Certified Public Accountant (CPA) Regulation 3 — Questions and Answers
Question 1: Which of the following is NOT a requirement for a valid Chapter 7 bankruptcy petition under the means test?
- Current monthly income below state median
- Passing the disposable income calculation
- Filing fee payment
- Debtor must have no prior bankruptcies (Correct answer)
Correct answer: Debtor must have no prior bankruptcies
A prior bankruptcy does not automatically disqualify a debtor from Chapter 7; prior filings only affect eligibility for discharge timing.
Question 2: An S corporation has $100,000 of ordinary income. Shareholder A owns 30% of shares. What amount flows through to Shareholder A?
- $0
- $30,000 (Correct answer)
- $70,000
- $100,000
Correct answer: $30,000
S corporation income is allocated to shareholders based on their pro-rata percentage of stock ownership.
Question 3: Under the Foreign Corrupt Practices Act (FCPA), which of the following payments is a permissible 'facilitating payment'?
- Bribing a foreign official to obtain a government contract
- Paying a foreign minister to influence legislation
- Paying a low-level official to expedite routine permit processing (Correct answer)
- Funding a foreign political party
Correct answer: Paying a low-level official to expedite routine permit processing
The FCPA permits facilitating payments made to foreign officials to expedite or secure performance of routine non-discretionary governmental actions.
Question 4: A taxpayer has net operating loss (NOL) carryforward provisions under post-TCJA rules. Which statement is correct?
- NOLs can be carried back 2 years and forward 20 years
- NOLs can only be carried forward indefinitely but limited to 80% of taxable income (Correct answer)
- NOLs can be carried forward 5 years without limitation
- NOLs expired with TCJA and are no longer allowed
Correct answer: NOLs can only be carried forward indefinitely but limited to 80% of taxable income
Post-TCJA, NOLs generated after 2017 cannot be carried back (generally) but can be carried forward indefinitely, limited to 80% of taxable income.
Question 5: Which element is NOT required to establish negligence in a tort claim against a CPA?
- Duty of care
- Breach of duty
- Intent to deceive (Correct answer)
- Proximate causation of damages
Correct answer: Intent to deceive
Negligence does not require intent; the four elements are duty, breach, causation, and damages.
Question 6: A married couple files jointly and has $400,000 in net investment income. What is the Net Investment Income Tax (NIIT) rate?
- 0.9%
- 3.8% (Correct answer)
- 2.5%
- 5%
Correct answer: 3.8%
The Net Investment Income Tax is imposed at a rate of 3.8% on the lesser of net investment income or the excess of MAGI over the threshold.
Question 7: Under UCC Article 2, when does risk of loss pass to the buyer in a shipment contract (FOB shipping point)?
- When the buyer receives the goods
- When the seller delivers goods to the carrier (Correct answer)
- When the goods are identified to the contract
- When the buyer pays for the goods
Correct answer: When the seller delivers goods to the carrier
In a shipment contract (FOB shipping point), risk of loss passes to the buyer when the seller delivers goods to the carrier.
Certified Public Accountant (CPA) Regulation 3
Which of the following is NOT a requirement for a valid Chapter 7 bankruptcy petition under the means test?