CPA Regulation (REG) : CPA Regulation (REG)
Study concepts, example questions & explanations for CPA Regulation (REG)
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Example Questions
Example Question #1 : Individual Adjustments & Deductions
Which of the following amounts represents an adjustment to adjusted gross income (AGI) for the current tax year?
Child support paid to a former spouse pursuant to a divorce agreement executed in 2019.
Child support paid to a former spouse pursuant to a divorce agreement executed in 2019.
Alimony paid to a former spouse pursuant to a divorce agreement executed in 2019.
Alimony paid to a former spouse pursuant to a divorce agreement executed in 2014.
Alimony paid to a former spouse pursuant to a divorce agreement executed in 2014.
For a divorce finalized on or before Dec. 31, 2018, alimony received is included in gross income. For divorces finalized after this date, alimony is not included in gross income. All other items are regularly excluded from AGI.
Example Question #2 : Individual Income Tax Exemptions, Credits, & Deductions
The self-employment tax is:
Fully deductible in determining net income from self-employment.
Fully deductible as an itemized deduction.
Not deductible.
One-half deductible from gross income in arriving at adjusted gross income.
One-half deductible from gross income in arriving at adjusted gross income.
Self-employment tax is only partially deductible (50%), and is calculated as part of determining AGI.
Example Question #1 : Individual Income Tax Exemptions, Credits, & Deductions
Which of the following is not a deduction to arrive at adjusted gross income?
Trade or business expenses.
Capital losses in excess of capital gains.
Mortgage interest.
Alimony payments pursuant to a divorce settlement finalized on or before 12/31/18.
Mortgage interest.
Mortgage interest is only included as a deduction, or a “below the line” reduction of a tax liability. All of the others are “above the line” reductions of AGI, prior to the standard or itemized deduction.
Example Question #61 : Cpa Regulation (Reg)
The self employment tax is:
Not deductible
Fully deductible in determining net income from self-employment
One half deductible from gross income in arriving at adjusted gross income
Fully deductible from gross income in arriving at adjusted gross income
One half deductible from gross income in arriving at adjusted gross income
One half of the self-employment tax is deductible to arrive at adjusted gross income. These other options are partially or not deductible.
Example Question #61 : Cpa Regulation (Reg)
Of the following, which is not an adjustment to arrive at adjusted gross income?
Self-employed health insurance
Qualified mortgage interest paid
Alimony paid pursuant to a divorce settled on or before December 31, 2018
Self-employed FICA (50%)
Qualified mortgage interest paid
The qualified mortgage interest paid is deductible on Sch A as an itemized deduction.
Example Question #62 : Cpa Regulation (Reg)
Based on the TCJA of 2017, which statement is correct? Included in taxable gross income is:
Child support received as of a divorce in 2019
Alimony payments received as of a divorce in 2019
Child support received as of a divorce in 2015
Alimony payments received as of a divorce in 2015
Alimony payments received as of a divorce in 2015
Child support no matter what year is not included in AGI. Alimony received based on an agreement on or before 12/31/2018 would be included.
Example Question #64 : Cpa Regulation (Reg)
Which of the following credits can result in a refund even if the individual had no income tax liability?
Elderly and permanently and totally disabled credit
Earned income credit
Credit for prior year minimum tax
Child and dependent care credit
Earned income credit
“Refundable” tax credits are allowable in excess of a taxpayer’s tax obligation and may result in a refund. Among the possible answers, only the earned income credit is “refundable.” While the other answers may result in reducing a tax obligation to zero, they may not be taken in excess of this to result in a tax refund in a given year.
Example Question #65 : Cpa Regulation (Reg)
How may taxes paid by an individual to a foreign country be treated?
As an itemized deduction subject to a 2% floor
As a nondeductible expense
As a credit against federal income taxes due
As an adjustment to gross income
As a credit against federal income taxes due
Generally speaking, taxes paid to foreign entities result in a dollar-for-dollar reduction in the US tax obligation (a credit), rather than a reduction of taxable income (a deduction).
Example Question #63 : Cpa Regulation (Reg)
Ron and Leslie have two children, ages 7 and 9. Both children meet the definition of qualifying child. The family has adjusted gross income of $325,000. What is the amount of the child tax credit on the couple’s income tax return?
$1,000
$3,000
$4,000
$2,000
$4,000
The child tax credit is worth up to $2,000 for children classified as dependents who are under age 17 as of the last day of the tax year. The credit phases out starting at $200,000 for single filers, and $400,000 for joint filers.
Example Question #64 : Cpa Regulation (Reg)
Of the following, which credit can result in a refund even if the individual had no income tax liability?
Credit for prior year minimum tax
Elderly and permanently and totally disabled credit
Child and dependent care credit
Earned income credit
Earned income credit
The earned income credit is refundable. Eligible taxpayers can get advance payments from their employers because the credit is assured.
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