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Under Circular 230, which of the following scenarios represents a permissible contingent fee arrangement for a practitioner representing a client before the IRS?

A CPA is preparing a tax return for a client who wishes to take a position that the CPA believes has a 'reasonable basis' but does not meet the 'substantial authority' standard. To avoid a preparer penalty for an understatement of liability due to an unreasonable position, which of the following actions must the CPA take?

Regarding the retention of client records under Circular 230, which of the following statements is correct when a client requests the return of their records but has not paid the practitioner's fees?

Under the Ultramares rule regarding accountant liability to third parties for negligence, which of the following parties would most likely be able to recover damages from an accountant who negligently prepared a financial statement?

Taxpayer A filed their Year 1 tax return on April 15, Year 2. The return omitted ,000 of gross income, which exceeded 25% of the gross income stated on the return. No fraud was involved. What is the latest date the IRS can assess additional tax?

A taxpayer owes ,000 in taxes on a return filed 2 months late. They also paid the tax 2 months late. Assuming no extension was filed and no reasonable cause exists, what is the total failure-to-file and failure-to-pay penalty?

Which of the following defenses would be most effective for a CPA accused of common law fraud by a client?

Under Section 11 of the Securities Act of 1933, which of the following must a plaintiff prove to hold a CPA liable for a misstatement in a registration statement?

A CPA is auditing a client's financial statements. The client refuses to provide a representation letter. The CPA decides to withdraw from the engagement. Under the AICPA Code of Professional Conduct, which of the following is true regarding the CPA's duty of confidentiality if contacted by the successor auditor?

Regarding the Statements on Standards for Tax Services (SSTS), when may a tax preparer use a client's estimates to prepare a tax return?

Patterson (Principal) hired Aris (Agent) to manage an apartment complex. The employment contract explicitly stated Aris could not hire maintenance workers without Patterson's prior approval. Despite this, Aris hired a plumber to fix a burst pipe in an emergency. Patterson refused to pay. Is Patterson liable?

Under the doctrine of Respondeat Superior, which of the following acts by an employee would most likely result in the employer being held liable?

On June 1, Offeror mailed an offer to Offeree. On June 3, Offeror mailed a revocation. On June 4, Offeree received the offer and immediately mailed an acceptance. On June 5, Offeree received the revocation. On June 6, Offeror received the acceptance. Is there a contract?

Under the Statute of Frauds, which of the following oral contracts is legally enforceable?

Seller (a merchant in Chicago) sells goods to Buyer (in New York) with shipping terms 'F.O.B. Chicago'. The goods are destroyed in transit. Who bears the risk of loss?

Under UCC Article 2, the 'Perfect Tender Rule' allows a buyer to reject goods if they fail to conform to the contract in any respect. To which of the following does this rule NOT apply?

A surety pays a debt owed by the principal debtor to the creditor. Which right allows the surety to now 'step into the shoes' of the creditor and exercise the creditor's rights (such as enforcing a lien) against the debtor?

Creditors want to file an involuntary Chapter 7 bankruptcy petition against Debtor Corp. Debtor Corp has 15 creditors with total unsecured claims of 0,000. What is the minimum requirement to file the petition?

A bankruptcy trustee may set aside a 'preferential transfer' made by the debtor. Which of the following payments made by a debtor 60 days before filing for bankruptcy would most likely NOT be considered a preferential transfer?

Which of the following debts is generally dischargeable in a Chapter 7 bankruptcy?

Which of the following is a key advantage of a Limited Liability Company (LLC) over an S Corporation?

Under Regulation D, Rule 506 of the Securities Act of 1933, which of the following statements is correct regarding the exemption from registration?

A taxpayer's spouse died in Year 1. The taxpayer has a dependent child (age 10) living at home. The taxpayer did not remarry. What is the taxpayer's filing status for Year 1, Year 2, and Year 3?

An employee receives ,000 of non-discriminatory group term life insurance coverage from their employer. The cost of the policy is .50 per ,000 of coverage per month. How much must be included in the employee's gross income for the year?

A single taxpayer redeemed Series EE savings bonds in Year 1. The total proceeds were ,000 (,000 principal + ,000 interest). The taxpayer used all proceeds to pay for qualified higher education expenses. The taxpayer's modified AGI is ,000. The phase-out range for the exclusion is ,000 - ,000. What amount of interest is excludable from gross income?

A self-employed consultant had net earnings from self-employment of 0,000 in Year 1. The self-employment tax rate is 15.3% (12.4% SS + 2.9% Medicare) up to the wage base, and 2.9% thereafter. Assume the Social Security wage base is 68,600. The calculated total Self-Employment Tax is approximately 1,120. What is the consultant's 'Adjustment to Income' (above-the-line deduction) for this tax?

Taxpayer (AGI 0,000) incurred the following medical expenses: Doctor bills ,000; Cosmetic surgery (elective) ,000; Prescription drugs ,000; Health insurance premiums (after-tax) ,000. Insurance reimbursed ,000. What is the deductible medical expense amount on Schedule A?

A taxpayer (AGI 0,000) donated cash of ,000 to a public charity and long-term capital gain stock (FMV ,000, Basis ,000) to a public charity. What is the maximum charitable contribution deduction allowed in the current year?

Taxpayer paid ,000 in investment interest expense. They had ,000 in interest income and ,000 in qualified dividends. They did NOT elect to treat the qualified dividends as investment income. What is the investment interest expense deduction?

A married couple filing jointly paid the following taxes in Year 1: State income tax ,000; Real estate tax on primary home ,000; Personal property tax on cars ,000. What is their itemized deduction for taxes (SALT)?

A single taxpayer has taxable income of 00,000 (before QBI deduction). Their sole source of income is a law practice (SSTB). The threshold for QBI phase-out is 91,950 and the top of the range is 41,950 (Year 1 inflation adjusted). What is their QBI deduction?

Taxpayer (AGI 30,000) actively participates in a rental real estate activity that produced a ,000 loss. They have no other passive income. How much of the loss can they deduct against ordinary income?

A taxpayer invested ,000 in a partnership (passive activity). In Year 1, their share of the loss was ,000. They had no other passive income. What is the suspended loss due to the At-Risk rules and the Passive Activity rules respectively?

A taxpayer has 2 qualifying children (under age 17). Their tax liability before credits is 0. Their earned income is ,000. What is the amount of the Child Tax Credit they can claim as a REFUND (Additional Child Tax Credit)? (Assume current tax year rules, max refundable approx ,700 per child).

Taxpayer has ,000 of U.S. source income and ,000 of foreign source income. Total taxable income is ,000. The U.S. tax liability before credits is ,000. The taxpayer paid ,000 in foreign taxes. What is the Foreign Tax Credit limitation?

Which of the following items is added back to regular taxable income to calculate Alternative Minimum Taxable Income (AMTI) for an individual?

A taxpayer had AGI of 60,000 in Year 1 and tax liability of 0,000. In Year 2, they expect a tax liability of 0,000. To avoid the underpayment penalty for Year 2 via the Safe Harbor rules, what is the minimum estimated tax payment required?

Shareholder A contributes property (Basis ,000, FMV 0,000) to a newly formed C Corporation for 60% of the stock. Shareholder B contributes services (FMV ,000) for 40% of the stock. What is Shareholder A's recognized gain?

A C Corporation has taxable income of 0,000 before the charitable contribution deduction and dividends received deduction. It made cash charitable contributions of ,000. What is the allowable charitable contribution deduction?

Corp A owns 25% of Corp B. Corp A received ,000 in dividends from Corp B. Corp A's taxable income before the DRD is ,000. What is the Dividends Received Deduction (DRD)?

A C Corporation has a Net Operating Loss (NOL) carryforward of 0,000 from Year 2 arising after the TCJA. In Year 3, the corporation has taxable income of 0,000. What is the maximum NOL deduction allowed in Year 3?

A C Corporation has Accumulated E&P of (,000) (deficit) at the beginning of the year. Current E&P for the year is ,000. The corporation distributes ,000 to its sole shareholder. How is the distribution taxed?

A C Corporation redeems 50% of Shareholder X's stock for 0,000. Shareholder X's basis in the redeemed stock was ,000. After the redemption, X owns 40% of the corporation (down from 60%). How is this transaction treated for Shareholder X?

A C Corporation distributes an asset (FMV 0,000, Basis ,000) to its sole shareholder in a complete liquidation. The shareholder's basis in the stock is ,000. What are the tax consequences?

Which of the following would terminate an S Corporation election?

An S Corp shareholder has a beginning stock basis of ,000. During the year, the following occurred (pro-rata share): Ordinary Income ,000; Cash Distribution ,000; Long-Term Capital Loss ,000. What is the shareholder's ending stock basis?

A C Corp elected S status effective Jan 1, Year 1. At that time, it had an asset with FMV 0,000 and Basis ,000. In Year 3, it sold the asset for 0,000. The corporate tax rate is 21%. What is the Built-in Gains (BIG) Tax liability?

An S Corporation has an Accumulated Adjustments Account (AAA) of ,000 and Accumulated E&P (from C Corp years) of ,000. It makes a cash distribution of ,000 to its sole shareholder. The shareholder's stock basis is ,000. What is the tax treatment of the distribution?

Partner A provides services worth ,000 in exchange for a 20% capital interest in a partnership. The partnership has no liabilities. What are the tax consequences to Partner A?

A general partnership is formed. Partner A contributes cash of ,000 for a 50% interest. The partnership borrows ,000 from a bank (Recourse debt). What is Partner A's initial outside basis?

Partner X has an outside basis of ,000. In a non-liquidating distribution, X receives cash of ,000 and property with a basis to the partnership of ,000 (FMV ,000). What is X's basis in the property received and ending outside basis?

Partner Y has an outside basis of ,000. In a complete liquidation of the partnership interest, Y receives cash of ,000 and inventory with a basis of ,000. No other assets are received. What is Y's recognized gain or loss?

Partner Z sells their 30% interest in a partnership for ,000 cash. Z's outside basis was ,000. The partnership has no liabilities but has 'Hot Assets' (Unrealized Receivables) of ,000. What is the character of Z's gain?

A partner is entitled to a Guaranteed Payment of ,000. The partnership has ,000 of ordinary income before the guaranteed payment. What amount of income does the partner report, and what is the partnership's reported ordinary income?

A partner has a ,000 passive loss from a partnership. Their outside basis is ,000. Their at-risk amount is ,000. They have ,000 of passive income from another source. How much of the loss is deductible in the current year?

Which of the following members of an LLC is most likely subject to self-employment tax on their share of LLC ordinary income?

Which of the following characteristics distinguishes a 'Simple Trust' from a 'Complex Trust'?

A trust has the following activity: Interest Income ,000; Dividends ,000; Capital Gains (allocable to corpus) ,000; Trustee Fees (allocable to income) ,000. What is the Distributable Net Income (DNI)?

A decedent established a revocable trust 5 years before death, funding it with million. At the date of death, the trust assets were worth million. What amount is included in the decedent's gross estate?

In Year 1, a married couple (US citizens) gives ,000 cash to their son. They elect gift splitting. The annual exclusion is ,000 per donee. What is the taxable gift amount for the couple combined?

A tax-exempt university operates a coffee shop open to the public. The shop generates ,000 in profit. The university also has ,000 in dividend income from its endowment. What amount is subject to Unrelated Business Income Tax (UBIT)?

Which of the following organizations is most likely to be classified as a Private Foundation rather than a Public Charity?

Uncle gives Niece stock with a Basis of ,000 and FMV of ,000. Niece sells the stock later for ,000. What is Niece's recognized gain or loss?

Decedent died on Jan 1. Estate elects Alternate Valuation Date (AVD). Asset A: Date of Death (DOD) Value 0k, 6-month Value 0k. Asset B: DOD Value 0k, Sold 3 months later for 0k. What is the basis of these assets in the hands of the heir?

Taxpayer has the following capital gains/losses: LTCG (15% rate) ,000; LTCL (28% rate collectibles) (,000); STCG ,000. What is the final tax treatment?

In Year 5, a business sells a machine (Section 1231 asset) for a ,000 gain. In Years 1-4, the business had net Section 1231 losses of ,000 that were deducted as ordinary losses. How is the Year 5 gain taxed?

A business purchased ,000 of office furniture (7-year property) on Feb 1 and ,000 of machinery (5-year property) on Dec 1. No other assets were purchased. Which MACRS convention must be used?

In Year 1, Company X purchased equipment for .2 million. The Section 179 limit is .16 million and the phase-out threshold is .05 million. Taxable income is million. What is the maximum Section 179 deduction allowed?

Investor exchanges a building (FMV 0,000, Basis 0,000) for another building (FMV 0,000) and ,000 cash. What is the realized gain, recognized gain, and basis in the new building?

A warehouse (Basis 0,000) was destroyed by fire. Insurance paid 0,000. The taxpayer purchased a replacement warehouse for 0,000 within the required period. What is the recognized gain and the basis of the new warehouse?

A single taxpayer lived in a home for 1 year, rented it out for 2 years, then moved back in and lived there for 2 years. They sold it for a 0,000 gain. What is the maximum exclusion allowed under Section 121?

Father sells stock (Basis ,000) to Daughter for ,000 (FMV). Daughter later sells the stock to an unrelated party for ,000. What is Father's recognized loss and Daughter's recognized gain?

A CPA is representing a client in an IRS examination regarding a complex tax shelter transaction. The CPA discovers that the client had omitted a significant amount of income related to the transaction on the filed return. Under Treasury Department Circular No. 230, which of the following actions must the CPA take?

A tax return preparer is facing a penalty for an understatement of tax liability on a client's return. The understatement resulted from a position that did not have substantial authority but had a reasonable basis. The position was NOT disclosed on the return. Which of the following statements is correct regarding the preparer's liability under IRC §6694?

Taxpayer L received a Statutory Notice of Deficiency (90-day letter) from the IRS regarding a tax dispute of $75,000. L wishes to contest the liability in court but does not have the funds to pay the tax in advance. Which court must L petition?

A CPA is sued for common law negligence by a third party who relied on the CPA's audit report. The jurisdiction follows the 'Ultramares' doctrine. Under this doctrine, the CPA will generally be liable to the third party only if:

Which of the following communications between a CPA and a client would generally be protected by the federally authorized tax practitioner privilege under IRC §7525?

A taxpayer filed their Year 1 tax return on March 15, Year 2. The return reported gross income of $100,000 and tax liability of $20,000. The taxpayer inadvertently omitted $26,000 of gross income from the return. The IRS wishes to assess additional tax. What is the latest date the IRS can assess additional tax for Year 1?

Under the Uniform Accountancy Act (UAA), which of the following is a ground for a State Board of Accountancy to revoke a CPA's license?

P, a principal, engaged A as an agent to buy 100 acres of land. P instructed A to keep P's identity secret. A entered into a contract with T to buy the land, signing the contract 'A, Agent'. A did not reveal P's identity. If P fails to perform on the contract, which of the following is correct regarding liability to T?

On June 1, Buyer sent a purchase order to Seller for 1,000 widgets at $10 each. The purchase order stated 'delivery by June 30'. On June 3, Seller sent an acknowledgment form that stated, 'We accept your order. Delivery will be by July 15.' Buyer did not object. Under UCC Article 2, which of the following is correct?

Debtor D has filed for Chapter 7 bankruptcy. Which of the following debts is most likely to be discharged?

Lender A lent Money to Debtor and perfected a security interest in Debtor's equipment on February 1. Lender B lent money to Debtor and perfected a security interest in the same equipment on March 1. On April 1, Lender A advanced additional funds to Debtor under a future advances clause in the original security agreement. Debtor defaulted. Who has priority regarding the April 1 advance?

Under the Foreign Corrupt Practices Act (FCPA), which of the following payments is most likely prohibited?

Which of the following business entities generally provides all of its owners with limited liability while allowing them to participate in management without risking that liability?

Under the Revised Model Business Corporation Act, which of the following actions generally requires shareholder approval?

A taxpayer purchased a machine for use in their business for $20,000. They paid $1,000 for shipping and $2,000 for installation. One year later, the machine was repaired at a cost of $500. What is the taxpayer's initial tax basis in the machine?

In Year 1, J purchased stock for $10,000. In Year 3, J gave the stock to K when the fair market value (FMV) was $8,000. No gift tax was paid. K sold the stock in Year 4 for $7,000. What is the amount and character of K's loss?

Company X purchased 5-year MACRS property for $200,000 and placed it in service on November 15 of the current year. This was the only personal property placed in service during the year. Which depreciation convention must Company X use?

A taxpayer sold a building used in their business for $500,000. The building was purchased for $400,000. Total depreciation taken was $100,000 (straight-line). What is the amount and character of the gain?

Which of the following items is EXCLUDED from gross income for federal income tax purposes?

Taxpayer A, a single individual, has Adjusted Gross Income (AGI) of $150,000. A actively participates in a rental real estate activity that produced a $20,000 loss for the current year. A has no other passive income. How much of the rental loss can A deduct against ordinary income this year?

In Year 1, Taxpayer T had a net short-term capital loss of $2,000 and a net long-term capital loss of $4,000. T had no capital gains. What amount of capital loss can T deduct in Year 1, and what is the carryforward?

Which of the following is a 'refundable' tax credit?

Corporation C had book income of $500,000. Included in book income was $10,000 of municipal bond interest. C paid $5,000 in premiums for a life insurance policy on its CEO (C is the beneficiary). C also had a net capital loss of $8,000 for the year. What is C's taxable income?

S Corporation Status: Which of the following shareholders would cause a corporation to be INELIGIBLE to make an S election?

Partner A contributed property with a basis of $10,000 and a fair market value (FMV) of $20,000 to the AB Partnership in exchange for a 50% interest. The property was subject to a $4,000 mortgage which the partnership assumed. What is A's initial outside basis in the partnership interest?

A C Corporation owns 30% of the voting stock of a domestic corporation. The C Corporation received $10,000 in dividends from this investment. The C Corporation's taxable income before the dividends received deduction (DRD) was $8,000. What is the allowable DRD?

Under the Uniform Commercial Code (UCC) Sales Article, which of the following warranties is created by an express affirmation of fact made by the seller to the buyer?

A taxpayer had the following income in the current year: Salary $50,000; Partnership Income (active) $10,000; Interest Income $2,000. The taxpayer also had a $5,000 loss from a rental real estate activity in which they actively participated (AGI is well below phase-out limits). What is the taxpayer's Adjusted Gross Income (AGI)?

Which of the following acts by a CPA would most likely result in the assessment of a penalty for 'willful or reckless conduct' under IRC §6694(b)?

Under the Statute of Frauds, which of the following contracts must be in writing to be enforceable?

A taxpayer holds a 50% interest in an S Corporation. At the beginning of the year, their stock basis was $10,000. During the year, the S Corp reported: Ordinary Income $5,000; Tax-Exempt Interest $1,000; Cash Distribution to Taxpayer $8,000. What is the taxpayer's stock basis at the end of the year?

Which of the following is a requirement for a security interest to 'attach' under UCC Article 9?

A taxpayer operates a consulting business as a sole proprietorship. In the current year, the business had net income of $100,000. The taxpayer paid $6,000 for health insurance for themselves and their family. How is the health insurance payment treated for tax purposes?

Which of the following creates a 'temporary difference' between book income and tax income?

Under the Revised Uniform Partnership Act (RUPA), absent an agreement to the contrary, how are profits and losses shared in a general partnership?

Taxpayer B, a single individual, died on January 15, Year 1. The executor of B's estate elects a fiscal year ending October 31. When is the final individual income tax return (Form 1040) for B due (assuming no extension)?

Which of the following is a requirement for a payment to be classified as alimony for a divorce agreement executed in Year 1 (post-2018)?

A taxpayer exchanged a business truck (Adjusted Basis $10,000, FMV $15,000) for another business truck (FMV $15,000). The exchange occurred in the current year. What is the recognized gain on this transaction?

Which of the following is a primary authority for tax purposes?

Under the Affordable Care Act (ACA), an Applicable Large Employer (ALE) may be subject to a penalty if it fails to offer minimum essential coverage to at least what percentage of its full-time employees?

A C Corporation had a net capital loss of $10,000 in Year 4. It had reported net capital gains of $2,000 in Year 1, $3,000 in Year 2, and $1,000 in Year 3. What is the amount of capital loss carryforward to Year 5?

Which of the following is a 'separately stated item' on a Partnership Schedule K-1?

Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory?

A taxpayer received a gift of $15,000 cash from a friend and inherited $50,000 cash from an aunt in the current year. How much of these amounts must be included in the taxpayer's gross income?

Which of the following is a requirement for a valid contract under common law?

A taxpayer is a 10% partner in a partnership. The partnership incurred a $100,000 ordinary loss for the year. The taxpayer's adjusted basis in the partnership interest at the end of the year (before loss) was $8,000. The taxpayer's at-risk amount was $6,000. The taxpayer materially participates in the partnership. What amount of loss can the taxpayer deduct on their individual return?

Which of the following is a characteristic of a 'Section 1231 asset'?

A taxpayer had the following in the current year: Wages $40,000; Net Short-Term Capital Gain $2,000; Net Long-Term Capital Gain $5,000. What is the taxpayer's total taxable capital gain included in Adjusted Gross Income?

Under Circular 230, a practitioner may charge a contingent fee in which of the following situations?

Which of the following is a requirement for a 'Qualified Subchapter S Subsidiary' (QSub)?

A taxpayer purchased a $10,000 machine for business use. They elected to expense $6,000 under Section 179. What is the basis for MACRS depreciation?

Which of the following is a 'void' contract?

A taxpayer had $50,000 of wages and $3,000 of gambling winnings. They had $4,000 of gambling losses. They itemize deductions. What is the impact on taxable income?

Which of the following entities reports its income on Form 1065?

Under the UCC Secured Transactions Article (Article 9), which of the following will perfect a security interest in a negotiable instrument (like a promissory note)?

A C Corporation distributes land to a shareholder as a dividend. The land has an adjusted basis of $10,000 and a fair market value (FMV) of $30,000. What are the tax consequences to the Corporation?

Which of the following is deductible as a medical expense on Schedule A (subject to the 7.5% AGI floor)?

A partner in a partnership receives a guaranteed payment of $10,000 for services rendered. The partnership has $50,000 of ordinary income before the guaranteed payment. The partner has a 50% profits interest. What is the partner's total income from the partnership to be reported on their Form 1040?

Which of the following defenses is available to a surety to avoid liability on a debt?

A taxpayer sold their principal residence for $600,000. They purchased it 5 years ago for $200,000 and have lived in it ever since. They are single. What is the taxable gain?

Which of the following is an 'above-the-line' deduction (Adjustment to Income) for an individual taxpayer?

In a liquidating distribution of a partnership, Partner P receives cash of $10,000 and inventory with a basis to the partnership of $5,000. P's outside basis in the partnership was $8,000 prior to the distribution. What is P's recognized gain or loss?

Which of the following organizations must file an annual information return (Form 990) with the IRS?

Under the Sales Article of the UCC, the warranty of title:

Taxpayer M, age 50, withdrew $10,000 from a traditional IRA in the current year to pay for unreimbursed medical expenses that exceeded 7.5% of AGI. M has not met any other exception. What is the tax treatment?

A corporation has a $50,000 Net Operating Loss (NOL) in the current year (Year 5). It had taxable income of $20,000 in Year 1, $10,000 in Year 2, and $30,000 in Year 3. How is the NOL treated?

Which of the following acts is most likely to cause a piercing of the corporate veil, holding shareholders personally liable?

A taxpayer is a 'Specified Service Trade or Business' (SSTB) with taxable income of $500,000 (Married Filing Jointly). The threshold for the QBI deduction phase-out is $383,900 - $483,900 (hypothetical range for the year). What is the taxpayer's QBI deduction?

Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), a Chapter 7 filing may be dismissed or converted to Chapter 13 if the debtor fails which test?

A taxpayer purchased a bond for $900 (face value $1,000) in the secondary market. The bond has $100 of market discount. The taxpayer does NOT elect to include market discount in income currently. Two years later, the taxpayer sells the bond for $950. At the time of sale, accrued market discount is $30. What is the character of the $50 gain?

Which of the following creates 'nexus' for state income tax purposes under Public Law 86-272?

A taxpayer operates an illegal drug trafficking business. Which of the following expenses are deductible for tax purposes?

A CPA is preparing an original tax return for a client who is claiming a refund based on a position that has a reasonable basis but does not meet the substantial authority standard. Under Treasury Department Circular No. 230, which of the following actions must the CPA take to avoid a violation?

A practitioner is representing a taxpayer in an IRS examination. The taxpayer has a 25% ownership interest in a partnership that is also being audited. The practitioner determines that representing both the taxpayer and the partnership would create a conflict of interest. Under Circular 230, the practitioner may continue to represent both parties only if:

A tax return preparer willfully attempts to understate the tax liability on a client's return by intentionally omitting income shown on a Form 1099-MISC. The preparer did not disclose this position. Which of the following penalties is the IRS most likely to assess against the preparer?

Which of the following scenarios would most likely result in the assessment of a penalty for failure to sign a tax return under IRC §6695?

Regarding the disciplinary authority of State Boards of Accountancy, which of the following statements is correct?

A taxpayer filed their Year 1 tax return on March 15, Year 2. The return omitted $6,000 of gross income. The total gross income reported on the return was $20,000. Assuming no fraud was involved, what is the latest date the IRS can assess additional tax?

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

A CPA is sued for negligence by a third party who relied on the CPA's audited financial statements. The jurisdiction follows the 'Ultramares' doctrine. Under this doctrine, the CPA will generally be liable to the third party only if:

Which of the following authorities carries the highest weight in the federal tax hierarchy?

A taxpayer failed to file their tax return by the due date (including extensions). The tax due was $10,000. The return was filed 40 days late. The taxpayer had no reasonable cause. What is the total failure-to-file and failure-to-pay penalty assessed?

Peyton is the manager of a retail store owned by Corp X. Corp X explicitly instructed Peyton not to hire any vendors without corporate approval. Despite this, Peyton hired a cleaning service to clean the store, signing the contract as 'Peyton, Manager for Corp X.' The cleaning service was unaware of the restriction on Peyton's authority. Is Corp X liable for the contract?

Under the UCC Sales Article, which of the following statements is correct regarding the 'Battle of the Forms' between two merchants?

Which of the following oral contracts is enforceable under the Statute of Frauds?

In a Chapter 7 bankruptcy liquidation, which of the following claims has the highest priority for distribution?

On May 1, Vendor A sold a machine to Debtor on credit and retained a security interest. Vendor A delivered the machine on May 5. Vendor A filed a financing statement on May 12. On May 8, Lender B loaned money to Debtor, took a security interest in the same machine, and filed a financing statement immediately. Who has priority?

Which of the following defenses would effectively release a gratuitous surety from liability to a creditor?

Under the Foreign Corrupt Practices Act (FCPA), which of the following payments would most likely be prohibited?

In Year 1, Alex received a gift of stock from a parent. The parent's adjusted basis was $10,000, and the fair market value (FMV) at the date of the gift was $8,000. No gift tax was paid. In Year 2, Alex sold the stock for $9,000. What is the amount of gain or loss Alex must recognize?

A taxpayer purchased 100 shares of TechCorp stock for $5,000 on January 1. On December 15 of the same year, the taxpayer sold the 100 shares for $3,000. On December 20, the taxpayer purchased 50 shares of TechCorp stock for $1,600. What is the recognized loss on the December 15 sale and the basis of the new 50 shares?

In Year 1, a taxpayer placed the following 5-year MACRS assets in service: Asset A (Cost $100,000) on February 1; Asset B (Cost $200,000) on November 1. No other assets were placed in service. Which depreciation convention must be used?

A company acquired a patent for $150,000 as part of the purchase of a trade or business on August 1 of Year 1. What is the amortization deduction for Year 1?

A taxpayer sold a machine used in their business for $50,000. The machine was purchased for $40,000, and $15,000 of depreciation had been taken (Adjusted Basis = $25,000). How is the gain recognized?

An employee receives $150,000 of group-term life insurance coverage from their employer. The policy is non-discriminatory. The IRS Uniform Premium table cost is $0.10 per $1,000 of coverage per month. How much annual income must the employee include in gross income?

In Year 1, a taxpayer itemized deductions and deducted $5,000 of state income taxes. The total itemized deductions exceeded the standard deduction by $200. In Year 2, the taxpayer received a $500 refund of the Year 1 state income taxes. How much of the refund is taxable in Year 2?

A single taxpayer sold their principal residence for a $400,000 gain. They had owned and lived in the home for only 12 months due to a job transfer to a different state (a qualified unforeseen circumstance). What is the maximum exclusion allowed?

A self-employed taxpayer had net earnings from self-employment of $100,000. They paid $12,000 in health insurance premiums for themselves and their family. They were not eligible to participate in any subsidized health plan maintained by an employer of their spouse. How is the $12,000 treated?

A taxpayer donated a painting to a public charity (museum) which displayed it. The taxpayer had owned the painting for 5 years. Cost basis was $10,000; FMV was $50,000. The taxpayer's AGI is $100,000. What is the maximum charitable contribution deduction allowed for the current year?

A married couple filing jointly paid the following taxes in the current year: State income tax $8,000; Real estate tax on primary home $5,000; Personal property tax on cars $1,000. What is their itemized deduction for taxes (SALT)?

A taxpayer has $50,000 of salary, $10,000 of passive income from a rental activity, and $25,000 of passive losses from a limited partnership interest. The taxpayer also has $5,000 of active business income. How much of the passive loss is deductible in the current year?

A single taxpayer has Adjusted Gross Income (AGI) of $140,000. They actively participate in a rental real estate activity that generated a $20,000 loss. How much of this loss is deductible in the current year?

A C Corporation has gross income of $500,000, operating expenses of $300,000, and dividends received from a 25%-owned domestic corporation of $100,000. What is the corporation's Dividends Received Deduction (DRD)?

Shareholder A contributes property with a basis of $20,000 and FMV of $50,000 to a C Corporation in exchange for 40% of the stock. Shareholder B contributes services worth $75,000 for 60% of the stock. What is Shareholder A's recognized gain?

A C Corporation distributes land to its sole shareholder as a dividend. The land has a basis of $20,000 and a FMV of $60,000. The corporation has ample E&P. What are the tax consequences to the corporation?

An S Corporation has an Accumulated Adjustments Account (AAA) of $20,000 and Accumulated Earnings and Profits (AEP) from C Corp years of $10,000. The corporation distributes $35,000 to its sole shareholder. The shareholder's stock basis (before distribution) is $50,000. How is the distribution taxed?

Partner A contributes land with a basis of $40,000 and FMV of $100,000 to a partnership for a 50% interest. The land is subject to a $20,000 mortgage which the partnership assumes. What is Partner A's initial outside basis?

A partnership distributes cash of $10,000 and property with a basis of $15,000 (FMV $20,000) to a partner in a non-liquidating distribution. The partner's outside basis before distribution was $22,000. What is the partner's basis in the received property?

Which of the following items is a permanent difference for Schedule M-1 purposes?

A C Corporation had a net capital loss of $20,000 in Year 4. It had capital gains of $5,000 in Year 1, $8,000 in Year 2, and $0 in Year 3. What is the amount of capital loss carryforward to Year 5?

Which of the following entities is eligible to elect S Corporation status?

A taxpayer has a $10,000 loss from a rental real estate activity in which they actively participate. Their Modified AGI is $130,000. What is the allowable deduction under the 'Mom and Pop' exception?

Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory?

A taxpayer's spouse died in Year 1. The taxpayer has a dependent child who lives with them. The taxpayer did not remarry. What is the taxpayer's filing status for Year 3?

Which of the following credits is refundable?

A taxpayer has Net Investment Income (NII) of $50,000 and Modified AGI of $220,000. The filing status is Single (Threshold $200,000). What is the Net Investment Income Tax (NIIT) liability?

Which of the following is an adjustment (add-back) for Alternative Minimum Tax (AMT) purposes for an individual?

A C Corporation distributes assets in a complete liquidation. The assets have a basis of $100,000 and FMV of $300,000. The corporation has a $50,000 liability on the assets, which the shareholder assumes. What is the gain recognized by the corporation?

Which of the following organizations must file an annual information return (Form 990) with the IRS?

A multistate corporation has the following factors: Sales in State A $500,000; Total Sales $1,000,000. Payroll in State A $100,000; Total Payroll $1,000,000. Property in State A $200,000; Total Property $1,000,000. State A uses a double-weighted sales factor apportionment formula. What is the apportionment percentage for State A?

Under the Revised Model Business Corporation Act, which of the following actions requires shareholder approval?

A partner in a general partnership transfers their partnership interest to a third party without the consent of the other partners. Which of the following statements is true?

Which of the following creates a 'rebuttable presumption' that a payment to a worker is for an employee relationship rather than an independent contractor relationship?

A taxpayer exchanges a business building (Adjusted Basis $100,000, FMV $200,000) for a new business building (FMV $180,000) and $20,000 cash. What is the recognized gain and the basis of the new building?

Which of the following acts by a debtor would constitute a 'preference' voidable by a bankruptcy trustee?

A taxpayer purchased a bond for $900 (Face Value $1,000) on the secondary market. The bond has 5 years to maturity. The taxpayer elects to amortize the market discount. How is the amortization treated?

Under the Affordable Care Act (ACA), an Applicable Large Employer (ALE) may be subject to a penalty if it fails to offer minimum essential coverage to at least what percentage of its full-time employees?

A taxpayer has a $5,000 short-term capital loss, a $2,000 short-term capital gain, and a $10,000 long-term capital gain. What is the net capital gain/loss and its character?

Which of the following statements regarding the Section 179 expense deduction is correct for the current year?

A C Corporation incurs $60,000 of organizational costs in its first year of operations. What is the maximum deduction for organizational costs in the first year?

A taxpayer receives a non-qualified stock option (NQSO) with a readily ascertainable fair market value at the grant date. When is the income recognized?

A C Corporation distributes a property dividend. The property has a basis of $10,000, FMV of $40,000, and is subject to a liability of $15,000 assumed by the shareholder. The corporation has E&P of $100,000. What is the amount of the dividend income to the shareholder?

Which of the following is a requirement for a valid contract under Common Law?

A taxpayer has a 50% interest in a partnership. The partnership agreement states that the taxpayer receives a guaranteed payment of $20,000 for services. The partnership reports $50,000 of ordinary income before the guaranteed payment. What is the taxpayer's total income from the partnership?

Under the UCC Secured Transactions Article, which of the following is required for the 'attachment' of a security interest?

A taxpayer's student loan interest for the year was $3,000. The taxpayer is single with Modified AGI of $60,000 (below the phase-out range). What is the maximum student loan interest deduction?

Which of the following acts generally requires the filing of a Currency Transaction Report (CTR) by a financial institution?

A taxpayer is a 10% shareholder in an S Corporation. The corporation paid $5,000 of health insurance premiums for the taxpayer. How is this reported?

Which of the following is a 'Section 751 asset' (Hot Asset) that triggers ordinary income recognition upon the sale of a partnership interest?

A taxpayer has a Qualified Business Income (QBI) of $100,000 from a sole proprietorship. The taxpayer is single with taxable income of $150,000. What is the QBI deduction?

Which of the following is a requirement for a valid deed to transfer real property?

A tax-exempt organization has $5,000 of unrelated business taxable income (UBTI). What is the filing requirement and tax rate?

Which of the following is a primary difference between a Public Charity and a Private Foundation?

A taxpayer sold stock for $10,000 that was purchased two years ago for $6,000. The taxpayer is in the 37% ordinary income tax bracket and the 20% long-term capital gains bracket. What is the tax liability on this sale?

A CPA is representing a client in an IRS examination. The client has requested that the CPA not provide certain documents to the Revenue Agent, claiming they are irrelevant. The CPA determines that the documents are indeed relevant and not privileged. Under Circular 230, which of the following is the CPA's required course of action?

A tax return preparer is engaged to prepare a tax return for a client who has a significant deduction that is not supported by substantial authority. The preparer determines there is a reasonable basis for the position. To avoid the penalty for an understatement of taxpayer liability due to an unreasonable position under IRC §6694, which of the following actions must the preparer take?

Regarding the burden of proof in a civil tax proceeding, which of the following statements is correct regarding the shift of the burden of proof to the IRS under IRC §7491?

A taxpayer filed their Year 1 individual income tax return on April 1, Year 2. The return reported gross income of $100,000 and tax liability of $20,000. 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?

Under the Ultramares doctrine regarding a CPA's liability for negligence to third parties, which of the following parties would most likely be able to recover damages from a CPA who negligently prepared a financial statement?

Which of the following communications between a CPA and a client would generally be protected by the tax practitioner privilege under IRC §7525?

A taxpayer owes the IRS $50,000 in unpaid taxes. The taxpayer files a petition with the U.S. Tax Court to challenge the deficiency. Which of the following statements regarding the U.S. Tax Court is correct?

Pace Corp. is incorporated in State A but does business in States A, B, and C. State B uses a three-factor apportionment formula (Sales, Payroll, Property) with a double-weighted sales factor. Pace has the following activity in State B:<br/>- Sales: $2,000,000 (Total company sales: $10,000,000)<br/>- Payroll: $500,000 (Total company payroll: $5,000,000)<br/>- Property: $1,000,000 (Total company property: $4,000,000)<br/>What is Pace's apportionment percentage for State B?

Under the Revised Model Business Corporation Act, which of the following statements is correct regarding a shareholder's right to inspect corporate books and records?

Which of the following scenarios would most likely result in a 'piercing of the corporate veil,' holding shareholders personally liable for corporate debts?

Under the Uniform Commercial Code (UCC) Article 9, which of the following actions will perfect a security interest in inventory?

A debtor files for Chapter 7 bankruptcy. Which of the following debts is generally dischargeable?

Under the Sales Article of the UCC (Article 2), which of the following statements is correct regarding the Statute of Frauds for a contract for the sale of goods?

A principal hires an agent to manage a retail business. The principal instructs the agent not to purchase inventory from Vendor X. However, the agent purchases inventory from Vendor X, who is unaware of the restriction. The principal has previously paid for inventory purchased by the agent from other vendors. Is the principal liable on the contract with Vendor X?

Which of the following acts is generally prohibited under the Foreign Corrupt Practices Act (FCPA)?

In Year 1, Jordan received a gift of stock from a parent. The parent's adjusted basis was $10,000, and the fair market value (FMV) at the date of the gift was $8,000. Jordan sold the stock in Year 2 for $9,000. What is the amount of gain or loss Jordan must report for Year 2?

A taxpayer purchased a machine for business use on November 15, Year 1, for $100,000. This was the only personal property placed in service during the year. The taxpayer uses the MACRS system. Which convention must be used to calculate depreciation for Year 1?

In a like-kind exchange under IRC §1031 (post-TCJA), which of the following exchanges qualifies for nonrecognition of gain?

A taxpayer sells stock for a loss of $5,000 on May 1. On May 15, the taxpayer purchases substantially identical stock. Which of the following statements correctly describes the tax treatment of the loss?

Regarding the Net Investment Income Tax (NIIT) under IRC §1411, which of the following items is included in 'Net Investment Income'?

A taxpayer, age 45, is a single filer with high income. Which of the following itemized deductions is subject to a 'floor' based on Adjusted Gross Income (AGI) in the current tax year?

In Year 1, a taxpayer exercised Incentive Stock Options (ISOs) to purchase 1,000 shares of stock. The exercise price was $10 per share, and the fair market value (FMV) on the exercise date was $25 per share. The taxpayer held the stock through the end of the year. What is the tax consequence for Year 1?

A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability was approximately $14,130. Which of the following describes the income tax deduction available to the taxpayer regarding this tax?

Under the Qualified Business Income (QBI) deduction (IRC §199A), which of the following businesses is considered a 'Specified Service Trade or Business' (SSTB) where the deduction may be limited or disallowed at higher income levels?

A taxpayer has a $10,000 passive activity loss from a rental real estate activity in the current year. The taxpayer is an active participant in the rental activity and has Modified Adjusted Gross Income (MAGI) of $130,000. What amount of the loss can be deducted against ordinary income in the current year?

Regarding the Child Tax Credit (CTC) for tax years 2018-2025, which of the following statements is correct regarding the refundable portion (Additional Child Tax Credit)?

A C Corporation has current year Earnings & Profits (E&P) of $20,000 and accumulated E&P of ($30,000) at the beginning of the year. The corporation makes a $25,000 cash distribution to its sole shareholder. What is the tax treatment of the distribution?

Shareholders A (80%) and B (20%) form a C Corporation. A contributes property with a basis of $20,000 and FMV of $80,000. B contributes services worth $20,000. What is the tax consequence to Shareholder A?

A C Corporation has taxable income of $500,000 before the charitable contribution deduction and the Dividends Received Deduction (DRD). It made cash charitable contributions of $60,000. It received $10,000 in dividends from a 15%-owned domestic corporation. What is the corporation's allowable charitable contribution deduction?

Which of the following entities is eligible to elect S Corporation status?

An S Corporation distributes property with a fair market value of $50,000 and an adjusted basis of $30,000 to its sole shareholder. What is the tax consequence to the S Corporation?

A partner contributes services worth $50,000 in exchange for a 25% capital interest in a partnership. The partnership has no liabilities. What is the partner's recognized income and initial basis in the partnership interest?

In a non-liquidating distribution, a partnership distributes cash of $10,000 and property with an adjusted basis of $20,000 to a partner. The partner's outside basis immediately before the distribution was $25,000. What is the partner's basis in the distributed property?

Which of the following items is a 'separately stated item' on a Partnership Schedule K-1?

Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory for a manufacturer?

A taxpayer receives a refund of $1,000 in Year 2 for state income taxes paid in Year 1. In Year 1, the taxpayer claimed the standard deduction. How much of the refund is taxable in Year 2?

Which of the following is a 'permanent difference' for Schedule M-3 reconciliation purposes?

A C Corporation incurs $55,000 in organizational costs to start the business. It begins business on July 1, Year 1. What is the maximum deduction for organizational costs in Year 1?

Under the Revised Uniform Partnership Act (RUPA), absent an agreement to the contrary, how are profits and losses shared among partners?

A taxpayer has $5,000 of investment interest expense in the current year. The taxpayer has $3,000 of interest income and $2,000 of qualified dividends. The taxpayer does NOT elect to treat the qualified dividends as investment income. What is the investment interest expense deduction?

Which of the following statements is correct regarding the 'at-risk' rules for loss limitations?

A taxpayer sells a personal residence for $600,000. They bought it 3 years ago for $200,000 and have lived in it as their primary residence for the entire time. They are single. What is the recognized gain?

Under the Affordable Care Act (ACA), which of the following employers is an 'Applicable Large Employer' (ALE) subject to the Employer Shared Responsibility provisions?

A C Corporation has a net capital loss of $10,000 in Year 4. It reported the following net capital gains in prior years: Year 1: $2,000; Year 2: $3,000; Year 3: $1,000. What is the amount of capital loss carryforward to Year 5?

Which of the following creates a 'temporary difference' for deferred tax purposes?

A taxpayer is a 50% partner in a partnership. The partnership agreement states that the taxpayer is guaranteed a payment of $20,000 for services, plus 50% of the partnership income after deducting the guaranteed payment. The partnership reports $60,000 of income before the guaranteed payment. What is the taxpayer's total income from the partnership?

Which of the following defenses would effectively release a surety from liability to a creditor?

A taxpayer purchased a $10,000 computer for business use. The taxpayer wants to maximize the deduction in the current year. Assuming sufficient business income and investment limits are not exceeded, what is the optimal tax treatment?

Which of the following is required for a valid contract to be formed?

A taxpayer has a $3,000 short-term capital loss and a $2,000 long-term capital gain in the current year. The taxpayer also has $50,000 of ordinary income. What is the taxpayer's Adjusted Gross Income (AGI)?

Under the Uniform Accountancy Act, which of the following is generally a requirement for a CPA to practice across state lines (mobility) without obtaining a new license?

A taxpayer contributes property with a basis of $10,000 and a fair market value of $15,000 to a qualified charitable organization. The property is tangible personal property that the charity puts to an 'unrelated use' (sells immediately). What is the deductible amount?

Which of the following is a requirement for a valid deed to transfer real property?

A taxpayer has a home office that is used exclusively and regularly as the principal place of business. The gross income from the business is $10,000. Direct expenses of the business (supplies, etc.) are $6,000. Allocable home expenses (mortgage interest, taxes, utilities, depreciation) total $5,000. What is the home office deduction allowed?

Which of the following credits is a 'refundable' tax credit?

A C Corporation distributes land to a shareholder as a dividend. The land has a FMV of $50,000 and is subject to a liability of $60,000 that the shareholder assumes. The corporation's basis in the land is $20,000. What is the gain recognized by the corporation?

Which of the following acts by a partner would likely be considered a violation of the duty of loyalty under the Revised Uniform Partnership Act (RUPA)?

A taxpayer holds a $10,000 bond issued by the City of New York. The bond pays $500 of interest in the current year. The taxpayer also sells the bond for a $200 gain. What are the federal tax consequences?

Under the UCC Secured Transactions Article (Article 9), if a debtor defaults, which of the following is a right of the secured party?

A taxpayer is a 10% shareholder in an S Corporation. The taxpayer's stock basis at the beginning of the year is $10,000. The S Corporation reports a $200,000 ordinary loss for the year. The taxpayer's share is $20,000. The taxpayer also has a $5,000 loan outstanding to the corporation. What amount of loss can the taxpayer deduct in the current year?

Which of the following is a requirement for a corporation to be classified as a Personal Holding Company (PHC)?

A taxpayer exchanges a business warehouse (adjusted basis $100,000, FMV $200,000) for a new warehouse (FMV $180,000) and $20,000 cash. What is the recognized gain?

Regarding the Accumulated Earnings Tax (AET), what is the minimum accumulated earnings credit allowed for a manufacturing C Corporation?

A taxpayer has a Net Operating Loss (NOL) in 2024. Which of the following statements is correct regarding the carryover of this NOL?

Which of the following is a requirement for a valid 'Incentive Stock Option' (ISO)?

A taxpayer is a 40% partner in a partnership. The partnership has $100,000 of recourse liabilities and $50,000 of nonrecourse liabilities. The taxpayer bears the economic risk of loss for the recourse liabilities. What is the taxpayer's share of liabilities for basis purposes?

Which of the following is a 'primary authority' for tax research purposes?

A C Corporation distributes appreciated property to a shareholder in a complete liquidation. Which of the following statements is correct?

Under the UCC, an implied warranty of merchantability arises when:

A taxpayer is a general partner in a partnership. The partnership agreement provides for a guaranteed payment for services. Which of the following taxes is the guaranteed payment subject to?

Which of the following tax-exempt organizations must file an annual information return (Form 990)?

A taxpayer sells a rental property for $500,000. The property was purchased for $400,000. The taxpayer claimed $100,000 of depreciation deductions (straight-line) during the holding period. What is the character of the gain?

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?

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?

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

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?

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?

A taxpayer owes $50,000 in taxes for Year 1. The return was filed on time, but the tax was not paid until 3 months after the due date. No extension was filed. Assuming no fraud and no reasonable cause, what is the total failure-to-pay penalty?

In the hierarchy of tax authority, which of the following carries the GREATEST authoritative weight?

A CPA firm negligently prepared a financial statement for a client. The firm knew the client intended to use the statement to obtain a loan from Bank A. However, the client actually used the statement to obtain a loan from Bank B. Bank B relied on the statement and suffered a loss. In a jurisdiction that follows the 'Ultramares' doctrine, is the CPA firm liable to Bank B?

In which of the following situations does the tax practitioner privilege under IRC §7525 apply?

A principal terminates an agent's actual authority. To terminate the agent's apparent authority with respect to third parties who have previously dealt with the agent, what action is REQUIRED?

Under the UCC Sales Article (Article 2), which of the following statements is correct regarding the 'Battle of the Forms' between two merchants where the acceptance includes additional terms?

A debtor owes a creditor $10,000. The debt is barred by the statute of limitations. The debtor writes a letter to the creditor promising to pay $5,000 of the barred debt. Which of the following is true?

Which of the following defenses is available to a gratuitous surety but NOT to a compensated surety?

In a Chapter 7 bankruptcy liquidation, which of the following claims has the highest priority for distribution?

On April 1, Vendor sold a computer to Debtor on credit. Debtor took possession that day. On April 10, Vendor filed a financing statement. On April 5, Debtor borrowed money from Bank, granting a security interest in the same computer. Bank filed a financing statement on April 5. Who has priority in the computer?

Under the Foreign Corrupt Practices Act (FCPA), which of the following payments is prohibited?

A shareholder of a C corporation may be held personally liable for the corporation's debts under the doctrine of 'piercing the corporate veil' in which of the following situations?

In Year 1, Jordan received a gift of stock from a parent. The parent's adjusted basis was $10,000, and the fair market value (FMV) at the date of the gift was $8,000. No gift tax was paid. In Year 2, Jordan sold the stock for $9,000. What is the amount of gain or loss Jordan must report?

A taxpayer purchased a machine for business use on November 15 of the current year for $100,000. This was the only depreciable personal property placed in service during the year. The taxpayer does not elect Section 179 expensing or bonus depreciation. Which MACRS convention must be used?

In the current year, a taxpayer sold 100 shares of Tech Corp stock for $4,000. The taxpayer's basis in the stock was $5,000. Two weeks later, the taxpayer purchased 50 shares of Tech Corp stock for $2,200. What is the taxpayer's recognized loss on the sale and the basis of the new 50 shares?

A taxpayer exchanged a warehouse used in business (adjusted basis $200,000, FMV $300,000) for land to be used in business (FMV $280,000) and $20,000 cash. What is the taxpayer's recognized gain and the basis of the new land?

Which of the following intangible assets is amortizable over 15 years under IRC §197?

An employer provides group-term life insurance to an employee with a coverage amount of $90,000. The plan is non-discriminatory. The IRS uniform premium cost is $0.10 per $1,000 of coverage per month. How much must be included in the employee's gross income for the year?

In Year 1, a taxpayer paid $4,000 in state income taxes and deducted them as an itemized deduction. The taxpayer's total itemized deductions exceeded the standard deduction by $1,000. In Year 2, the taxpayer received a $1,500 refund of the state income taxes paid in Year 1. How much of the refund is taxable in Year 2?

A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability is $14,130. What is the taxpayer's adjusted gross income (AGI) adjustment for this tax?

A taxpayer has Adjusted Gross Income (AGI) of $100,000. During the year, the taxpayer donated a piece of artwork to a public charity (a museum) that will display the art. The taxpayer had held the art for 5 years. The art had a basis of $10,000 and a Fair Market Value (FMV) of $40,000. What is the maximum charitable contribution deduction allowed for the current year?

Regarding the Qualified Business Income (QBI) deduction under IRC §199A, which of the following is considered a 'Specified Service Trade or Business' (SSTB) where the deduction may be limited or disallowed for high-income taxpayers?

A taxpayer has a $20,000 loss from a rental real estate activity in which they actively participate. The taxpayer's Modified Adjusted Gross Income (MAGI) is $130,000. How much of the loss can be deducted against ordinary income in the current year?

A single taxpayer provides more than half the support for a parent who lives in a nursing home. The parent received $3,000 in taxable interest income and $8,000 in non-taxable Social Security benefits. The parent has no other income. Can the taxpayer claim the parent as a dependent?

Which of the following tax credits is fully or partially REFUNDABLE?

Redwood Corp., a C corporation, had book income of $500,000. Included in book income was $10,000 of municipal bond interest. The corporation paid $5,000 in premiums on a key-person life insurance policy (corporation is beneficiary). What is Redwood's taxable income?

A C corporation owns 25% of the stock of another domestic corporation. The C corporation received $100,000 in dividends from this investment. The C corporation's taxable income before the dividends-received deduction (DRD) is $200,000. What is the amount of the DRD?

Shareholders of a calendar-year C corporation want to elect S corporation status for the current year. What is the deadline for filing Form 2553 to be effective for the current year?

At the beginning of the year, a shareholder had a stock basis of $10,000 in an S corporation. During the year, the shareholder's share of ordinary income was $5,000, and the corporation made a cash distribution of $12,000 to the shareholder. What is the shareholder's stock basis at year-end?

A partner contributes property with an adjusted basis of $20,000 and a fair market value of $50,000 to a partnership in exchange for a 50% interest. The property is subject to a liability of $10,000, which the partnership assumes. What is the partner's initial outside basis in the partnership?

Which of the following organizations must file an annual information return (Form 990) with the IRS?

Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory for a manufacturer?

A taxpayer sold a rental property for $500,000. The property was acquired for $400,000. Total depreciation taken was $100,000. What is the character of the gain?

Which of the following acts by a debtor would be grounds for a denial of discharge in a Chapter 7 bankruptcy?

Under the Affordable Care Act (ACA), an Applicable Large Employer (ALE) may be subject to a penalty if it fails to offer minimum essential coverage to at least what percentage of its full-time employees?

A C corporation distributes land to a shareholder as a dividend. The land has an adjusted basis of $20,000 and a fair market value of $50,000. The land is subject to a liability of $10,000, which the shareholder assumes. What is the amount of gain recognized by the corporation?

Which of the following statements is correct regarding the Net Operating Loss (NOL) rules for C corporations for tax years beginning after 2020?

A taxpayer holds a 30% interest in a partnership. The partnership agreement states that the taxpayer's share of liabilities is 30%. The partnership has $100,000 in nonrecourse liabilities. The taxpayer has an outside basis of $50,000. The partnership incurs a loss of $200,000 for the year. What is the maximum loss the taxpayer can deduct, assuming the passive activity rules do not apply?

Which of the following is a requirement for a corporation to elect S corporation status?

A taxpayer had the following income and losses for the year: Salary $50,000; Passive Activity Income $10,000; Passive Activity Loss ($15,000); Active Business Loss ($5,000). What is the taxpayer's Adjusted Gross Income (AGI)?

Under the Uniform Commercial Code (UCC) Article 9, which of the following actions will PERFECT a security interest in inventory?

A taxpayer is a cash-basis sole proprietor. In Year 1, the taxpayer performed services for a client and sent a bill for $5,000. In Year 2, the client disputed the bill and paid only $2,000. The taxpayer accepted this as full payment. What is the bad debt deduction for the taxpayer in Year 2?

Which of the following is a 'Section 1231 asset'?

A C corporation has current Earnings & Profits (E&P) of $20,000 and accumulated E&P of ($30,000) deficit at the beginning of the year. The corporation makes a $25,000 cash distribution to its sole shareholder. How much of the distribution is a taxable dividend?

Which of the following items is an adjustment (add-back) for the Individual Alternative Minimum Tax (AMT)?

A taxpayer sells a personal residence for $600,000. They bought it 3 years ago for $200,000 and lived in it for the entire period. They are single. What is the recognized gain?

Under the Statute of Frauds, which of the following contracts MUST be in writing to be enforceable?

A taxpayer purchased a $100,000 machine for business use. The taxpayer expensed $20,000 under Section 179. The remaining basis is depreciated using MACRS. What is the basis for MACRS depreciation?

Which of the following business entities provides limited liability to ALL its owners and allows for 'pass-through' taxation?

A taxpayer received a $5,000 state income tax refund in Year 2 for taxes paid in Year 1. In Year 1, the taxpayer took the standard deduction. How much of the refund is taxable in Year 2?

Which of the following credits can result in a refund even if the taxpayer has no income tax liability?

A C corporation incurred $60,000 of organizational costs in its first year of operations. What is the maximum deduction the corporation can take for these costs in its first tax year?

Under the Revised Model Business Corporation Act, which of the following actions generally requires shareholder approval?

A taxpayer has a $3,000 short-term capital loss carryover from the prior year. In the current year, the taxpayer has a $12,000 long-term capital gain and a $15,000 short-term capital loss. What is the taxpayer's deductible capital loss for the current year?

Which of the following is a 'primary' source of tax authority?

A taxpayer contributes property with a basis of $10,000 and FMV of $20,000 to a C corporation in exchange for 100% of the stock. The taxpayer also receives $2,000 in cash. What is the recognized gain?

Which of the following is NOT a requirement for a negotiable instrument under the UCC?

A taxpayer's home was destroyed by a federally declared disaster. The adjusted basis was $200,000. The FMV before the disaster was $300,000, and $0 after. Insurance paid $250,000. What is the deductible casualty loss (before AGI limitations)?

Which of the following is a 'separately stated item' on a Partnership Schedule K-1?

A taxpayer is a 50% shareholder in an S corporation. The corporation has $0 accumulated E&P. At the beginning of the year, the shareholder's stock basis was $10,000. The corporation reported $5,000 of ordinary income and distributed $20,000 cash to the shareholder. What is the shareholder's recognized gain?

Under Circular 230, which of the following fees is generally PROHIBITED for a tax practitioner preparing an original tax return?

A C corporation distributes assets in a complete liquidation. The assets have a basis of $100,000 and FMV of $150,000. The shareholder has a stock basis of $80,000. What are the tax consequences?

Which of the following is TRUE regarding the 'at-risk' limitation for losses?

A multi-state corporation has the following factors: Property 80% in State A; Payroll 50% in State A; Sales 50% in State A. State A uses an apportionment formula that double-weights the sales factor. What is the apportionment percentage for State A?

Which of the following creates 'nexus' for sales tax purposes under the Supreme Court's Wayfair decision?

A partner in a partnership receives a guaranteed payment of $10,000 for services rendered. The partnership has $50,000 of ordinary income before the guaranteed payment. The partner has a 50% profit interest. What is the partner's total income from the partnership?

Which of the following is a requirement for a 'Qualified Stock Option' (Incentive Stock Option - ISO)?