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AICPA CPA Regulation Sample Questions:

1. Conner purchased 300 shares of Zinco stock for $30,000 in 1980. On May 23, 1994, Conner sold all the
stock to his daughter Alice for $20,000, its then fair market value. Conner realized no other gain or loss
during 1994. On July 26, 1994, Alice sold the 300 shares of Zinco for $25,000.
What amount of the loss from the sale of Zinco stock can Conner deduct in 1994?

A) $3,000
B) $0
C) $5,000
D) $10,000

2. Barkley owns a vacation cabin that was rented to unrelated parties for 10 days during the year for $2,500.
The cabin was used personally by Barkley for three months and left vacant for the rest of the year.
Expenses for the cabin were as follows:
Real estate taxes $1,000
Maintenance and utilities $2,000
How much rental income (loss) is included in Barkley's adjusted gross income?

A) $500
B) $(500)
C) $(1,500)
D) $0

3. Which one of the following will result in an accruable expense for an accrual-basis taxpayer?

A) A repair completed prior to year end but not invoiced.
B) A signed contract for repair work to be done and the work is to be completed at a later date.
C) A repair completed prior to year end and paid upon completion.
D) An invoice dated prior to year end but the repair completed after year end.

4. Which of the following statements is the best definition of real property?

A) Real property is land and everything permanently attached to it.
B) Real property is land and intangible property in realized form.
C) Real property is all tangible property including land.
D) Real property is only land.

5. Hall, a divorced person and custodian of her 12-year old child, filed her 1990 federal income tax return as
head of a household. She submitted the following information to the CPA who prepared her 1990 return:
. In 1990, Hall sold an antique that she bought in 1980 to display in her home. Hall paid $800 for the
antique and sold it for $1,400, using the proceeds to pay a court ordered judgment.
The $600 gain that Hall realized on the sale of the antique should be treated as:

A) An involuntary conversion.
B) A nontaxable antiquities transaction.
C) Long-term capital gain.
D) Ordinary income.

Solutions: