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Exam Code: REG
Exam Name: CPA Regulation
Updated: Aug 18, 2026
Q & A: 70 Questions and Answers
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| Section | Weight | Objectives |
|---|---|---|
| Federal Taxation of Individuals | 15–25% | - Individual income taxation
|
| Federal Taxation of Entities | 18–28% | - Business entity taxation
|
| Business Law | 10–20% | - Business structure law
|
| Federal Taxation of Property Transactions | 12–22% | - Property transactions
|
| Ethics, Professional Responsibilities, and Federal Tax Procedures | 15–25% | - Federal tax procedures
|
1. Darr, an employee of Sorce C corporation, is not a shareholder. Which of the following would be included
in a taxpayer's gross income?
A) A $10,000 gift from the taxpayer's grandparents.
B) The dividend income on shares of stock that the taxpayer received for services rendered.
C) The fair market value of land that the taxpayer inherited from an uncle.
D) Employer-provided medical insurance coverage under a health plan.
2. John and Mary were divorced in 1991. The divorce decree provides that John pay alimony of $10,000 per
year, to be reduced by 20% on their child's 18th birthday. During 1992, John paid $7,000 directly to Mary
and $3,000 to Spring College for Mary's tuition. What amount of these payments should be reported as
income in Mary's 1992 income tax return?
A) $5,600
B) $8,600
C) $10,000
D) $8,000
3. On December 1, 1992, Michaels, a self-employed cash basis taxpayer, borrowed $100,000 to use in her
business. The loan was to be repaid on November 30, 1993. Michaels paid the entire interest of $12,000
on December 1, 1992. What amount of interest was deductible on Michaels' 1993 income tax return?
A) $12,000
B) $11,000
C) $1,000
D) $0
4. Rich is a cash basis self-employed air-conditioning repairman with 1993 gross business receipts of
$ 20,000. Rich's cash disbursements were as follows:
What amount should Rich report as net self-employment income?
A) $13,900
B) $14,900
C) $14,100
D) $15,100
5. In a tax year where the taxpayer pays qualified education expenses, interest income on the redemption of
qualified U.S. Series EE Bonds may be excluded from gross income. The exclusion is subject to a
modified gross income limitation and a limit of aggregate bond proceeds in excess of qualified higher
education expenses. Which of the following is (are) true?
I. The exclusion applies for education expenses incurred by the taxpayer, the taxpayer's spouse, or any
person whom the taxpayer may claim as a dependent for the year.
II. "Otherwise qualified higher education expenses" must be reduced by qualified scholarships not
includible in gross income.
A) Both I and II.
B) II only.
C) Neither I nor II.
D) I only.
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: D | Question # 3 Answer: B | Question # 4 Answer: D | Question # 5 Answer: A |
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