2015 CPA Released Qs Regulation

7/24/2019 2015 CPA Released Qs Regulation

1/26

AICPA Released Questions from the

2014 Uniform CPA Exam

- Released May 2015 -

REGULATION

Uniform CPA Examination Questions and unofficial Answers, copyright by American Institute of Certified Public

Accountants, Inc. All rights reserved. Reprinted by Roger CPA Review with permission.
http://www.aicpa.org/Pages/default.aspx


2/26


3/26

2015 AICPA Released RegulationQuestions

Please note: This document contains all the question information released by the AICPA. The table below each question containsplacement data for the question within the exam template from which the question comes. The Key value is the correct letteranswer for each preceding question. For best study results, the Roger CPA Review team adds comprehensive solution rationaleswhen integrating new questions to your course materials.

MULTPLE CHOICE - DIFFICULT

The IRS requested client records from a CPA who does not have possession or control of the records.According to Treasury Circular 230, the CPA must

A. Notify the IRS of the identity of any person who, according to the CPAs belief, could have therecords.

B. Require the client to submit the records to the IRS or withdraw from the engagement.C. Obtain the records from the client and submit them to the IRS.D. Contact all third parties associated with the records, such as banks and employers, to obtain the

requested records for submission to the IRS.

Attribute ValueItem ID 69871

Area 001

Group 001

Topic 001

Key A

Under Treasury Circular 230, which of the following correctly represents the requirements related to thecommunication of fee information from a tax practitioner to a taxpayer:

It may be communicated only through the confidential engagement letter between the tax practitioner andthe taxpayer.It may be communicated in a number of ways, including in professional lists, telephone directories,mailings, and electronic mail.It must be communicated as an estimate before the engagement begins, with the understanding that theactual amount of the fee will notbe determined until the engagement ends.It may notbe communicated by television, radio, or hand-delivered flyers.

Attribute Value

Item ID 71253

Area 001

Group 001

Topic 001

Key B


4/26

2015 AICPA Released QuestionsREG

2

A taxpayer wants to take a position on a tax return that the CPA determines is frivolous. However, theCPA and the taxpayer determine that the possibility of the return being selected for audit is remote andthat even if the return is selected for audit the issue most likely will not be raised. According to the AICPAStatements on Standards for Tax Services, under these circumstances the CPA

A. Can sign or prepare the return with this position as long as the CPA advises the taxpayer that theposition is frivolous.

B. Cannot sign or prepare the return with this position.C. Can sign or prepare the return with this position because there is a realistic possibility that the

position will notbe challenged.D. Can sign or prepare the return with this position if the taxpayer signs a tax preparer waiver of

liability.

Attribute Value

Item ID 73905

Area 001

Group 001

Topic 002

Key B

Which of the following types of debtor are not eligible for relief under Chapter 11 of the BankruptcyCode?

A. Individuals.B. Railroads.C. Airlines.D. Stockbrokers.

Attribute Value

Item ID 59959

Area 002

Group 004

Topic 002

Key D


5/26


3

Which of the following statements is correct regarding the taxes payable under the FederalUnemployment Tax Act (FUTA)?

A. Liability arises only when wages are actually, notconstructively, paid to employees.B. Credits for this tax are allowed to employers for certain state unemployment taxes paid by the

employer.C. The amount is withheld from the wages of all employees.D. The amount is determined as a percentage of all compensation paid to an employee.

Attribute Value

Item ID 60715

Area 002

Group 005

Topic 002

Key B

In a principal-agent relationship that is notcontractual, which of the following remedies is notavailable tothe agent whose principal is guilty of violating a duty owed the agent?

A. Recovery for past services.B. Recovery for future damages.C. Specific performance.D. Withholding further performance.

Attribute Value

Item ID 61075

Area 002

Group 001Topic 002

Key C


6/26


4

An individual client asks a CPA to determine whether the client is solvent for federal tax purposes. Theclient has assets consisting of cash and marketable securities with a basis of $250,000 and a fair marketvalue of $155,000. The client has liabilities of $175,000, which include $130,000 of nondischargeableliabilities under the Bankruptcy Code. Which of the following statements is correct?

A. The client is insolvent since the client's liabil ities exceed the fair market value of the client'sassets by $20,000.

B. The CPA is unable to determine whether the client is solvent or insolvent because the CPA is notan accredited appraiser.

C. The client is solvent because the fair market value of the client's assets exceeds the client'snondischargeable debt by $25,000.

D. The client is solvent because the basis of the client's assets totals $250,000 and exceeds theclient's liabilities by $75,000.

Attribute Value

Item ID 70181

Area 002

Group 004

Topic 002

Key A

In which of the following situations will a controlled foreign corporation located in Ireland be deemed tohave Subpart F income?

A. Services are provided by an Irish company in England under a contract entered into by its U.S.parent.

B. Property is produced in Ireland by the Irish company and sold outside its country of incorporation.C. Services are performed in Ireland by the Irish company under a contract entered into by its U.S.

parent.D. Property is bought from the controlled foreign corporation's U.S. parent and is sold by an Irish

company for use in an Irish manufacturing plant.

Attribute Value

Item ID 71203

Area 003

Group 007

Topic 000

Key A


7/26


5

Kuo sells residential rental property to his son, Karl for $100,000. Karl gives Kuo $1,000 and aninstallment note for the balance of $99,000. Kuo's basis is $50,000. Karl pays Kuo $4,000 in year 1. Inyear 2, after paying Kuo $5,000, Karl sells the property for $70,000. Which of the following statementsabout this situation is correct?

A. Kuo should report the entire gain of $50,000 in year 1 because installment sales of depreciableproperty are notallowed between related parties..

B. Kuo should report $2,500 gain in year 1.C. Kuo should report the entire gain of $50,000 in year 1 because Karl disposed of the land within

two years of purchase.D. Kuo should report a $49,000 gain in year 2.

Attribute Value

Item ID 72317

Area 003

Group 004

Topic 004

Key B

A husband and wife agree to split monetary gifts to their relatives. The husband gives his daughter$20,500, and the wife gives her niece $17,000. The annual exclusion is $12,000. What amount is thetaxable gift for the husband and wife?

A. $0.B. $13,500C. $17,000.D. $37,500.

Attribute Value

Item ID 63329

Area 004

Group 007

Topic 002

Key A


8/26


6

If a security becomes worthless in the current taxable year, it is treated as sold or exchanged on

A. The last day of the preceding taxable year.B. The last day of the current taxable year.C. The date it is deemed worthless.D. The first day of the current taxable year.

Attribute Value

Item ID 65887

Area 004

Group 002

Topic 000

Key B

Mike and Carol, a married couple, have two assets at the time of Mike's death: a $10,000,000 lifeinsurance policy owned by Mike naming Carol as the sole beneficiary, and $8,000,000 of real estateowned by the couple as joint tenants with right of survivorship. What is the amount of the maritaldeduction to Mike's estate for these two assets?

A. $9,000,000.B. $10,000,000.C. $14,000,000.D. $18,000,000.

Attribute Value

Item ID 71567

Area 004

Group 007Topic 004

Key C


9/26


7

Logan, an employee of Argon Industries, earned a salary of $60,000 in year 2. In addition, the followingtwo transactions between Logan and Argon occurred in year 2: Logan received a bonus of 100 shares ofpublicly-traded stock worth $13,000 with a basis to Argon of $8,000, and Logan purchased 1,000 sharesof unrestricted Argon stock pursuant to a nonqualifying stock option plan for $10 per share when stockwas valued at $25 per share. What amount of compensation should Argon report in Logan's Form W-2 foryear 2?

A. $60,000B. $73,000C. $88,000D. $93,000

Attribute Value

Item ID 68447

Area 005

Group 001

Topic 001

Key C

Flowers, a married taxpayer, purchased an annuity for $64,400 that will pay $700 per month over the lifeof Flowers and Flowers' spouse. At the time of purchase the couple's joint life expectancy was 23 years.Flowers received payment beginning April 1, year 1 amounting to $6,300 in the first year of the annuitycontract. How much is includible in Flowers' gross income in the first year?

A. $0B. $2,100C. $4,200D. $6,300

Attribute Value

Item ID 69443

Area 005

Group 006

Topic 000

Key C


10/26


8

Four years ago, an individual taxpayer purchased silver coins at face value for $200. The coins werestolen in the current year, when their fair market value was $1,000. The coins were not covered byinsurance. Without considering the limit based on AGI, what is the maximum amount of loss that thetaxpayer can deduct on the current-year's tax return?

A. $100B. $200C. $900D. $1,000

Attribute Value

Item ID 71829

Area 005

Group 003

Topic 000

Key A

An S corporation had the following income and expenses:

Sales $240,000

Rent expense 25,000

Entertainment expense 5,000

Interest income 1,500

Contributions to qualifying charities 600

Section 179 expense 3,000

Depreciation expense 1,800

What would be reported as ordinary income on the corporation's income tax return?

A. $206,100B. $208,600C. $210,700D. $213,200

Attribute Value

Item ID 60537

Area 006Group 004

Topic 002

Key C


11/26


9

Dove and Eagle formed a business entity in which they are equal owners. Dove contributed cash of$100,000, and Eagle contributed land with a basis of $40,000 and fair market value of $100,000. For itsfirst year of operations, the entity had taxable income of $60,000 and made no distributions. At year end ithad outstanding recourse liabilities to third parties of $10,000. Eagle had a basis of $70,000 in the entityat the end of the first year of operations. What type of entity was formed?

A. C corporation.B. S corporation.C. General partnership.D. Limited liability company (LLC).

Attribute Value

Item ID 63185

Area 006

Group 001

Topic 001

Key B

Jetson and Tomson are equal partners in JT Partnership, which has the following income and expenseitems:

Sales $100,000

Interest income from checking account 1,000

Charitable contributions 3,000

Employee wages 4,000

Cost of goods sold 50,000

What is the nonseparately stated partnership income?$43,000$44,000$46,000$47,000

Attribute Value

Item ID 63549

Area 006

Group 005

Topic 001

Key C


12/26


10

Borasco Corp. owns land with a fair market value of $200,000. Borasco purchased the land 10 years agofor $65,000 and owes a liability of $50,000 as of August 2 of the current year. Alvo Corp. owns 100% ofBorasco. Borasco is completely liquidated on August 2 of the current year, according to a plan adoptedon June 18 of the current year. As a result, the land is transferred to Alvo in complete cancellation ofBorasco's stock. What basis does Alvo have in the land it receives?

A. $15,000B. $65,000C. $150,000D. $200,000

Attribute Value

Item ID 72071

Area 006

Group 001

Topic 004

Key B

What is the tax rate for an S corporation that pays tax on built-in gains?

A. The calculated income tax rate of the corporation.B. The income tax rate of the shareholder.C. The highest individual income tax rate.D. The highest corporate income tax rate.

Attribute Value

Item ID 73915

Area 006Group 004

Topic 005

Key D


13/26


11

MULTIPLE CHOICE - MODERATE

The partnership of Rodgers & Higgs, CPAs, performed audits of Alt Corp., a publicly-traded company, forthe past several years. After issuing the current year's audit report, the CFO of Alt confessed to havingcommitted fraud against Alt. Under which of the following statutes would the investors most likely bringsuit against Rodgers & Higgs?

A. Securities Act of 1933, if they can prove ordinary negligence.B. Securities Act of 1933, if they can prove gross negligence.C. Securities Exchange Act of 1934, if they can prove ordinary negligence.D. Securities Exchange Act of 1934, if they can prove scienter.

Attribute Value

Item ID 64687

Area 001

Group 003

Topic 002

Key D

In which of the following circumstances would a tax return preparer be prohibited from disclosing a client'stax return information?

A. The information will be needed for a peer review.B. The information will be provided in response to a court order.C. The information will be provided to a section 501(c)(3) charity.D. The information will be used to prepare state or local tax returns.

Attribute Value

Item ID 66653Area 001

Group 003

Topic 003

Key C


14/26


12

Under the Statements on Standards for Tax Services, what is a CPA's responsibility for verifyinginformation furnished by the taxpayer or third parties?

A. A CPA need notmake additional inquiries if the information furnished appears to be incorrect,incomplete, or inconsistent with other facts known to the CPA.

B. A CPA need notconsider implications of information furnished if the information comes directlyfrom a third party.

C. A CPA may, in good faith, rely on information furnished by the taxpayer or by third parties withoutverification.

D. A CPA should notrefer to the taxpayer's previous tax returns unlessthe returns reporttransactions that affect the current tax period.

Attribute Value

Item ID 71499

Area 001

Group 001

Topic 002

Key C

Which of the following contractual assignments is prohibited?

A. The right to receive royalties.B. The right to be insured under a liability insurance policy.C. The right to receive installment payments.D. The rights under an option contract.

Attribute Value

Item ID 60103

Area 002

Group 002

Topic 003

Key B


15/26


13

Under which of the following circumstances would a promoter be relieved of personal liability on contractsentered into while engaged in forming a corporation?

A. When the bylaws of the corporation expressly adopt all preincorporation contracts withoutnovation.

B. When the corporation unknowingly accepts the benefits of the contract.C. When the contracting party verbally agrees to relieve the promoter.D. When the third party, the corporation, and the promoter enter into an agreement to substitute the

corporation for the promoter.

Attribute Value

Item ID 63695

Area 002

Group 006

Topic 002

Key D

Under the Negotiable Instruments Article of the UCC, which of the following defenses could besuccessfully asserted by the drawer of a draft against a holder in due course of that draft?

A. The drawer issued the draft to the payee because of the payee's fraudulent representationsconcerning the value of the property the payee was transferring to the drawer in return for thedraft.

B. The drawer issued the draft as a gift to the original payee, without the drawer receiving anyconsideration or value for it.

C. The drawer was discharged from the obligation in bankruptcy after the issuance of the draft.D. The drawer issued the draft as bearer paper, and it was transferred by the original holder to the

next holder without an endorsement.

Attribute Value

Item ID 73425

Area 002

Group 003

Topic 002

Key C


16/26


14

The two equal shareholders of a C corporation are thinking of filing an election to have the companytreated as an S corporation. Which of the following consequences is an advantage of this election?

A. The corporation's net operating loss carryovers from prior years are immediately deductible bythe shareholders.

B. The corporation's tax-free fringe benefits for the shareholders will be deductible by thecorporation.

C. The shareholders of the S corporation will be taxed only on distributions from the corporation.D. The corporation's capital losses can be claimed on the tax returns of the shareholders.

Attribute Value

Item ID 72459

Area 003

Group 006

Topic 003

Key D

Benson exchanged a van, used exclusively for business and with an adjusted basis of $100,000, for anew van with a fair market value of $120,000 and received $5,000 in cash. What amount of gain didBenson recognize from the transaction?

A. $0B. $5,000C. $20,000D. $25,000

Attribute Value

Item ID 56793

Area 004

Group 004

Topic 000

Key B


17/26


15

Which of the following items qualifies for treatment under Section 1231 (Property Used in the Trade orBusiness and Involuntary Conversions)?

A. Copyright used in the business, held for 10 years.B. Building used in the business, held for six months.C. Machinery used in the business, held for eleven months.D. Computer used in the business, held for four years.

Attribute Value

Item ID 63237

Area 004

Group 001

Topic 000

Key D

A personal services corporation may deduct payments made to owner-employees only in the year inwhich the

A. Corporation is formed.B. Expense is accrued on the books and records of the corporation.C. Corporation makes a valid S election.D. Owner-employee includes it in income.

Attribute Value

Item ID 64941

Area 004

Group 006

Topic 000Key D


18/26


16

An individual taxpayer reports the following information:

U.S. Treasury bond income $ 100

Municipal bond income 200

Rental income 500

Investment interest expense 1,000

What amount of investment interest can the taxpayer deduct in the current year?

A. $100B. $300C. $800D. $1,000

Attribute Value

Item ID 61621

Area 005

Group 003Topic 000

Key A

As a result of a divorce, a taxpayer received the following during the current year:

Cash from the property settlement $100,000

Child support 12,000

Alimony payments 30,000

What amount, if any, must be included in gross income for the current year?

A. $0B. $30,000C. $130,000D. $142,000

Attribute Value

Item ID 72133

Area 005

Group 001

Topic 001

Key B


19/26


17

Thompson's spouse died in year 1. Thompson did not remarry in year 2 and lived alone the entire year.What is Thompson's year 2 filing status?

A. Married filing jointly.B. Surviving spouse.C. Head of household.D. Single.

Attribute Value

Item ID 73923

Area 005

Group 007

Topic 000

Key D

Paige, a 25% shareholder in an S corporation, had a stock basis of $10,000 at the beginning of the year.The corporation had ordinary income of $200,000 for the year. There were no separately stated items.Paige received wages from the corporation of $25,000 and a distribution of $30,000. What was Paige'sbasis in the stock at year end?

A. $0B. $5,000C. $30,000D. $35,000

Attribute Value

Item ID 61717

Area 006Group 004

Topic 003

Key C


20/26


18

Kline and Salomon form the KS Partnership as 50/50 partners. Kline contributes equipment that has a fairmarket value of $60,000 and an adjusted basis of $45,000. In addition, the equipment is subject to a$10,000 loan that KS Partnership is assuming. What amount represents Kline's initial basis in thepartnership?

A. $35,000B. $40,000C. $45,000D. $60,000

Attribute Value

Item ID 62901

Area 006

Group 005

Topic 002

Key B

Parent company X and subsidiary company Y file a calendar year consolidated federal income tax return.Company X reported a $120,000 tax loss, which included a $10,000 dividend from Y. Company Yreported $140,000 of taxable income, which included $30,000 of dividends received from less than 20%owned stock investments. Neither company took into account any applicable dividends receiveddeduction. What is the group's consolidated tax loss for the year?

A. ($1,000)B. ($4,000)C. ($11,000)D. ($20,000)

Attribute Value

Item ID 66541

Area 006

Group 003

Topic 006

Key C


21/26


19

Which of the following is a disadvantage of a revocable trust?

A. The grantor will be subject to gift taxes on the transfer of property to the trust.B. The trust assets are subject to being probated upon the death of the grantor.C. The grantor loses power to control the trust funds for federal estate tax purposes.D. The trust is included in the gross estate of the grantor.

Attribute Value

Item ID 69499

Area 006

Group 006

Topic 001

Key D

IRC Section 263A requires the capitalization of certain indirect costs related to inventory when aqualifying business is manufacturing tangible personal property. Which of the following costs isnotrequired to be capitalized as part of this adjustment?

A. Marketing.B. Recruiting.C. Payroll.D. Securities services.

Attribute Value

Item ID 60605

Area 003

Group 004

Topic 002Key A


22/26


20

A company terminated its S corporation status for the current tax year. When can the company reelect Sstatus?

A. Immediately.B. Third year from the current tax year.C. Fifth year from the current tax year.D. Cannot reelect in future.

Attribute Value

Item ID 64285

Area 006

Group 004

Topic 001

Key C

The CPA was preparing the financial statement for a limited liability company. To which of the followingwould the CPA's report be addressed?

A. Member.B. ShareholderC. General partner.D. Limited partner.

Attribute Value

Item ID 64619

Area 002

Group 006

Topic 001Key A


23/26


21

TASK-BASED SIMULATIONS (TBS)

Task 637_01


24/26


22

Selection List Column B, Tax Return Dates (all MOs)


25/26


23

Task 562_01


26/26


Task 3773_01

2015 CPA Released Qs Regulation

Documents