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AICPA CPA Regulation Sample Questions:
1. 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.
In 1992, Joan received an acre of land as an inter-vivos gift from her grandfather. At the time of the gift,
the land had a fair market value of $50,000. The grandfather's adjusted basis was $60,000. Joan sold the
land in 1994 to an unrelated third party for $56,000.
A) $55,000
B) $1,300
C) $1,500
D) $1,250
E) $500
F) $2,500
G) $3,000
H) $1,000
I) $2,000
J) $900
K) $0
L) $10,000
M) $50,000
N) $25,000
O) $75,000
2. On December 31, 1989, a building owned by Pine Corp. was totally destroyed by fire. The building had
fire insurance coverage up to $500,000. Other pertinent information as of December 31, 1989 follows:
During January 1990, before the 1989 financial statements were issued, Pine received insurance
proceeds of $500,000. On what amount should Pine base the determination of its loss on involuntary
conversion?
A) $530,000
B) $560,000
C) $520,000
D) $550,000
3. Capital assets include:
A) A manufacturing company's investment in U.S. Treasury bonds.
B) Seven-year MACRS property used in a corporation's trade or business.
C) A corporation's accounts receivable from the sale of its inventory.
D) A corporate real estate developer's unimproved land that is to be subdivided to build homes, which will
be sold to customers.
4. Darr, an employee of Sorce C corporation, is not a shareholder. Which of the following would be included
in a taxpayer's gross income?
A) The dividend income on shares of stock that the taxpayer received for services rendered.
B) A $10,000 gift from the taxpayer's grandparents.
C) The fair market value of land that the taxpayer inherited from an uncle.
D) Employer-provided medical insurance coverage under a health plan.
5. Farr made a gift of stock to her child, Pat. At the date of gift, Farr's stock basis was $10,000 and the
stock's fair market value was $15,000. No gift taxes were paid. What is Pat's basis in the stock for
computing gain?
A) $5,000
B) $15,000
C) $0
D) $10,000
Solutions:
| Question # 1 Answer: K | Question # 2 Answer: A | Question # 3 Answer: A | Question # 4 Answer: A | Question # 5 Answer: D |







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