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Practice Test 8 - CPA Taxation & Regulation (REG)

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

  1. In 2025, Olivia is unmarried and maintains a household for her father, Henry, who lived in a nursing home all year; Olivia paid more than half the cost of Henry's support and more than half the cost of keeping up her own home. Henry's gross income is below the dependency threshold and he is a U.S. citizen. Under IRC §2(b) and IRC §152(d), under what circumstances does Olivia qualify for head of household status based on these facts?
  2. Under Circular 230 Section 10.22, a practitioner has a duty of competence. Which of the following best describes this duty?
  3. Innocent misrepresentation differs from fraudulent misrepresentation in what key way?
  4. No filing on a PMSI in consumer goods; a consumer sells for value to a buyer for consumer use with no knowledge.
  5. A C corporation contributes appreciated property (adjusted basis $30,000, FMV $80,000) to a qualifying charity. What is the corporation's charitable contribution deduction for the donated property?
  6. On September 1, 20X2, RetailChain (debtor) granted Bank Senior a security interest in all inventory and perfected by filing on September 1. On September 18, 20X2, RetailChain purchased additional inventory from Supplier on credit; Supplier took a purchase money security interest, RetailChain received possession on September 18, Supplier filed on September 19, but Supplier's authenticated notice to Bank Senior was received on September 25 (after RetailChain received possession). RetailChain defaulted on October 10, 20X2. Under Uniform Commercial Code Article 9, which secured party has priority in the September 18 inventory?
  7. Which of the following itemized deductions is allowed for AMT purposes (i.e., is NOT added back as an AMT adjustment)?
  8. What is Paul's basis in the land after the distribution, and what is his remaining basis in the partnership interest?
  9. Jasper Partners is a general partnership between R and T. The partnership agreement provides that R receives a special allocation of the first $10,000 of tax-exempt interest under IRC Section 704(b), with all remaining income items shared 50/50. For the year, Jasper has $10,000 of tax-exempt interest and $90,000 of ordinary business income. Assuming the special allocation has substantial economic effect, how should the partnership allocate the items?
  10. Which of the following statements correctly describes the low-income housing tax credit (LIHTC) under Section 42?
  11. Under Section 1033(b), when a corporation reinvests only part of the condemnation proceeds in replacement property, which of the following correctly describes the basis of the replacement property?
  12. In 2025, Noah is unmarried and lived all year with his girlfriend, Mia, and Mia's son, Ben (age 14). Ben is Mia's qualifying child under IRC §152(c); Mia had $2,000 of wages and is not Noah's dependent. Noah paid 80% of the cost of keeping up the home. Under IRC §2(b) and the dependency rules of IRC §151–§152, under what circumstances does Noah qualify for head of household status based on these facts?
  13. Under Chapter 13 of the Bankruptcy Code, what is the primary benefit for individual debtors?
  14. Which of the following items increases a partner's tax basis in their partnership interest but does not increase their Section 704(b) book capital account?
  15. What is the asset's adjusted basis for determining gain or loss on the sale?
  16. Pine, Inc. is a C corporation with current and accumulated E&P of $25,000. Pine distributes property with FMV $60,000 and adjusted basis to Pine of $10,000 (no liabilities) to its shareholder. Under the property distribution rules, what amount of gain or loss is recognized by Pine?
  17. In a partnership liquidation, the partnership distributes assets to its two equal partners. Partner X receives land (partnership basis $50,000, FMV $90,000) and Partner Y receives equipment (partnership basis $50,000, FMV $90,000). Each partner has an outside basis of $70,000. What is Partner X's basis in the land?
  18. For UBIT purposes, unrelated business taxable income (UBTI) is defined as income from a trade or business that meets which three criteria?
  19. Which of the following scenarios illustrates the defense of duress in contract law?
  20. Under Section 501(c)(3), a private foundation that engages in a prohibited act of self-dealing with a disqualified person may be subject to which of the following consequences?

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