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Some Sample REG questions I’m studying on.

As a Canadian resident, some of these are little foreign to me. I noticed, REG hasn’t changed much since 2009. Those are the ‘good times’, passed it during that year. But getting 50s, in 2017 Q1 & Q3 attempts. Not complaining, it’s expected. Studying hard this time, especially working with my MCQs speed.

1) In the current year Tatum exchanged farmland for an office building. The farmland had a basis of $250,000, a fair market value (FMV) of $400,000, and was encumbered by a $120,000 mortgage. The office building had an FMV of $350,000 and was encumbered by a $70,000 mortgage. Each party assumed the other’s mortgage.
What is the amount of Tatum’s recognized gain?
a. $0 b. $ 50,000 c. $100,000 d. $150,000

2) Danielson invested $2,000,000 in DEC, a qualified small business corporation. Six years later, Danielson sold all of the DEC stock for $16,000,000, and purchased an office building with the proceeds. Danielson had not previously excluded any gain on the sale of small business stock.
What is Danielson’s taxable gain after the exclusion?
a. $0 b. $6,000,000 c. $7,000,000 d. $9,000,000

3) Robbe, a cash basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $5,500, consisting solely of $5,500 of state income taxes paid last year. Robbe’s itemized deduction amount, which exceeded the standard deduction available to single taxpayers for last year by $1,150, was fully deductible and it was not subject to any limitations or phase-outs. In the current year, Robbe received a $1,500 state tax refund relating to the prior year.

What is the proper treatment of the state tax refund?
a. Include none of the refund in income in the current year.
b. Include $1,150 in income in the current year.
c. Include $1,500 in income in the current year.
d. Amend the prior-year’s return and reduce the claimed itemized deductions for that year.

4) Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S Corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane’s modified adjusted gross income was $165,000.

What amount of the real estate rental activity loss was deductible?
a. $0 b. $15,000 c. $25,000 d. $35,000

5) Quigley, Roberk, and Storm form a corporation. Quigley exchanges $25,000 of legal fees for 30 shares of stock. Roberk exchanges land with a basis of $10,000 and a fair market value of $100,000 for 60 shares of stock. Storm exchanges $10,000 cash for 10 shares of stock.

What amount of income should each shareholder recognize?
Quigley Roberk Storm
a. $0 $0 $0
b. $25,000 $90,000 $0
c. $25,000 $90,000 $10,000
d. $0 $90,000 $0

6) Tap, a calendar-year S corporation, reported the following items of income and expense in the current year:
Revenue $44,000
Operating expenses 20,000
Long-term capital loss 6,000
Charitable contributions 1,000
Interest expense 4,000
What is the amount of Tap’s ordinary income?
a. $13,000 b. $19,000 c. $20,000 d. $24,000

7)During the current year, a trust reports the following information:
Dividends $10,000
Interest from corporate bonds 12,000
Tax-exempt interest from state bonds 4,000
Capital gain (allocated to corpus) 2,000
Trustee fee (allocated to corpus) 6,000

What is the trust’s accounting income?
a. $22,000 b. $26,000 c. $28,000 d. $34,000

8) On June 30, Gold and Silver are calendar-year C corporations. The corporations have merged, with Gold as a subsidiary of Silver. Silver owns 85% of Gold’s voting stock and fair market value (FMV).

Which of the following tax return filings would be appropriate for the two companies?
a. Two separate returns, because Silver owns at least 80% of both the voting stock and FMV of Gold. b. Two separate returns, because the merger took place before the close of the second quarter.
c. A consolidated return, because Silver owns at least 80% of both the voting stock and FMV of Gold.
d. A consolidated return, because the merger took place before the close of the second quarter

9) Terry, a taxpayer, purchased stock for $12,000. Later, Terry sold the stock to a relative for $8,000.
What amount is the relative’s gain or loss?
a. $2,000 loss. b. $0 c. $2,000 gain. d. $4,000 gain.

10) Winkler, a CPA, provided accounting services to a client, Thompson. On December 15 of the same year, Thompson gave Winkler 100 shares of Foster Corp. as compensation for services. The adjusted basis of the stock was $4,000, and its fair market value at the time of transfer was $5,000. Two months later, Winkler sold the stock on February 15 for $7,500. What is the amount that Winkler should recognize as gain on the sale of stock?
a. $0 b. $1,000 c. $2,500 d. $5,000

11.) Stone Corp. has been an S corporation since inception. In each of Year 1, Year 2, and Year 3, Stone made distributions in excess of each shareholder’s basis. Which of the following statements is correct concerning these three years?

a. In Year 1 and Year 2 only, the excess distributions are taxed as capital gain.
b. In Year 1 only, the excess distributions are tax free.
c. In Year 3 only, the excess distributions are taxed as capital gain.
d. In all three years, the excess distributions are taxed as capital gains.

Disclaimer: The above questions are taken from older AICPA Newly Released REG questions. These questions are only intended for ‘educational purposes’, and those that might be interested to join the ‘CPA’ community.

[Anonymous]

I hate REG. I’ve nver felt so rushed as I did on my last exam. It’s ridiuclous. Rush, rush, rush through MCQ’s, then digest everything in each Sim and work quickly. It’s pretty insane, but it is what it is. I’m praying for a pass on my REG retake, so I can be done.

Goodluck.

[Author]

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