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| Section | Weight | Objectives |
|---|---|---|
| Ethics, Professional Responsibilities, and Federal Tax Procedures | 10-20% | - IRS audit, appeals, and collection procedures - Treasury Department Circular 230 rules - Licensing and disciplinary systems - Tax preparer penalties and due diligence - Ethics and responsibilities in tax practice |
| Business Law | 10-20% | - Contracts and UCC Article 2 - Agency relationships - Secured transactions (UCC Article 9) - Business structure legal framework - Debtor-creditor relationships and bankruptcy |
| Federal Taxation of Individuals | 15-25% | - Filing status and exemptions - Pass-through entity income reporting - Gross income inclusions and exclusions - Loss limitations and tax computation - Adjustments, deductions, and credits |
| Federal Taxation of Property Transactions | 12-22% | - Like-kind exchanges and involuntary conversions - Capital vs ordinary asset classification - Recognition of gains and losses - Cost recovery, depreciation, and amortization - Basis and holding periods of assets |
| Federal Taxation of Entities | 28-38% | - Book-tax differences and distributions - Tax-exempt organizations - Partnerships and LLCs - C Corporations - S Corporations |
Question 1
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. $250,000
C. $0
D. $320,000
Question 2
In the current year Jensen had the following items:
What is Jensen's AGI for the current year?
A. $59,000
B. $62,000
C. $84,000
D. $44,000
Question 3
Baum, an unmarried optometrist and sole proprietor of Optics, buys and maintains a supply of eyeglasses
and frames to sell in the ordinary course of business. In 1999, Optics had $350,000 in gross business
receipts and its year-end inventory was not subject to the uniform capitalization rules. Baum's 1999
adjusted gross income was $90,000 and Baum qualified to itemize deductions. During 1999, Baum
recorded the following information:
Business expenses:
What amount should Baum report as 1999 net earnings from self-employment?
A. $273,000
B. $281,750
C. $243,250
D. $252,000
Question 4
On February 1, 1993, Hall learned that he was bequeathed 500 shares of common stock under his
father's will. Hall's father had paid $2,500 for the stock in 1990. Fair market value of the stock on
February 1, 1993, the date of his father's death, was $4,000 and had increased to $5,500 six months later.
The executor of the estate elected the alternate valuation date for estate tax purposes. Hall sold the stock
for $4,500 on June 1, 1993, the date that the executor distributed the stock to him. How much income
should Hall include in his 1993 individual income tax return for the inheritance of the 500 shares of stock,
which he received from his father's estate?
A. $4,000
B. $2,500
C. $0
D. $5,500
Question 5
Smith, an individual calendar-year taxpayer, purchased 100 shares of Core Co. common stock for
$ 15,000 on December 15, 1992, and an additional 100 shares for $13,000 on December 30, 1992. On
January 3, 1993, Smith sold the shares purchased on December 15, 1992, for $13,000. What amount of
loss from the sale of Core's stock is deductible on Smith's 1992 and 1993 income tax returns?
A. Option C
B. Option D
C. Option A
D. Option B
Solutions:
| Question 1 Answer: B | Question 2 Answer: A | Question 3 Answer: B | Question 4 Answer: C | Question 5 Answer: C |
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