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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Federal Taxation of Entities | 18–28% | - Business entity taxation
|
| Topic 2: Federal Taxation of Individuals | 15–25% | - Individual income taxation
|
| Topic 3: Ethics, Professional Responsibilities, and Federal Tax Procedures | 15–25% | - Ethics and professional conduct
|
| Topic 4: Business Law | 10–20% | - Business structure law
|
| Topic 5: Federal Taxation of Property Transactions | 12–22% | - Property transactions
|
Question 1
On December 1, 1997, Krest, a self-employed cash basis taxpayer, borrowed $200,000 to use in her
business. The loan was to be repaid on November 30, 1998. Krest paid the entire interest amount of
$ 24,000 on December 1, 1997. What amount of interest was deductible on Krest's 1997 income tax return?
A. $22,000
B. $24,000
C. $2,000
D. $0
Question 2
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. $5,000
B. $10,000
C. $3,000
D. $0
Question 3
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.
Tom received $10,000, consisting of $5,000 each of principal and interest, when he redeemed a Series
EE savings bond in 1994. The bond was issued in his name in 1990 and the proceeds were used to pay
for Laura's college tuition. Tom had not elected to report the yearly increases in the value of the bond.
A. $75,000
B. $1,500
C. $50,000
D. $500
E. $900
F. $10,000
G. $55,000
H. $1,250
I. $2,500
J. $25,000
K. $3,000
L. $1,300
M. $1,000
N. $2,000
O. $0
Question 4
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 1994, Joan received $1,300 in unemployment compensation benefits. Her employer made a $100
contribution to the unemployment insurance fund on her behalf.
A. $75,000
B. $1,500
C. $50,000
D. $500
E. $900
F. $10,000
G. $55,000
H. $1,250
I. $2,500
J. $25,000
K. $3,000
L. $1,300
M. $1,000
N. $2,000
O. $0
Question 5
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 1994, Joan received $3,500 as beneficiary of the death benefit, which was provided by her brother's
employer. Joan's brother did not have a nonforfeitable right to receive the money while living.
A. $75,000
B. $1,500
C. $50,000
D. $500
E. $900
F. $10,000
G. $55,000
H. $1,250
I. $2,500
J. $25,000
K. $3,000
L. $1,300
M. $1,000
N. $2,000
O. $0
Solutions:
| Question 1 Answer: C | Question 2 Answer: D | Question 3 Answer: O | Question 4 Answer: L | Question 5 Answer: O |
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