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Practice Test 9 - CPA Taxation & Regulation (REG)

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

  1. A taxpayer purchases 100 shares of stock for $5,000 and later receives a 100% stock dividend (100 additional shares). What is the taxpayer's basis per share after receiving the stock dividend?
  2. You are preparing an S Corporation election for Harbor Tooling, Inc., a domestic corporation, with only eligible shareholders under IRC §1361. The corporation began business on March 10 and wants S status effective March 10. Under IRC §1362, by what deadline must Harbor Tooling generally file Form 2553 to make a timely election for that effective date (assuming no late-election relief is requested)?
  3. A qualified disability trust is entitled to a special personal exemption. Under Section 642(b)(2)(C), what is the personal exemption for a qualified disability trust?
  4. Shareholders of a closely held corporation have which of the following special rights compared to publicly held corporations, if provided for in a shareholder agreement?
  5. In 2025, Sam (head of household) has $120,000 of taxable income before capital gains and losses. Sam sold stock held 11 months for a $7,000 loss and sold corporate bonds held 2 years for a $3,000 loss; Sam also sold investment land held 18 months for a $15,000 gain. What is Sam's net capital gain/loss for 2025?
  6. When a CPA uses estimates on a tax return under SSTS No. 4, what is the CPA's primary obligation regarding those estimates?
  7. Under UCC Section 2-711, which of the following remedies is available to a buyer when a seller fails to deliver goods or repudiates the contract?
  8. A party challenges a contract's enforceability claiming the other party lacked mental capacity. Under what standard is mental incapacity determined in contract law?
  9. In 2025, Mason is married to Riley and they lived together all year. Mason's 19-year-old child from a prior relationship lived with Mason and Riley all year, is not a full-time student, and earned $6,200 in wages; Mason provided more than half of the child's support. Under IRC §152(c) and §152(d), which individuals qualify as dependents?
  10. For tax year 2024, Paige is married filing separately and pays $4,000 of qualified tuition for her own eligible undergraduate education (first four years) and otherwise meets the American Opportunity Tax Credit requirements. Which statement is correct regarding Paige's ability to claim the AOTC for 2024?
  11. When a holder fails to make timely presentment of a check for payment, what is the effect on the drawer's liability under UCC Section 3-414?
  12. An exempt organization has UBTI of $80,000 from an unrelated business. In computing its UBIT liability under Section 511, which of the following deductions is the organization allowed?
  13. Leo contributes land to the newly formed LMN Partnership in exchange for a 33% interest. At the time of contribution, the land has an adjusted basis of $50,000 and a fair market value of $80,000. The land is subject to a mortgage of $20,000, which the partnership assumes. What is Leo's initial basis in his partnership interest?
  14. Under the Statute of Frauds, which of the following contracts must be in writing to be enforceable?
  15. For federal income tax purposes, how will D&E Solutions, LLC, be treated by default?
  16. Quantum meruit is a theory of recovery available in which of the following situations?
  17. An S corporation with two equal shareholders (50% each) has ordinary income of $100,000 and makes a cash distribution of $30,000 to one shareholder only. How much income does each shareholder report?
  18. For federal income tax, an individual timely filed a 2020 Form 1040 on April 15, 2021. On August 1, 2022, the taxpayer filed an amended return (Form 1040-X) reporting additional tax due for 2020, and paid the additional tax with the amended return. Under these circumstances, when does the IRS's general statute of limitations for assessment of 2020 tax expire?
  19. Vesper Corp elects S corporation status on March 15 of Year 1 for the current tax year beginning January 1. Vesper had been a C corporation for its entire prior history. Which of the following requirements must Vesper meet to make a valid S election?
  20. Undue influence as a defense to contract enforcement involves which of the following?

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