AICPA CPA Regulation Sample Questions:
1. Starr, a self-employed individual, purchased a piece of equipment for use in Starr's business. The costs
associated with the acquisition of the equipment were:
What is the depreciable basis of the equipment?
A) $58,400
B) $59,125
C) $59,425
D) $55,000
2. In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of
qualified U.S. Series EE Bonds may be excluded from gross income. The exclusion is subject to a
modified gross income limitation and a limit of aggregate bond proceeds in excess of qualified higher
education expenses. Which of the following is (are) true?
I. The exclusion applies for education expenses incurred by the taxpayer, the taxpayer's spouse, or any
person whom the taxpayer may claim as a dependent for the year.
II. "Otherwise qualified higher education expenses" must be reduced by qualified scholarships not
includible in gross income.
A) Neither I nor II.
B) II only.
C) I only.
D) Both I and II.
3. On December 1, 1992, Michaels, a self-employed cash basis taxpayer, borrowed $100,000 to use in her
business. The loan was to be repaid on November 30, 1993. Michaels paid the entire interest of $12,000
on December 1, 1992. What amount of interest was deductible on Michaels' 1993 income tax return?
A) $0
B) $12,000
C) $11,000
D) $1,000
4. Greller owns 100 shares of Arden Corp., a publicly-traded company, which Greller purchased on January
1 , 2001, for $10,000. On January 1, 2003, Arden declared a 2-for-1 stock split when the fair market value
(FMV) of the stock was $120 per share. Immediately following the split, the FMV of Arden stock was $62
per share. On February 1, 2003, Greller had his broker specifically sell the 100 shares of Arden stock
received in the split when the FMV of the stock was $65 per share. What is the basis of the 100 shares of
Arden sold?
A) $6,000
B) $5,000
C) $6,500
D) $6,200
5. Tom and Joan Moore, both CPAs, filed a joint 1994 federal income tax return showing $70,000 in taxable
income. During 1994, Tom's daughter Laura, age 16, resided with Tom. Laura had no income of her own
and was Tom's dependent.
Determine the amount of income or loss, if any that should be included on page one of the Moores' 1994
Form 1040.
The Moores had no capital loss carryovers from prior years. During 1994, the Moores had the following
stock transactions, which resulted in a net capital loss:
A) $0
B) $25,000
C) $3,000
D) $75,000
E) $2,000
F) $1,300
G) $900
H) $55,000
I) $50,000
J) $1,500
K) $1,250
L) $1,000
M) $10,000
N) $2,500
O) $500
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: D | Question # 3 Answer: C | Question # 4 Answer: B | Question # 5 Answer: C |
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