the taxpayer's mortgage on the relinquished property, and the taxpayer does not assume any debt on the replacement property; no cash changes hands. What are the consequences of receiving boot in this exchange?
  13. Under Section 661, a complex trust may deduct distributions to beneficiaries. Which of the following distributions is included in the Section 661 deduction?
  14. On February 1, 20X2, CleanCo (debtor) granted Lender A a security interest in "all equipment, now owned or hereafter acquired"; the interest attached on February 1 and Lender A filed on February 2. On March 1, 20X2, CleanCo purchased a commercial washer from Seller on credit; CleanCo signed a security agreement granting Seller a purchase money security interest and received possession on March 1. Seller filed on March 18. Under Uniform Commercial Code Article 9, which security interest prevails in the washer?
  15. What is the amount of loss from the partnership that Pat can deduct on his current year tax return?
  16. A partner's outside basis is $0 when the partnership distributes property with a partnership basis of $25,000 and FMV of $40,000 in a current distribution. What is the partner's basis in the distributed property?
  17. Which of the following is an example of income that is substantially related to an exempt organization's exempt purpose and therefore not subject to UBIT?
  18. What is the failure-to-file penalty under Section 6651(a)(1) for a taxpayer who files a return 3 months late with a $10,000 tax liability, none of which had been paid?
  19. Under Section 643(a), which of the following is generally excluded from the computation of DNI for a trust or estate?
  20. What is the MACRS depreciation deduction for the computer in Year 3, the year of sale?

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