Certified Public Accountant (CPA) Regulation 5

Question 1

Which of the following individuals is subject to self-employment tax?

Accepted Answer

A sole proprietor with net earnings from self-employment of $500

Answer

A sole proprietor with net earnings from self-employment of $400 or more is subject to self-employment tax.

Question 2

Under the UCC, a 'firm offer' made by a merchant is irrevocable for up to:

Accepted Answer

90 days

Answer

Under UCC Article 2, a merchant's firm offer is irrevocable for the time stated, or if no time is stated, for a reasonable time not exceeding 3 months (90 days).

Question 3

A taxpayer sells their primary residence for a $350,000 gain. They are single and have lived in the home for 3 of the last 5 years. How much gain is excluded?

Accepted Answer

$250,000

Answer

Single taxpayers may exclude up to $250,000 of gain on the sale of a principal residence if ownership and use tests are met.

Question 4

Which of the following is true regarding the attorney-client privilege as it applies to a CPA working alongside an attorney?

Accepted Answer

The CPA's work product may be protected if assisting an attorney in legal representation

Answer

A CPA's communications may be protected under attorney-client privilege if the CPA is acting as an agent of an attorney providing legal services.

Question 5

Which of the following is a 'hot asset' for purposes of IRC Section 751?

Accepted Answer

Unrealized receivables and substantially appreciated inventory

Answer

Hot assets under Section 751 include unrealized receivables and substantially appreciated inventory items, which trigger ordinary income recognition on sale.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant (CPA) Regulation 5