Reg CPA Exam Questions
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Are you ready to pass the REG CPA Exam? Find out by testing yourself with free CPA Exam questions from UWorld CPA. This download includes actual AICPA-released CPA Exam questions, as well as sample questions written by our team of experts. It also includes detailed answer explanations to help you understand your areas of weakness. These CPA Exam practice questions mimic the actual CPA Exam Sections and feature the latest topics you’ll see on exam day.
The Regulation (REG) section of the CPA Exam mainly focuses on taxation. Its five testlets are broken into two testlets with 72 MCQs between them and another 8 TBSs split among the remaining three testlets. In the REG section of the CPA Exam, 50% of your score comes from MCQs and 50 % from TBSs.
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Question 1
A tax return preparer may disclose or use tax return information without the taxpayer’s consent to
- A. Facilitate a supplier’s or lender’s credit evaluation of the taxpayer.
- B. Accommodate the request of a financial institution that needs to determine the amount of taxpayer’s debt to it, to be forgiven.
- C. Be evaluated by a quality or peer review.
- D. Solicit additional nontax business.
C is Correct
Disclosure or use of the information on a tax return can only be done with the written consent of the taxpayer. Absent the taxpayer’s written consent, disclosure or use of the taxpayer’s tax return information by a tax preparer makes the preparer subject to a penalty for knowingly or recklessly disclosing tax return information.
However, there are exceptions to the penalty. Specifically, tax preparers may disclose or use information on a tax return if the disclosure is (1) for quality or peer reviews; (2) for use in preparing state and local taxes and/or in declaring estimated taxes;(3) under code; and (4) under the order of a
court of law.
Thus, disclosing information for a peer review is an allowable exception to the penalty for knowingly or recklessly disclosing tax return information.
Question 2
In the current year, Fitz, a single taxpayer, sustained a $48,000 loss on Code Sec. 1244 stock in JJJ Corp., a qualifying small business corporation, and a $20,000 loss on Code Sec. 1244 stock in MMM Corp., another qualifying small business corporation. What is the maximum amount of loss that Fitz can deduct for the current year?
- A. $50,000 capital loss
- B. $68,000 capital loss
- C. $18,000 ordinary loss and $50,000 capital loss
- D. $50,000 ordinary loss and $18,000 capital loss
D is Correct
If Section 1244 stock is sold at a loss the loss is treated as an ordinary loss up to the applicable limit. The limit applies per calendar year and is $50,000 for single taxpayers and $100,000 for those filing as married-joint. Fitz’s total Section 1244 losses are $68,000 but only $50,000 of the loss is characterized as ordinary. The remaining $18,000 is treated as a capital loss since investments are a capital asset.
Question 3
If an exempt organization is a corporation, the tax on unrelated business taxable income is
- A. Computed at corporate income tax rates.
- B. Computed at rates applicable to trusts.
- C. Credited against the tax on recognized capital gains.
- D. Abated
A is Correct
An exempt organization’s unrelated business income in excess of $1,000 is taxed at regular corporate income tax rates if the organization is a corporation. An exempt organization must be a trust in order for its unrelated business income to be taxed at the rates applicable to trusts.
Question 4
A corporation’s penalty for underpaying federal estimated taxes is
- A. Not deductible.
- B. Fully deductible in the year paid.
- C. Fully deductible if reasonable cause can be established for the underpayment.
- D. Partially deductible.
A is Correct
Even though a corporation’s penalty for underpay-ing federal estimated taxes is in the nature of interest, it is treated as an addition to tax, and as such, the penalty is not deductible.
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