Pass your actual test with our AICPA REG training material at first attempt
Updated: Jun 03, 2026
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1. On December 1, 1997, Krest, a self-employed cash basis taxpayer, borrowed $200,000 to use in her
business. The loan was to be repaid on November 30, 1998. Krest paid the entire interest amount of
$ 24,000 on December 1, 1997. What amount of interest was deductible on Krest's 1997 income tax return?
A) $2,000
B) $22,000
C) $24,000
D) $0
2. Which of the following is subject to the Uniform Capitalization Rules of Code Sec. 263A?
A) Mine development and exploration costs.
B) Warehousing costs incurred by a manufacturing company with $12 million in annual gross receipts.
C) Editorial costs incurred by a freelance writer.
D) Research and experimental expenditures.
3. Barkley owns a vacation cabin that was rented to unrelated parties for 10 days during the year for $2,500.
The cabin was used personally by Barkley for three months and left vacant for the rest of the year.
Expenses for the cabin were as follows:
Real estate taxes $1,000
Maintenance and utilities $2,000
How much rental income (loss) is included in Barkley's adjusted gross income?
A) $(500)
B) $(1,500)
C) $0
D) $500
4. Tom and Joan Moore, both CPAs, filed a joint 1994 federal income tax return showing $70,000 in taxable
income. During 1994, Tom's daughter Laura, age 16, resided with Tom. Laura had no income of her own
and was Tom's dependent.
Determine the amount of income or loss, if any that should be included on page one of the Moores' 1994
Form 1040.
The Moores had no capital loss carryovers from prior years. During 1994, the Moores had the following
stock transactions, which resulted in a net capital loss:
A) $10,000
B) $25,000
C) $2,500
D) $1,000
E) $2,000
F) $3,000
G) $900
H) $50,000
I) $75,000
J) $55,000
K) $1,500
L) $0
M) $1,300
N) $500
O) $1,250
5. Conner purchased 300 shares of Zinco stock for $30,000 in 1980. On May 23, 1994, Conner sold all the
stock to his daughter Alice for $20,000, its then fair market value. Conner realized no other gain or loss
during 1994. On July 26, 1994, Alice sold the 300 shares of Zinco for $25,000.
What was Alice's recognized gain or loss on her sale?
A) $5,000 long-term gain.
B) $5,000 short-term loss.
C) $5,000 long-term loss.
D) $0
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: B | Question # 3 Answer: C | Question # 4 Answer: F | Question # 5 Answer: D |
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