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CPA REG Taxation Of Individuals
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The CPA REG exam (Taxation of Individuals) focuses on federal taxation, covering gross income inclusions/exclusions, adjustments to Adjusted Gross Income (AGI), itemized deductions, tax credits, and filing statuses. It comprises 22-32% of the Regulation section, testing ability to calculate individual tax liability, passive losses, and property transactions.  Key Topics in Individual Taxation (REG) Gross Income: Inclusions (wages, interest, dividends) and exclusions (gifts, life insurance proceeds). Adjustments & Deductions: Above-the-line adjustments to arrive at AGI (e.g., IRAs, student... Show more
CPA REG Taxation Of Individuals
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25 Questions

1. Dr. Bernstein is a cash-basis taxpayer. The following items pertain to Dr. Bernstein’s medical practice in Year 4:
What amount of taxable net income should Dr. Bernstein report from his medical practice for Year 4?,$255
2. Shapiro, an individual taxpayer, reports the following items for Year 9:
$40,000 of ordinary income from partnership A: operating a pinball arcade in which Shapiro materially participates
$9,000 net gain from partnership B: operating a bike rental business in which Shapiro does not materially participate
$17,000 loss from Shapiro’s rental of a building to a third party
How much of Shapiro’s $17,000 building rental loss is deductible in Year 9?
3. Which of the following dividends are taxable?
I. Dividend on a listed stock where the taxpayer reinvests the dividend into additional shares
II. Dividend on a life insurance policy
III. Dividend of a Chinese corporation listed on a foreign stock exchange,I and III only,I
4. In Year 8, Kathleen and Lee were married and had four dependent children. On May 1, Year 8, Lee packed his bags and abruptly deserted his family. His whereabouts were still unknown to Kathleen at the time she filed her Year 8 income tax return in February of Year 9. What is the most advantageous filing status that Kathleen is legally allowed for Year 8?
5. When exchanging “like-kind” property, which of the following terms has essentially the same meaning as “realized gain”?
I. Recognized gain
II. Accounting gain
III. Economic gain
6. Which of the following is a condition required for accumulated interest on Series EE US savings bonds to be exempt from tax?
I. The bonds must have been purchased by the taxpayer or taxpayer’s spouse and put in the name of a dependent child.
II. Redemption proceeds from the bonds are used to fix up the taxpayer’s home.
7. Karen and Terry were divorced in Year 3. The divorce decree provides that beginning in Year 4, Terry pay alimony of $20,000 per year, to be reduced by 30% on their child’s 18th birthday. Karen and Terry’s child is currently 13 years old. During Year 4, Terry paid $9,000 to Karen’s landlord, $6,000 directly to Karen, and $5,000 to Wildwood College for Karen’s college tuition. What amount of these payments should be reported as income in Karen’s Year 4 income tax return?
8. Walter is 86 years old but still files an income tax return because he works part-time at a nearby amusement park. Which of the following is true?,Because of his age
9. Which of the following statements is TRUE with respect to capital assets for individual taxpayers?,Gains and losses for both investment and personal property are reported on Form 1040
10. In Year 2, Stegman had a passive gain of $1,000 and a passive loss of $5,000. Stegman also earned a salary of $50,000 from her employer in Year 2 and had interest income of $100 on a certificate of deposit. What is Stegman’s net passive income or loss for Year 2?
11. Jay, a dentist, billed Lou $600 for dental services. Lou paid Jay $200 cash for these services and catered a party for Jay’s office staff in full settlement of the bill. Lou caters comparable parties for $350 and makes a profit of approximately $250 per party. What amount should Jay include in taxable income as a result of this transaction?
12. Gil Gallon’s wife died in Year 1. Gil Gallon did not remarry. He continued to maintain a home for himself and his dependent infant child during Year 1 and Year 2, providing full support for himself and his child during these years. Gil Gallon’s filing status for Year 2 is:
13. Buddy is a cash-basis, self-employed handyman. He files Schedule C as a sole proprietor. His cash receipts and disbursements for Year 2 were as follows:
What amount can Buddy deduct on his Form 1040 Schedule C for Year 2?
14. For which of the following potential dependents would taxpayers NOT have to demonstrate that they provided more than one-half of the support?
I. Taxpayer’s qualifying child
II. Taxpayer’s parent
15. Benson, an individual taxpayer, reported the following items for Year 7: $70,000 of ordinary income from partnership A: operating a bowling alley in which she materially participates; $9,000 passive loss from partnership B: operating an equipment rental business in which she does not materially participate; $7,000 of rental income from a building rented to a third party; and $4,000 of interest and dividend income. What is Benson’s AGI for Year 7?
16. Cindy, an unmarried individual, had an AGI of $75,000 for Year 9. Cindy incurred a loss of $30,000 from a rental real estate activity in which she actively participated during Year 9. What amount of loss attributable to this rental activity can Cindy use in Year 9 to offset income earned from nonpassive sources?
17. Griffin received the following interest payments during the current year:
Interest of $500 on a refund of federal income tax for last year
Interest of $400 on an award for personal injuries sustained in a car accident three years ago
Interest of $1,600 on municipal bonds
Interest of $1,100 on US savings bonds (Series HH)
What amount, if any, should be reported as interest income on Griffin’s current year tax return?
18. Tatum owned 1,000 shares of common stock in Cyrus Corp. for which she paid $50 per share. The company distributed a 5% common stock dividend to all holders of common stock. The fair market value (FMV) of the stock on the date of distribution was $60. With respect to this dividend, what amount must be included in Tatum’s gross income?
19. Anita’s income from self-employment last year was:,$10
20. In Year 10, Shan, a single taxpayer, received $160,000 in salary from his employer; received $15,000 in income from an S corporation in which he did not actively participate during Year 10; and incurred a $35,000 loss from a rental real estate activity in which he did actively participate during Year 10. Shan’s AGI amounted to $165,000 for Year 10. What amount of the $35,000 loss associated with the rental real estate activity was deductible in Year 10?
21. Rocky owns the following assets: recreational skis and a limousine that is used in her personal limousine service business for transporting passengers to and from airports. Which of these assets should Rocky classify as part of capital assets?,The recreational skis only,The limousine only,Both the recreational skis and the limousine,Neither the recreational skis or the limousine,a,Capital assets are assets used for personal enjoyment or held for investment. Section 1231 assets
22. Which of the following would be considered a capital asset?
I. Land operated as a small outdoor marketplace
II. A large shed on the land used for table storage when the marketplace is not open
23. Skorecki owns a two-family house that has two identical apartments. He lives in one unit and rents out the other. In Year 4, the rental apartment was fully occupied and Skorecki received $10,000 in rent. Skorecki owned no other real estate during Year 4 and paid the following:
Skorecki is preparing his Year 4 income tax return. Depreciation for the entire house was determined to be $2,000. What amount should Skorecki include in his income for the rental property for Year 4?
24. During Year 5, Tammy accepted and received a $10,000 humanitarian award. Tammy was selected to win this award without any action on her part, and no future services are expected of her as a condition of receiving the award. Which of the following is correct?
I. If Tammy never took possession of the $10,000 but instead had the amount sent directly to a charity, the $10,000 would be excluded from gross income.
II. If Tammy first took the $10,000 check and later donated it to a charity, the $10,000 would be included in gross income.
25. Olney, an accrual basis taxpayer, operates an office building. He received the following payments during the current year:
What amount can be included in Olney’s current gross income?

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