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AICPA CPA Regulation Sample Questions:
1. In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of
qualified U.S. Series EE Bonds may be excluded from gross income. The exclusion is subject to a
modified gross income limitation and a limit of aggregate bond proceeds in excess of qualified higher
education expenses. Which of the following is (are) true?
I. The exclusion applies for education expenses incurred by the taxpayer, the taxpayer's spouse, or any
person whom the taxpayer may claim as a dependent for the year.
II. "Otherwise qualified higher education expenses" must be reduced by qualified scholarships not
includible in gross income.
A) II only.
B) Neither I nor II.
C) Both I and II.
D) I only.
2. Under a $150,000 insurance policy on her deceased father's life, May Green is to receive $12,000 per
year for 15 years. Of the $12,000 received in 1987, the amount subject to income tax is:
A) $0
B) $2,000
C) $12,000
D) $1,000
3. Which of the following sales should be reported as a capital gain?
A) Real property subdivided and sold by a dealer.
B) Sale of inventory.
C) Government bonds sold by an individual investor.
D) Sale of equipment.
4. Allen owns 100 shares of Prime Corp., a publicly-traded company, which Allen purchased on January 1,
2 001, for $10,000. On January 1, 2003, Prime declared a 2-for-1 stock split when the fair market value
(FMV) of the stock was $120 per share. Immediately following the split, the FMV of Prime stock was $62
per share. On February 1, 2003, Allen had his broker specifically sell the 100 shares of Prime stock
received in the split when the FMV of the stock was $65 per share. What amount should Allen recognize
as long-term capital gain income on his Form 1040, U.S. Individual Income Tax Return, for 2003?
A) $1,500
B) $2,000
C) $750
D) $300
5. Porter was unemployed for part of the year. Porter received $35,000 of wages, $4,000 from a state
unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental
unemployment benefit plan. What is the amount of Porter's gross income?
A) $37,000
B) $35,000
C) $39,000
D) $41,000
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: B | Question # 3 Answer: C | Question # 4 Answer: A | Question # 5 Answer: D |
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