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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Business Law | 10-20% | - Debtor-creditor relationships and bankruptcy - Business structure legal framework - Agency relationships - Secured transactions (UCC Article 9) - Contracts and UCC Article 2 |
| Topic 2: Ethics, Professional Responsibilities, and Federal Tax Procedures | 10-20% | - Treasury Department Circular 230 rules - Licensing and disciplinary systems - Tax preparer penalties and due diligence - IRS audit, appeals, and collection procedures - Ethics and responsibilities in tax practice |
| Topic 3: Federal Taxation of Entities | 28-38% | - Partnerships and LLCs - S Corporations - Book-tax differences and distributions - C Corporations - Tax-exempt organizations |
| Topic 4: Federal Taxation of Property Transactions | 12-22% | - Capital vs ordinary asset classification - Basis and holding periods of assets - Recognition of gains and losses - Like-kind exchanges and involuntary conversions - Cost recovery, depreciation, and amortization |
| Topic 5: Federal Taxation of Individuals | 15-25% | - Loss limitations and tax computation - Filing status and exemptions - Gross income inclusions and exclusions - Pass-through entity income reporting - Adjustments, deductions, and credits |
1. Ryan, age 57, is single with no dependents. On July 1, 1997, Ryan's principal residence was sold for the
net amount of $500,000 after all selling expenses. Ryan bought the house in 1963 and occupied it until
sold. On the date of sale, the house had a basis of $180,000. Ryan does not intend to buy another
residence. What is the maximum exclusion of gain on sale of the residence that may be claimed in Ryan's
1 997 income tax return?
A) $250,000
B) $125,000
C) $320,000
D) $0
2. Barkley owns a vacation cabin that was rented to unrelated parties for 10 days during the year for $2,500.
The cabin was used personally by Barkley for three months and left vacant for the rest of the year.
Expenses for the cabin were as follows:
Real estate taxes $1,000
Maintenance and utilities $2,000
How much rental income (loss) is included in Barkley's adjusted gross income?
A) $500
B) $(1,500)
C) $(500)
D) $0
3. Doris and Lydia are equal partners in the capital and profits of Agee & Nolan, but are otherwise unrelated.
The following information pertains to 300 shares of Mast Corp. stock sold by Lydia to Agee & Nolan:
The amount of long-term capital loss that Lydia realized in 1988 on the sale of this stock was:
A) $3,000
B) $5,000
C) $2,500
D) $0
4. Which payment(s) is(are) included in a recipient's gross income?
I. Payment to a graduate assistant for a part-time teaching assignment at a university. Teaching is not a
requirement toward obtaining the degree.
II. A grant to a Ph.D. candidate for his participation in a university-sponsored research project for the
benefit of the university.
A) Neither I nor II.
B) Both I and II.
C) I only.
D) II only.
5. John and Mary were divorced in 1991. The divorce decree provides that John pay alimony of $10,000 per
year, to be reduced by 20% on their child's 18th birthday. During 1992, John paid $7,000 directly to Mary
and $3,000 to Spring College for Mary's tuition. What amount of these payments should be reported as
income in Mary's 1992 income tax return?
A) $8,600
B) $5,600
C) $8,000
D) $10,000
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: D | Question # 3 Answer: B | Question # 4 Answer: B | Question # 5 Answer: C |
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