Regulation Flashcards
7 cards from real AICPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulation flashcards as text
Which of the following correctly describes the tax treatment of a nonliquidating distribution from an S corporation to a shareholder?
Answer: Reduces the shareholder's stock basis; taxable only to the extent it exceeds basis
S corporation distributions first reduce the shareholder's stock basis; amounts received in excess of basis are treated as gain from sale of stock.
The Treasury Department's Circular 230 governs the practice of which of the following before the IRS?
Answer: CPAs, attorneys, enrolled agents, and other practitioners
Circular 230 sets ethical and procedural standards for all practitioners — CPAs, attorneys, enrolled agents, and actuaries — authorized to represent clients before the IRS.
Under the Bankruptcy Code, which type of claim has the highest priority in a Chapter 7 liquidation?
Answer: Secured creditors up to the value of their collateral
Secured creditors are paid first, up to the value of their collateral, before any priority or unsecured claims are addressed in a Chapter 7 liquidation.
For federal income tax purposes, which of the following fringe benefits is excluded from an employee's gross income?
Answer: Employer-paid group-term life insurance premiums for coverage up to $50,000
Under IRC §79, employer-provided group-term life insurance coverage up to $50,000 is excluded from the employee's gross income.
Under UCC Article 9, a security interest in personal property is 'perfected' primarily by:
Answer: Filing a financing statement (UCC-1) in the appropriate state office
Perfection under UCC Article 9 is most commonly achieved by filing a UCC-1 financing statement in the correct filing office, giving public notice of the security interest.
A taxpayer sells a capital asset held for 14 months at a gain. Which tax rate applies to this long-term capital gain for a taxpayer in the 32% ordinary income bracket?
Answer: 15%
Taxpayers in the 22%, 24%, 32%, 35%, or lower bracket (but above the 0% threshold) pay a 15% preferential rate on net long-term capital gains.
Which of the following describes the concept of 'piercing the corporate veil' in business law?
Answer: Holding shareholders personally liable by disregarding the corporate entity
Piercing the corporate veil allows courts to hold shareholders personally liable when they have abused the corporate form (e.g., commingling funds, undercapitalization, or fraud).