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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Federal Taxation of Property Transactions | 5-15% | - Basis, cost recovery (depreciation and amortization) - Gains and losses on disposition of assets |
| Topic 2: Federal Taxation of Entities | 23-33% | - Tax compliance for corporations, partnerships, LLCs, and S corporations - Entity-level tax planning and reporting requirements |
| Topic 3: Ethics, Professional Responsibilities and Federal Tax Procedures | 10-20% | - Ethics and responsibilities in tax practice (Treasury Department Circular 230) - Licensing and disciplinary systems for CPA practice - Federal tax procedures, disclosures, penalties, and appeals |
| Topic 4: Business Law | 15-25% | - Agency, contracts, and debtor-creditor relationships - Legal duties and responsibilities in business transactions - Business structures and federal business regulations |
| Topic 5: Federal Taxation of Individuals | 22-32% | - Adjustments, deductions, exemptions and credits - Tax filing requirements and procedures - Individual taxable income and tax compliance |
1. In evaluating the hierarchy of authority in tax law, which of the following carries the greatest authoritative
value for tax planning of transactions?
A) Tax court decisions.
B) Internal Revenue Code.
C) IRS regulations.
D) IRS agents' reports.
2. Ryan, age 57, is single with no dependents. On July 1, 1997, Ryan's principal residence was sold for the
net amount of $500,000 after all selling expenses. Ryan bought the house in 1963 and occupied it until
sold. On the date of sale, the house had a basis of $180,000. Ryan does not intend to buy another
residence. What is the maximum exclusion of gain on sale of the residence that may be claimed in Ryan's
1 997 income tax return?
A) $125,000
B) $320,000
C) $0
D) $250,000
3. Smith made a gift of property to Thompson. Smith's basis in the property was $1,200. The fair market
value at the time of the gift was $1,400. Thompson sold the property for $2,500. What was the amount of
Thompson's gain on the disposition?
A) $1,300
B) $2,500
C) $1,100
D) $0
4. Doris and Lydia are equal partners in the capital and profits of Agee & Nolan, but are otherwise unrelated.
The following information pertains to 300 shares of Mast Corp. stock sold by Lydia to Agee & Nolan:
The amount of long-term capital loss that Lydia realized in 1988 on the sale of this stock was:
A) $3,000
B) $2,500
C) $0
D) $5,000
5. On December 1, 1992, Michaels, a self-employed cash basis taxpayer, borrowed $100,000 to use in her
business. The loan was to be repaid on November 30, 1993. Michaels paid the entire interest of $12,000
on December 1, 1992. What amount of interest was deductible on Michaels' 1993 income tax return?
A) $12,000
B) $0
C) $11,000
D) $1,000
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: D | Question # 3 Answer: A | Question # 4 Answer: D | Question # 5 Answer: C |
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