REG Prep Exam Questions & Answers 2024/2025
Pass Key (R1 M1 Filing Requirements and Filing Status) Widow/Head of Household - ANSWERSo In order to avoid confusing the required time period for different filing statuses, just remember:
Widow/Widower = Must be principal residence for dependent ch...
Pass Key (R1 M1 Filing Requirements and Filing Status) Widow/Head of Household - ANSWERSo In order
to avoid confusing the required time period for different filing statuses, just remember:
♣ Widow/Widower = Must be principal residence for dependent child for WHOLE year.
♣ Head of Household = Must be principal residence for qualifying person for more than half a year.
Pass Key (R1 M1 Filing Requirements and Filing Status) - ANSWERSo A taxpayer will be entitled to a
family tax credit for anyone whom a taxpayer "CARES" for, or whom they "SUPORT," even if the
dependent:
♣ Was born during the year; or
♣ Died during the year
Pass Key (R1 M2 Gross Income Part 1) - ANSWERS• Pass Key
o Event Income Basis
o Taxable = FMV FMV
o Nontaxable = None NBV
Pass Key (R1 M4 Items From Other Entities) - ANSWERSo A partner must include on his personal income
tax return his distributive share of each separate "pass-through" item.
o Guaranteed payments are a business expense that reduces partnership net business income flowing
through to the partners, and are also taxable to the partner receiving the payments.
Pass Key (R1 M4 Items From Other Entities) - ANSWERSSimilar to a partnership, shareholders in an S
corporation must include on their personal income tax return their distributive share of each separate
"pass-through" item. Shareholders are taxed on these items, regardless of whether or not the items have
been distributed (withdrawn) to them during the year.
,Pass Key (R2 M2 Itemized Deductions) - ANSWERSo Individuals are typically "cash basis". Therefore,
generally in order to be tax deductible, the item must have been:
♣ Incurred as an expense
♣ Paid or charged before year-end
Pass Key (R2 M2 Itemized Deductions) - ANSWERSo Once again, "cash basis" taxpayers are entitled to a
deduction in the year an item is paid or charged. Note that there is no "matching" to the year the tax is
applicable.
Pass Key (R2 M2 Itemized Deductions) - ANSWERSo Any dividend income (from stock purchased with
borrowed funds) that the taxpayer treats as investment income for purposes of the limitation on
investment interest expense is not a qualified dividend, available for the preferential 15% tax rate.
Pass Key (R2 M2 Itemized Deductions) Net Investment Expense treatment - ANSWERSo An easy way to
understand and remember this rule is to think of it like the limitation gambling losses. Investments (a
risk/gamble) have the limitation of not being permitted to deduct a "net investment expense."
Pass Key (R2 M2 Itemized Deductions) Charitable Contribution Limitation - ANSWERSo The CPA
Examination has typically tested the following rules with regard to charitable contributions limitation:
♣ Overall Limit = 60% AGI
• Cash - may be all 60%
• General property - Lesser of basis or FMV
• Appreciated long-term capital gain property - is limited to the lesser of:
o 30% of AGI
o The remaining amount to reach 60% after cash contributions
Pass Key (R2 M2 Itemized Deductions) - ANSWERSCPA Exam will test you on items and ask "is it an
"adjustment" or "itemized deduction"?"
, Pass Key (R2 M3 Tax computation and Credits) - ANSWERSo For 2018, a reduced tax rate applies to
qualified domestic dividend income and long-term capital gains:
♣ Regular Tax Rate: 10%-12% Reduced Rate: 0%
♣ Regular Tax Rate: 22%-32% Reduced Rate: 15%
♣ Regular Tax Rate: 35%-37% Reduced Rate: 20%
Pass Key (R2 M3 Tax computation and Credits) - ANSWERSThe most frequently tested issue involving the
earned income credit is that it is a refundable credit.
Pass Key (R2 M4 AMT and Other Taxes) - ANSWERSo The CPA Examination has focused the majority of
the questions concerning individual alternative minimum tax on the following four areas:
♣ 1. The AMT exemption formula
♣ 2. Distinguishing "adjustments" from "preferences"
♣ 3. The AMT credit carryforward period (against regular tax)
♣ 4. Credits: available to reduce AMT (not regular tax)
Pass Key (R2 M4 AMT and Other Taxes) AMT Calculation - ANSWERSo Regular taxable income
o +/- adjustments
o + preferences
o = Alternative minimum taxable income
o X AMT rate
o = Tentative AMT Tax
o (Tax credits)
o = Tentative minimum tax
o (regular income tax)
o = Alternative minimum tax
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