Certified Public Accountant (CPA) Regulation 2

Question 1

A taxpayer sells a capital asset held for 14 months at a gain. How is this gain classified for federal income tax purposes?

Accepted Answer

Long-term capital gain

Answer

Assets held more than 12 months qualify for long-term capital gain treatment.

Question 2

Under the Uniform Partnership Act, which of the following acts requires unanimous consent of all partners?

Accepted Answer

Admitting a new partner

Answer

Admitting a new partner requires unanimous consent of all existing partners.

Question 3

Which of the following best describes the 'check-the-box' regulations for federal tax purposes?

Accepted Answer

Rules allowing eligible entities to elect their tax classification

Answer

Check-the-box regulations allow eligible entities to elect how they are classified for federal tax purposes.

Question 4

A client receives $5,000 in compensatory damages and $20,000 in punitive damages from a personal injury lawsuit. What amount is includible in gross income?

Accepted Answer

$20,000

Answer

Compensatory damages for physical injury are excluded from income, but punitive damages are always taxable.

Question 5

Under the Statute of Frauds, which contract must be in writing to be enforceable?

Accepted Answer

A contract for the sale of real property

Answer

Contracts for the sale of real property must be in writing to be enforceable under the Statute of Frauds.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant (CPA) Regulation 2