CA Taxation & Regulatory Compliance 4

Question 1

A taxpayer sells rental property for $500,000 with an adjusted basis of $200,000. The depreciation previously deducted was $80,000. Under Section 1250, the recaptured depreciation on residential real property is taxed at a maximum rate of:

Accepted Answer

25%

Answer

Unrecaptured Section 1250 gain (depreciation on real property) is taxed at a maximum federal rate of 25% for individual taxpayers.

Question 2

Which form is used to report the foreign bank and financial account holdings (FBAR) required by FinCEN?

Accepted Answer

FinCEN Form 114

Answer

The FBAR is filed on FinCEN Form 114 (not a tax form) and is required when aggregate foreign account balances exceed $10,000 at any point during the year.

Question 3

Under the Sarbanes-Oxley Act (SOX), how long must audit workpapers be retained by public accounting firms?

Accepted Answer

7 years

Answer

SOX Section 802 requires auditors to retain audit records, including workpapers, for a minimum of 7 years from the date of the audit report.

Question 4

A partnership allocates losses to a partner who has a partnership basis of zero and no at-risk amount. Where does this loss go?

Accepted Answer

It is suspended and carried forward until basis increases

Answer

Losses that exceed a partner's basis are suspended and carried forward; they can be deducted in future years when the partner's basis (and at-risk amount) increases.

Question 5

Under the AICPA Code of Professional Conduct, which threat to independence arises when a CPA has a financial interest in a client?

Accepted Answer

Self-interest threat

Answer

A self-interest threat occurs when a CPA could benefit financially from a relationship with a client, potentially compromising objectivity.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Taxation & Regulatory Compliance 4