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

S corporation distributions first reduce the shareholder's stock basis; amounts received in excess of basis are treated as gain from sale of stock.

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

Circular 230 sets ethical and procedural standards for all practitioners — CPAs, attorneys, enrolled agents, and actuaries — authorized to represent clients before the IRS.

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

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.

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

Under IRC §79, employer-provided group-term life insurance coverage up to $50,000 is excluded from the employee's gross income.

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

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.

(AICPA) American Institute of Certified Public Accountants Practice Test

(AICPA) American Institute of Certified Public Accountants Practice Test

AICPA Regulation 5