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AICPA CPA Regulation Sample Questions:

1. During 1993 Kay received interest income as follows:
On U.S. Treasury certificates $4,000
On refund of 1991 federal income tax 500
The total amount of interest subject to tax in Kay's 1993 tax return is:

A) $0
B) $500
C) $4,000
D) $4,500

2. 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:
. The divorce agreement, executed in 1983, provides for Hall to receive $3,000 per month, of which $600
is designated as child support. After the child reaches 18, the monthly payments are to be reduced to
$ 2,400 and are to continue until remarriage or death. However, for the year 1990, Hall received a total of
only $5,000 from her former husband. Hall paid an attorney $2,000 in 1990 in a suit to collect the alimony
owed.
. In June 1990, Hall's mother gifted her 100 shares of a listed stock. The donor's basis for this stock, which
she bought in 1970, was $4,000, and market value on the date of the gift was $3,000. Hall sold this stock
in July 1990 for $3,500. The donor paid no gift tax.
. During 1990, Hall spent a total of $1,000 for state lottery tickets. Her lottery winnings in 1990 totaled
$ 200.
. Hall earned a salary of $25,000 in 1990. Hall was not covered by any type of retirement plan, but
contributed $2,000 to an IRA in 1990.
. 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.
. Hall paid the following expenses in 1990 pertaining to the home that she owns: realty taxes, $3,400;
mortgage interest, $7,000; casualty insurance, $490; assessment by city for construction of a sewer
system, $910; interest of $1,000 on a personal, unsecured bank loan, the proceeds of which were used
for home improvements. Hall does not rent out any portion of the home.
What amount should be reported in Hall's 1990 return as alimony income?

A) $28,800
B) $0
C) $5,000
D) $36,000

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.
The Moores received a stock dividend in 1994 from Ace Corp. They had the option to receive either cash
or Ace stock with a fair market value of $900 as of the date of distribution. The par value of the stock was
$ 500.

A) $3,000
B) $0
C) $500
D) $2,500
E) $2,000
F) $1,300
G) $50,000
H) $900
I) $25,000
J) $55,000
K) $10,000
L) $1,250
M) $75,000
N) $1,000
O) $1,500

4. Porter was unemployed for part of the year. Porter received $35,000 of wages, $4,000 from a state
unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental
unemployment benefit plan. What is the amount of Porter's gross income?

A) $35,000
B) $39,000
C) $41,000
D) $37,000

5. The uniform capitalization method must be used by:
I. Manufacturers of tangible personal property.
II. Retailers of personal property with $2 million dollars in average annual gross receipts for the 3
preceding years.

A) Both I and II.
B) II only.
C) I only.
D) Neither I nor II.

Solutions: