[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for REG. 🙂

[Anonymous]

Molly Morris is 15 years old. Molly’s parents (James and Beth) divorced in May of the current tax year. Molly lived with both parents until the divorce. Molly does not provide more than half of her own support. After the divorce, Molly’s mother has custody of Molly, but Molly lives equal time with both parents. James’ AGI is $40,000 and Beth’s AGI is $35,000. Molly’s parents cannot decide who gets to take the dependency exemption for Molly. Assuming neither parent waives their right to the exemption, which statement is true?

a. James takes the dependency exemption for Molly because his AGI is higher.
b. Beth takes the dependency exemption for Molly because her AGI is lower.
c. Beth and James must alternate taking the dependency exemption for Molly.
d. Both parents take a dependency exemption for Molly because she lives equal time with each parent.

[Anonymous]

Kim was seriously injured at her job. As a result of her injury, she received the following payments:
$5,000 reimbursement from employer-provided health insurance for medical expenses paid by Kim. The premiums this year paid by Kim’s employer totaled $6,000.
$15,000 disability pay. Kim has disability insurance provided by her employer as a nontaxable fringe benefit. Kim’s employer paid $6,000 in disability premiums this year on behalf of Kim.
$10,000 received for damages for personal physical injury.
$200,000 for punitive damages.

What amount is taxable to Kim?

a. $0
b. $225,000
c. $215,000
d. $236,000

[Anonymous]

I like this one

Betty is age 34 and has AGI of $50,000. The following items may qualify as itemized deductions for Betty:
Qualified medical expenses
$4,000
Real estate tax
$1,200
State income tax
$800
Charitable contributions
$600
Mortgage interest on acquisition indebtedness
$2,000
Home equity interest on a loan not used to improve the home
$300
Miscellaneous itemized deductions
$1,500

What is the itemized deduction add-back for the AMT?

a. $3,800
b. $8,800
c. $2,800
d. $2,500

[Anonymous]

Anthony entered into a long-term construction contract in Year 3. The total profit of the contract is $80,000 and does not change over the life of the contract. The contract will be completed in Year 5. The contract is 20% and 70% complete at the end of Years 3 and 4, respectively.

What is the alternative minimum tax adjustment required in Year 4?

a. $80,000
b. $56,000
c. $40,000
d. $16,000

[Anonymous]

Carol has taxable income before personal exemptions of $48,000. Included in that calculation are the following items:
Real estate taxes on her home
$2,000
Mortgage interest on acquisition indebtedness
$1,200
Charitable contributions
$550

Carol also had excluded municipal bond interest income of $8,000, $3,000 of which was deemed to be private activity bond interest. What are Carol’s total adjustments for alternative minimum tax?

a. $1,200
b. $6,750
c. $3,000
d. $2,000

[Anonymous]

Briana has various items of income as follows:

W-2 wages
$24,000
Interest and dividends
$3,000
Sole proprietorship income on Schedule C
$98,000
Income from an S corporation from Schedule K-1
$12,000
Income as a limited partner from a limited partnership from Schedule K-1
$10,000

For purposes of the self-employment tax, what are the net earnings from self-employment? (Note: Please answer before the required 92.35% calculation performed on Schedule SE.)

a. $10,000
b. $22,000
c. $98,000
d. $27,000

The above are some of the questions I marked for review before exam and for me it was tricky. I will post some more tomorrow.

Good luck to all of you 🙂

I will wait for the results on Feb 23rd. If I don't pass then I will lose my BEC credit which expires on Feb 28th.Fingers crossed and stressed.

[Anonymous]

Parent Corp. owns 15% of Sub Corp. Parent has gross income of $43,000 and allowable deductions of $39,000 before considering any dividends received deduction (DRD). Included in the $43,000 gross income is $8,000 in dividends from Sub.
What is the maximum DRD available to Parent?

a. $2,800
b. $3,200
c. $8,000
d. $5,600

[jack yassa]

@esenthil

Are those real exam questions?

[Anonymous]

Chandler Inc. has regular taxable income of $123,000. Included in that calculation are the following items:

Percentage depletion in excess of cost depletion
$3,000

Private activity bond interest income
$2,500

Charitable contributions
$8,500

Chandler had a long-term contract and reported no income during the current year under the completed contract method. Income reported under the percentage of completion method would have been $12,000. What is Chandler’s alternative minimum taxable income (AMTI)?

a. $128,500
b. $149,000
c. $140,500
d. $105,500

[Anonymous]

lol no real exam questions. I can't post real exam questions. This is from my study material.The above questions I marked to review before the exam and which was tricky for me. Just wanted to share.

[Bluetoothray]

I have a question that's been bugging me for a while now.
Question #97.
Which of the following statements is (are) correct regarding the common law elements that must be proven to support a finding of constructive fraud against a CPA?

a. The plaintiff has justifiably relied on the CPA's misrepresentation.
b. The CPA has acted in a grossly negligent manner.

The answer is both. I've had two or three similar questions to this, I can't seem to find the question numbers, where the plaintiff only had to prove that the CPA acted in a grossly negligent manner. Why is it both in this instance? What slight nuance am I missing here? Do you guys understand what I'm getting at?

[Anonymous]

b. The CPA has acted in a grossly negligent manner.

In BECKER they have given for constructive fraud – The CPA has acted in a grossly negligent manner.

Reliance is one of the real defense.

[Anonymous]

Constructive Fraud – Tort (Gross Negligence)

Material Misrepresentation of Fact – M

Reckless disregard for truth – R

Making statement without knowing if it true or false

Must have reasonable reliance – R

Must have intent to rely – I

Must have damages – applies to anyone suffering loss

– Yes both are correct

Reliance and Gross Negligence

[Anonymous]

This youtube channel was helpful to me

[Anonymous]

The reasoning for the answer of both is for common law constructive fraud you need the 5 qualities. What is needed for constructive fraud: Material misrepresentation of fact, actual and justifiable reliance of plaintiff, intent to induce reliance of plaintiff, defendant acted gross negligently/recklessly, and damages occurred.

From what I recall if the CPA was negligent and no material misrepresentation the CPA is not liable. I guess I could be wrong but I believe that a material misrepresentation must have had happened (Reasoning is, I recall there was a question in Becker that said the misstatement was not material so no liability was formed).

What you may be thinking of is for Securities Act of 1933, Section 11 the plaintiff only need to prove: they owned the security, suffered a loss, and a material misrepresentation or omission of fact occurred. The plaintiff does not need to prove reliance on the CPA's opinion. But here if they performed all audit procedures as a reasonable CPA they would not be liable.

I'm not sure if that helped at all but I thought I would give it a try. Good luck!

Audit: 92, FAR: 88, BEC: 82, REG: 2/17/15

[Author]

Replies