CPA®

CPA REG Practice Exam 5

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Comprehensive practice exam for the CPA Regulation (REG) section, aligned with the 2026 AICPA Blueprints. This exam covers Ethics, Business Law, and Federal Taxation (Property, Individuals, and Entities).

72

Questions

Hard

Difficulty

75%

Pass mark

Topics covered

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Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area I: Ethics & Tax Procedures Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area II: Business Law Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area III: Property Transactions Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area IV: Individual Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation Area V: Entity Taxation

Sample questions

Q01Hard1 mark

A CPA is representing a client, TechSolutions Inc., in an IRS examination regarding a large research and development credit claim. The CPA discovers that the client's CFO has omitted material facts in the documentation provided to the IRS, which significantly overstates the credit. The CFO refuses to correct the omission. Under Treasury Department Circular No. 230, which of the following is the CPA's REQUIRED course of action?

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Q02Hard1 mark

A tax return preparer is engaged to prepare a return for a client who has engaged in a transaction that lacks economic substance but generates a substantial tax loss. The preparer determines there is no 'substantial authority' for the position, but there is a 'reasonable basis' for it. The client refuses to disclose the position on Form 8275. If the preparer signs the return, which penalty is the preparer MOST likely subject to?

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Q03Hard1 mark

Which of the following statements accurately describes the disciplinary authority of a State Board of Accountancy compared to the AICPA?

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Q04Hard1 mark

A taxpayer filed their Year 1 individual income tax return on March 15, Year 2. The return showed a gross income of $100,000. The taxpayer inadvertently omitted $26,000 of gross income from the return. No fraud was involved. What is the latest date the IRS can assess additional tax for Year 1?

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Q05Hard1 mark

A taxpayer disagrees with a proposed IRS deficiency and wishes to litigate the matter. The taxpayer wants to have a jury trial. Which court MUST the taxpayer petition?

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All questions (72)

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Q01A CPA is representing a client, TechSolutions Inc., in an IRS examination regarding a large research and development ...Hard Q02A tax return preparer is engaged to prepare a return for a client who has engaged in a transaction that lacks economi...Hard Q03Which of the following statements accurately describes the disciplinary authority of a State Board of Accountancy com...Hard Q04A taxpayer filed their Year 1 individual income tax return on March 15, Year 2. The return showed a gross income of $...Hard Q05A taxpayer disagrees with a proposed IRS deficiency and wishes to litigate the matter. The taxpayer wants to have a j...Hard Q06A taxpayer owes $50,000 in taxes for Year 1. The return was filed on time, but the tax was not paid until 3 months af...Hard Q07In the hierarchy of tax authority, which of the following carries the GREATEST authoritative weight?Hard Q08A CPA firm negligently prepared a financial statement for a client. The firm knew the client intended to use the stat...Hard Q09In which of the following situations does the tax practitioner privilege under IRC §7525 apply?Hard Q10A principal terminates an agent's actual authority. To terminate the agent's apparent authority with respect to third...Hard Q11Under the UCC Sales Article (Article 2), which of the following statements is correct regarding the 'Battle of the Fo...Hard Q12A debtor owes a creditor $10,000. The debt is barred by the statute of limitations. The debtor writes a letter to the...Hard Q13Which of the following defenses is available to a gratuitous surety but NOT to a compensated surety?Hard Q14In a Chapter 7 bankruptcy liquidation, which of the following claims has the highest priority for distribution?Hard Q15On April 1, Vendor sold a computer to Debtor on credit. Debtor took possession that day. On April 10, Vendor filed a ...Hard Q16Under the Foreign Corrupt Practices Act (FCPA), which of the following payments is prohibited?Hard Q17A shareholder of a C corporation may be held personally liable for the corporation's debts under the doctrine of 'pie...Hard Q18In Year 1, Jordan received a gift of stock from a parent. The parent's adjusted basis was $10,000, and the fair marke...Hard Q19A taxpayer purchased a machine for business use on November 15 of the current year for $100,000. This was the only de...Hard Q20In the current year, a taxpayer sold 100 shares of Tech Corp stock for $4,000. The taxpayer's basis in the stock was ...Hard Q21A taxpayer exchanged a warehouse used in business (adjusted basis $200,000, FMV $300,000) for land to be used in busi...Hard Q22Which of the following intangible assets is amortizable over 15 years under IRC §197?Hard Q23An employer provides group-term life insurance to an employee with a coverage amount of $90,000. The plan is non-disc...Hard Q24In Year 1, a taxpayer paid $4,000 in state income taxes and deducted them as an itemized deduction. The taxpayer's to...Hard Q25A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability is $14,...Hard Q26A taxpayer has Adjusted Gross Income (AGI) of $100,000. During the year, the taxpayer donated a piece of artwork to a...Hard Q27Regarding the Qualified Business Income (QBI) deduction under IRC §199A, which of the following is considered a 'Spec...Hard Q28A taxpayer has a $20,000 loss from a rental real estate activity in which they actively participate. The taxpayer's M...Hard Q29A single taxpayer provides more than half the support for a parent who lives in a nursing home. The parent received $...Hard Q30Which of the following tax credits is fully or partially REFUNDABLE?Hard Q31Redwood Corp., a C corporation, had book income of $500,000. Included in book income was $10,000 of municipal bond in...Hard Q32A C corporation owns 25% of the stock of another domestic corporation. The C corporation received $100,000 in dividen...Hard Q33Shareholders of a calendar-year C corporation want to elect S corporation status for the current year. What is the de...Hard Q34At the beginning of the year, a shareholder had a stock basis of $10,000 in an S corporation. During the year, the sh...Hard Q35A partner contributes property with an adjusted basis of $20,000 and a fair market value of $50,000 to a partnership ...Hard Q36Which of the following organizations must file an annual information return (Form 990) with the IRS?Hard Q37Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into i...Hard Q38A taxpayer sold a rental property for $500,000. The property was acquired for $400,000. Total depreciation taken was ...Hard Q39Which of the following acts by a debtor would be grounds for a denial of discharge in a Chapter 7 bankruptcy?Hard Q40Under the Affordable Care Act (ACA), an Applicable Large Employer (ALE) may be subject to a penalty if it fails to of...Hard Q41A C corporation distributes land to a shareholder as a dividend. The land has an adjusted basis of $20,000 and a fair...Hard Q42Which of the following statements is correct regarding the Net Operating Loss (NOL) rules for C corporations for tax ...Hard Q43A taxpayer holds a 30% interest in a partnership. The partnership agreement states that the taxpayer's share of liabi...Hard Q44Which of the following is a requirement for a corporation to elect S corporation status?Hard Q45A taxpayer had the following income and losses for the year: Salary $50,000; Passive Activity Income $10,000; Passive...Hard Q46Under the Uniform Commercial Code (UCC) Article 9, which of the following actions will PERFECT a security interest in...Hard Q47A taxpayer is a cash-basis sole proprietor. In Year 1, the taxpayer performed services for a client and sent a bill f...Hard Q48Which of the following is a 'Section 1231 asset'?Hard Q49A C corporation has current Earnings & Profits (E&P) of $20,000 and accumulated E&P of ($30,000) deficit at the begin...Hard Q50Which of the following items is an adjustment (add-back) for the Individual Alternative Minimum Tax (AMT)?Hard Q51A taxpayer sells a personal residence for $600,000. They bought it 3 years ago for $200,000 and lived in it for the e...Hard Q52Under the Statute of Frauds, which of the following contracts MUST be in writing to be enforceable?Hard Q53A taxpayer purchased a $100,000 machine for business use. The taxpayer expensed $20,000 under Section 179. The remain...Hard Q54Which of the following business entities provides limited liability to ALL its owners and allows for 'pass-through' t...Hard Q55A taxpayer received a $5,000 state income tax refund in Year 2 for taxes paid in Year 1. In Year 1, the taxpayer took...Hard Q56Which of the following credits can result in a refund even if the taxpayer has no income tax liability?Hard Q57A C corporation incurred $60,000 of organizational costs in its first year of operations. What is the maximum deducti...Hard Q58Under the Revised Model Business Corporation Act, which of the following actions generally requires shareholder appro...Hard Q59A taxpayer has a $3,000 short-term capital loss carryover from the prior year. In the current year, the taxpayer has ...Hard Q60Which of the following is a 'primary' source of tax authority?Hard Q61A taxpayer contributes property with a basis of $10,000 and FMV of $20,000 to a C corporation in exchange for 100% of...Hard Q62Which of the following is NOT a requirement for a negotiable instrument under the UCC?Hard Q63A taxpayer's home was destroyed by a federally declared disaster. The adjusted basis was $200,000. The FMV before the...Hard Q64Which of the following is a 'separately stated item' on a Partnership Schedule K-1?Hard Q65A taxpayer is a 50% shareholder in an S corporation. The corporation has $0 accumulated E&P. At the beginning of the ...Hard Q66Under Circular 230, which of the following fees is generally PROHIBITED for a tax practitioner preparing an original ...Hard Q67A C corporation distributes assets in a complete liquidation. The assets have a basis of $100,000 and FMV of $150,000...Hard Q68Which of the following is TRUE regarding the 'at-risk' limitation for losses?Hard Q69A multi-state corporation has the following factors: Property 80% in State A; Payroll 50% in State A; Sales 50% in St...Hard Q70Which of the following creates 'nexus' for sales tax purposes under the Supreme Court's Wayfair decision?Hard Q71A partner in a partnership receives a guaranteed payment of $10,000 for services rendered. The partnership has $50,00...Hard Q72Which of the following is a requirement for a 'Qualified Stock Option' (Incentive Stock Option - ISO)?Hard