CPA REG 2024
Taxpayer's employer's share of FICA for self-employment income of $150,000. - ✔✔$10,546. The
employer's share of FICA taxes for self-employment income is 6.20% of the first $137,700 of net
earnings from self-employment for Social Security and 1.45% of total wages for Medicare. The tax is
calculated as follows: ($137,700 × 6.20%) + [$150,000 × (1 - .0765) × 1.45%)].
A 33-year-old taxpayer withdrew $30,000 (pretax) from a traditional IRA. The taxpayer has a 28%
effective tax rate and a 35% marginal tax rate. What is the total tax liability associated with the
withdrawal? - ✔✔$13,500 the applicable tax rate is
35% the marginal tax rate and also the penalty is added
30,000*.35=10500+3000penalty=13500
According to the Securities Act of 1933, which of the following statements is correct regarding an issuer
of securities? - ✔✔If an issuer sells a security and fails to meet certain disclosure requirements, the
purchaser may sell it back to the issuer and recover the price paid.
Alex and Myra Burg, married and filing joint income tax returns, derive their entire income from the
operation of their retail candy shop. Their 2020 adjusted gross income was $50,000. The Burgs itemized
their deductions on Schedule A for 2020. The following unreimbursed cash expenditures were among
those made by the Burgs during 2020:
Repair and maintenance of motorized wheelchair for
physically handicapped dependent child $ 300
Tuition, meals, and lodging at special school for physically
handicapped dependent child in the institution primarily
for the availability of medical care, with meals and
lodging furnished as necessary incidents to that care
4,000
Without regard to the adjusted gross income percentage threshold, what amount may the Burgs claim
in their 2020 return as qualifying medical expenses? - ✔✔$4,300
,Medical care expenses of a taxpayer, a spouse, or a dependent are deductible only to the extent they
exceed 7.5% of AGI. Supplies purchased to alleviate a physical defect or provide relief from an ailment
qualify as medical expense. Capital expenditures for qualified medical costs are also deductible. If so, the
cost of repair and maintenance is also deductible. If the principal reason an individual is in an institution
other than a hospital, such as a special school for the handicapped, is the need for, and availability of,
the medical care furnished by the institution, the full costs of meals, lodging, and other services
necessary for furnishing the medical care are all qualified medical expenditures.
All of the following individuals, who meet the income and residency requirements, qualify for the
Earned Income Credit in 2020 except - ✔✔A 22-year-old married individual whose spouse is 18 years
old.
All of the following payments made to employees would be currently deductible as business expenses
except - ✔✔Wages paid to employees for constructing a new building to be used in the business.
Almost Ready, Inc., incurred $15,000 of expenditures in preparing its model car business. The
expenditures include market research costs and advertising fees. Almost Ready would like to deduct
these expenses on its current tax return as start-up expenditures. Which section and subsection of the
Internal Revenue Code defines start-up expenditures? - ✔✔IRC 195 (c)
Alt Partnership, a cash-basis, calendar-year entity, began business on October 1, 2020. Alt incurred and
paid the following in 2020:
Legal fees to prepare the partnership agreement $12,000 Accounting fees to prepare the
representations in offering materials 15,000 Alt elected to amortize costs. What was the maximum
amount (ignoring any immediate expensing allowed) that Alt may deduct on the 2020 partnership
return? - ✔✔Organization expenses are incurred in the formation of the partnership. The partnership
may elect to amortize organization expenses over a period of not less than 180 months. The fees related
to preparing the partnership agreement are organization expenses, but the expenses related to the
issuance or sale of partnership interests (syndication fees) are specifically excluded. The partnership
may recognize a maximum of 3 months of amortization expense this year, or $200 ($12,000 ÷ 180 × 3).
An employee gets a 15% discount on qualified property at the retail store where he works. The store's
gross profit percentage is 18%, and the discount resulted in $225 of savings. - ✔✔$0. Employee
discounts on the selling price of qualified property and services can be excluded from AGI. However, the
discount may not exceed the gross profit percentage or 20% of the price offered to customers, in the
case of qualified services.
, An individual taxpayer reports the following items for the current year:
Ordinary income from Partnership A, operating a movie theater in which the taxpayer materially
participates
$70,000
Net loss from Partnership B, operating an equipment rental business in which the taxpayer does not
materially participate (9,000)
Rental income from building rented to a third party 7,000
Short-term capital gain from sale of stock 4,000
What is the taxpayer's adjusted gross income for the year? - ✔✔$74,000
Anna is a 22-year-old student with earned income of $10,000 from a summer job and dividend income
of $1,100. Her parents claim her as a dependent on their tax return. What is Anna's basic standard
deduction amount? - ✔✔$10,350 The basic standard deduction amount of a student under age 24 who
is claimed as a dependent on another individual's income tax return is limited to the greater of either
$1,100 or the dependent's earned income for the year plus $350 up to the otherwise applicable basic
standard deduction amount. Earned income does not include either dividends or capital gains from the
sale of stock. Since Anna's earned income of $10,000 exceeds $1,100 and is less than the otherwise
applicable standard deduction amount of $12,400, Anna's applicable standard deduction is $10,350
($10,000 earned income + $350).
Can negative qualified business income (qualified business loss) be carried back? - ✔✔Qualified business
losses (QBLs) can only be carried forward to reduce the amount of qualified business income (QBI) in
later years.
Capital losses can be deduct up to - ✔✔$3000 MFJ and $1500 Single
Christopher Scott is a self-employed computer consultant. He earned a net profit of $100,000 in 2020
from his business. During 2020, he paid $2,500 for health insurance coverage for himself and his wife.
What is the amount and character of the deduction that the Scotts may claim on their 2020 individual
tax return? - ✔✔$2,500 deduction to arrive at adjusted gross income.
Self-employed individuals may deduct 100% of health insurance premiums from gross income to arrive
at adjusted gross income.
Taxpayer's employer's share of FICA for self-employment income of $150,000. - ✔✔$10,546. The
employer's share of FICA taxes for self-employment income is 6.20% of the first $137,700 of net
earnings from self-employment for Social Security and 1.45% of total wages for Medicare. The tax is
calculated as follows: ($137,700 × 6.20%) + [$150,000 × (1 - .0765) × 1.45%)].
A 33-year-old taxpayer withdrew $30,000 (pretax) from a traditional IRA. The taxpayer has a 28%
effective tax rate and a 35% marginal tax rate. What is the total tax liability associated with the
withdrawal? - ✔✔$13,500 the applicable tax rate is
35% the marginal tax rate and also the penalty is added
30,000*.35=10500+3000penalty=13500
According to the Securities Act of 1933, which of the following statements is correct regarding an issuer
of securities? - ✔✔If an issuer sells a security and fails to meet certain disclosure requirements, the
purchaser may sell it back to the issuer and recover the price paid.
Alex and Myra Burg, married and filing joint income tax returns, derive their entire income from the
operation of their retail candy shop. Their 2020 adjusted gross income was $50,000. The Burgs itemized
their deductions on Schedule A for 2020. The following unreimbursed cash expenditures were among
those made by the Burgs during 2020:
Repair and maintenance of motorized wheelchair for
physically handicapped dependent child $ 300
Tuition, meals, and lodging at special school for physically
handicapped dependent child in the institution primarily
for the availability of medical care, with meals and
lodging furnished as necessary incidents to that care
4,000
Without regard to the adjusted gross income percentage threshold, what amount may the Burgs claim
in their 2020 return as qualifying medical expenses? - ✔✔$4,300
,Medical care expenses of a taxpayer, a spouse, or a dependent are deductible only to the extent they
exceed 7.5% of AGI. Supplies purchased to alleviate a physical defect or provide relief from an ailment
qualify as medical expense. Capital expenditures for qualified medical costs are also deductible. If so, the
cost of repair and maintenance is also deductible. If the principal reason an individual is in an institution
other than a hospital, such as a special school for the handicapped, is the need for, and availability of,
the medical care furnished by the institution, the full costs of meals, lodging, and other services
necessary for furnishing the medical care are all qualified medical expenditures.
All of the following individuals, who meet the income and residency requirements, qualify for the
Earned Income Credit in 2020 except - ✔✔A 22-year-old married individual whose spouse is 18 years
old.
All of the following payments made to employees would be currently deductible as business expenses
except - ✔✔Wages paid to employees for constructing a new building to be used in the business.
Almost Ready, Inc., incurred $15,000 of expenditures in preparing its model car business. The
expenditures include market research costs and advertising fees. Almost Ready would like to deduct
these expenses on its current tax return as start-up expenditures. Which section and subsection of the
Internal Revenue Code defines start-up expenditures? - ✔✔IRC 195 (c)
Alt Partnership, a cash-basis, calendar-year entity, began business on October 1, 2020. Alt incurred and
paid the following in 2020:
Legal fees to prepare the partnership agreement $12,000 Accounting fees to prepare the
representations in offering materials 15,000 Alt elected to amortize costs. What was the maximum
amount (ignoring any immediate expensing allowed) that Alt may deduct on the 2020 partnership
return? - ✔✔Organization expenses are incurred in the formation of the partnership. The partnership
may elect to amortize organization expenses over a period of not less than 180 months. The fees related
to preparing the partnership agreement are organization expenses, but the expenses related to the
issuance or sale of partnership interests (syndication fees) are specifically excluded. The partnership
may recognize a maximum of 3 months of amortization expense this year, or $200 ($12,000 ÷ 180 × 3).
An employee gets a 15% discount on qualified property at the retail store where he works. The store's
gross profit percentage is 18%, and the discount resulted in $225 of savings. - ✔✔$0. Employee
discounts on the selling price of qualified property and services can be excluded from AGI. However, the
discount may not exceed the gross profit percentage or 20% of the price offered to customers, in the
case of qualified services.
, An individual taxpayer reports the following items for the current year:
Ordinary income from Partnership A, operating a movie theater in which the taxpayer materially
participates
$70,000
Net loss from Partnership B, operating an equipment rental business in which the taxpayer does not
materially participate (9,000)
Rental income from building rented to a third party 7,000
Short-term capital gain from sale of stock 4,000
What is the taxpayer's adjusted gross income for the year? - ✔✔$74,000
Anna is a 22-year-old student with earned income of $10,000 from a summer job and dividend income
of $1,100. Her parents claim her as a dependent on their tax return. What is Anna's basic standard
deduction amount? - ✔✔$10,350 The basic standard deduction amount of a student under age 24 who
is claimed as a dependent on another individual's income tax return is limited to the greater of either
$1,100 or the dependent's earned income for the year plus $350 up to the otherwise applicable basic
standard deduction amount. Earned income does not include either dividends or capital gains from the
sale of stock. Since Anna's earned income of $10,000 exceeds $1,100 and is less than the otherwise
applicable standard deduction amount of $12,400, Anna's applicable standard deduction is $10,350
($10,000 earned income + $350).
Can negative qualified business income (qualified business loss) be carried back? - ✔✔Qualified business
losses (QBLs) can only be carried forward to reduce the amount of qualified business income (QBI) in
later years.
Capital losses can be deduct up to - ✔✔$3000 MFJ and $1500 Single
Christopher Scott is a self-employed computer consultant. He earned a net profit of $100,000 in 2020
from his business. During 2020, he paid $2,500 for health insurance coverage for himself and his wife.
What is the amount and character of the deduction that the Scotts may claim on their 2020 individual
tax return? - ✔✔$2,500 deduction to arrive at adjusted gross income.
Self-employed individuals may deduct 100% of health insurance premiums from gross income to arrive
at adjusted gross income.
