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CPA
CPA Exam REG Exam Questions
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Which of the following statements about treatment of net passive
activity losses of an individual is correct?
A) Passive activity losses in excess of passive activity income are
permanently disallowed.
B) Net passive activity losses can be offset against portfolio income in
the current year.
C) Net passive activity losses are suspended and carried forward to
offset passive income of future years.
D) A taxpayer can elect either to offset net passive activity losses
against active and portfolio income or to carry the losses forward to
future years. - ANS ✓C) Net passive activity losses are suspended and
carried forward to offset passive income of future years.
Which of the following is true about the taxation of a partner in a
partnership?
A) Partners must include their share of partnership capital gains as
ordinary income on their personal income tax returns.
CPA Exam REG
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B) If a partner's loss is limited in one tax year because of the at-risk
rules, it may be carried forward to a later year, subject to that year's
at-risk computation.
C) Passive activity losses may be used to offset both passive activity
income and portfolio income.
D) A partner's loss is limited to the fair market value of their
partnership interest. - ANS ✓B) If a partner's loss is limited in one tax
year because of the at-risk rules, it may be carried forward to a later year,
subject to that year's at-risk computation.
A partner receives the following as part of a liquidating distribution:
Bases FMV
Cash $12,000 $12,000
Accounts Receivable (AR) $0 $4,000
Land $8,000 $3,000
Total $20,000 $19,000
The partner's basis in the partnership immediately prior to the
distribution is $25,000. What is the partner's basis in the AR and the
land immediately after the liquidating distribution?
A) AR: $4,000, land: $3,000
B) AR: $0, land: $13,000
C) AR: $13,000, land: $0
D) AR: $0, land: $8,000 - ANS ✓B) AR: $0, land: $13,000
A C corporation has the following capital gains and capital losses for
years 1 and 2:
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Capital Gains Capital Losses
Year 1 $250,000 $300,000
Year 2 $425,000 $350,000
If the C corporation had NO capital gains or losses prior to year 1,
what is the minimum net capital gain that can be reported for year 2?
A) $25,000
B) $50,000
C) 75,000
D) $425,000 - ANS ✓A) $25,000
The following information relates to three corporations, Mauve, Teal,
and Fuchsia:
Stockholders Mauve Teal Fuchsia
Adams 10% 18% 22%
Jefferson 40% 22% 0%
Washington 50% 0% 0%
Brook 0% 33% 70%
Smith 0% 27% 8%
Total 100% 100% 100%
None of the corporations has made a subchapter S election. Which of
the following statements about the corporation is true?
CPA Exam REG
