1)Perle, a dentist, billed Wood for dental services.Wood paid Perle $200 cash and built a bookcase for Perle's office in full settlement of the bill.Wood sells comparable bookcases for $350.What amount should Perle include in taxable income as a result of this transaction?

a)Zero

b)$200

c)$550

d)$600

2)Among which of the following related parties are losses from sales and exchanges not recognized for tax purposes?

a)Mother-in-law and daughter-in-law

b)Uncle and nephew

c)Brother and sister

d)Ancestors, lineal descendants, and all in-laws

3)A taxpayer purchased and placed in service a $690,000 piece of equipment in a year with a maximum allowable Section 179 amount of $500,000 and a ceiling of $2,000,000 of qualifying property.The equipment is 7 year property.The first year depreciation for 7 year property is 14.29%.Before considering any depreciation deduction, the taxpayer has $700,000 of taxable income.The taxpayer elected out of bonus depreciation.What amount is the maximum allowable depreciation deduction?

a)$98,601

b)$500,000

c)$527,151

d)$690,000

4)Which of the following Boards has the responsibility to regulate CPA firms that audit public companies?

a)Auditing Standards Board

b)Public Oversight Board

c)Public Company Accounting Oversight Board

d)Accounting Standards Board

5)Which of the following tax credits can result in a refund even if the individual had no income tax liability?

a)Credit for prior year alternative minimum tax

b)Elderly and permanently and totally disabled credit

c)Earned income credit

d)Child and dependent care credit

6)During 2xx3, Scott charged $4,000 on his credit card for his dependent son's medical expenses.Payment to the credit card company had not been made by the time Scott filed his income tax return in 2xx4.However, in 2xx3, Scott paid a physician $2,800 for the medical expenses of this wife, who died in2xx2.Disregarding the adjusted gross income percentage threshold, what amount could Scott claim in his 2xx3 income tax return for medical expenses?

a)Zero

b)$2,800

c)$4,000

d)$6,800

7)Which of the following statements is correct regarding the standards a CPA should follow when recommending tax return positions and preparing tax returns?

a)A CPA may recommend a position that the CPA concludes is frivolous as long as the position is adequately disclosed in the return.

b)A CPA may recommend a position for which the CPA has a good faith belief there is substantial authority of being sustained if challenged.

c)A CPA will usually NOT advise the client of the potential penalty consequences of the recommended tax return position.

d)A CPA ;may sign a tax return as preparer knowing that the return takes a position that will NOT be sustained if challenged.

8)A cash-basis taxpayer should report gross income

a)Only for the year in which income is actually received in cash

b)Only for the year in which income is actually received whether in cash or property

c)For the year in which income is either actually or constructively received incash only

d)For the year in which income is either actually or constructively received, whether in cash or in property

9)Which of the following must be satisfied for a taxpayer to expense, in the year of purchase, under Internal Revenue Code Section 179, the cost of new or used tangible depreciable personal property?

I.The property must be purchased for use in the taxpayer's active trade or business

II.The property must be purchased from an unrelated party

a)I only

b)II only

c)Both I and II

d)Neither I nor II

10)Which payment(s) is (are) included in a recipient's gross earnings?

I.Payment to a graduate student for a part-time teaching assignment at a university.Teaching is not a requirement toward obtaining the degree.

II.A grant to a PhD candidate for her participation in a university-sponsored research project for the benefit of the university.

a. I only

b. II only

c. Both I and II

d. Neither I nor II

11) Mish, a sole proprietor, uses the cash basis of accounting.At the beginning of the current, accounts receivable were $25,000.During the year, Mish collected $100,000 from customers.At the end of the year, accounts receivable were $15,000.What was Mish's gross taxable income for the current year?

a.$75,000

b. $90,000

c. $100,000

d. $110,000

12)Under the uniform capitalization rules applicable to taxpayers with property acquired for resale, which of the following costs should be capitalized with respect to inventory if no exceptions have been met?

Repackaging CostOff-site storage cost.

a. YesYes

b. YesNo

c. NoYes

d. NoNo

13) A couple filed a joint return in prior tax years.During the current tax year, one spouse died.The couple has one dependent child.The surviving spouse did not re-marry.What is the most beneficial filing status available to the surviving spouse for the first subsequent tax year?

a. Surviving spouse

b. Married filing separate

c. Single

d. Head of household

14)With regard to the inclusion of social security benefits in gross income, for the tax year, which of the following is correct?

a.The social security benefits in excess of modified adjusted gross income are included in gross income.

b.The social security benefits in excess of one-half of modified adjusted gross income are included in gross income.

c.85% of the social security benefits if the maximum amount of benefits to be included in gross income.

d.Social security benefits are never taxable.

15)Sam's year 2 taxable income was $175,000 with a corresponding tax liability of $30,000.For year 3, Sam expects taxable income of $250,000 and a tax liability of $50,000.In order to avoid a penalty for underpayment of estimated taxes, what is the minimum amount of year 3 estimated tax payments that Sam can make?

a.$30,000

b.$33,000

c.$45,000

d.$50,000

16)Alternative minimum tax preferences include:

Tax exempt interest fromCharitable contributions of

private activity bondappreciated capital gain property

a.YesYes

b.YesNo

c.NoYes

d.NoNo

17)The credit for prior year alternative minimum tax liability may be carried

a.Forward for a maximum of 5 years

b.Back to the 3 preceding years or carried forward for a maximum of 5 years

c.Back to the 3 preceding years.

d.Forward indefinitely

18)How may taxes paid by an individual to a foreign country be treated?

a.As an itemized deduction subject to the 2% floor

b.As a credit against federal income taxes due

c.As an adjustment to gross income

d.As a nondeductible expense

19)Which of the following statements about the child and dependent care credit is correct?

a.The credit is nonrefundable

b.The child must be under the age of 24 years old

c.The child must be a direct descendant of the taxpayer

d.The maximum credit is $500

20)Spence, who itemizes deductions, had adjusted gross income of $60,000 for the current year.The following additional information is available for the year:

* Cash contributions to United Way = $4,000

* Purchase of art object at University fundraising bazaar (with a fair market value of $800 on the date of purchase) (The University is a tax exempt organization)= $1,200

* Donation of furniture to Salvation Army (fair market value evidenced by receipt received) = $600

What is the maximum amount that Spence can claim for charitable contributions in the current year?

a.$5,400

b.$5,200

c.$5,000

d.$4,400

21) In the current year, Drake, a disabled taxpayer, made the following home improvements.

* Pool installation, which qualified as a medical expense and increased the value of his home by $25,000.

Cost = $100,000

* Widening doorways to accommodate Drake's wheelchair (the improvement did not increase the value of his house). Cost = $10,000

For regular income tax purposes and without regard to the adjusted gross income percentage threshold limitation, what maximum amount would be allowable as a medical expense deduction in the current year?

a.$110,000

b.$85,000

c.$75,000

d.$10,000

22) An individual starts paying student loans in the current year.How many years may the individual deduct a portion of the student loan interest?

a.current year only

b.5 years

c. 10 years

d.duration of the time that interest is paid