AICPA Regulation 5

Question 1

Which of the following correctly describes the tax treatment of a nonliquidating distribution from an S corporation to a shareholder?

Accepted Answer

Reduces the shareholder's stock basis; taxable only to the extent it exceeds basis

Answer

Always taxable as ordinary income to the extent of earnings and profits

Answer

Treated as a capital gain regardless of basis

Answer

Increases the shareholder's stock basis dollar-for-dollar

Question 2

The Treasury Department's Circular 230 governs the practice of which of the following before the IRS?

Accepted Answer

CPAs, attorneys, enrolled agents, and other practitioners

Answer

State-licensed attorneys only

Answer

Only enrolled agents

Answer

Only licensed CPAs holding PTIN numbers

Question 3

Under the Bankruptcy Code, which type of claim has the highest priority in a Chapter 7 liquidation?

Accepted Answer

Secured creditors up to the value of their collateral

Answer

General unsecured creditors

Answer

Equity interest holders

Answer

Administrative expenses of the bankruptcy estate

Question 4

For federal income tax purposes, which of the following fringe benefits is excluded from an employee's gross income?

Accepted Answer

Employer-paid group-term life insurance premiums for coverage up to $50,000

Answer

Personal use of a company car exceeding $500 per year

Answer

Cash bonuses provided for outstanding performance

Answer

Employer contributions to a non-qualified deferred compensation plan currently vested

Question 5

Under UCC Article 9, a security interest in personal property is 'perfected' primarily by:

Accepted Answer

Filing a financing statement (UCC-1) in the appropriate state office

Answer

Execution of a written security agreement signed by the debtor

Answer

Delivering the collateral to the secured party

Answer

Obtaining a court judgment against the debtor

Question 6

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?

Accepted Answer

15%

Answer

32% (same as ordinary income)

Answer

28%

Answer

0%

Question 7

Which of the following describes the concept of 'piercing the corporate veil' in business law?

Accepted Answer

Holding shareholders personally liable by disregarding the corporate entity

Answer

A court procedure to dissolve a corporation involuntarily

Answer

The process of merging two corporations into one

Answer

An IRS audit technique for examining corporate tax returns