CPA tax questions

Article Abstract:

Official tax questions from the uniform CPA examination are presented, along with unofficial answers. The questions cover passive activity losses (PAL), capital assets, and the computation of basis. The rules covering PAL dictate that income and losses are divided into three categories: active loss or income, investment or portfolio income, and passive activity loss or income. Capital assets are defined by the Internal Revenue Code as assets other than those assets it lists. Assets excluded by the definition include inventory, copyrights, and real property used in trade or a business. The basis of property typically is its cost or purchase price. The cost is the cash paid for the property, along with the fair market value of other property or services connected with the transaction.

Tests, problems and exercises, Accounting and auditing, Capital assets, Basis (Taxation), Passive activity (Taxation)

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CPA tax questions

Article Abstract:

Two questions from the CPA examinations and unofficial answers are presented. Alimony payments generally are included in the recipient-spouses' gross income and are deductible from the payer-spouses' gross income. However, no gain or loss is recognized between property transfers between two spouses, and the recipient-spouse will not have to recognize mortgage payments made by the payer-spouse and the payer-spouse cannot deduct the mortgage payments as alimony. The earned income credit can result in refunds for individuals not having taxes withheld from wages. The earned income tax credit is a refundable credit, and if the credit is greater than the liability of the taxpayer, the taxpayer is entitled to a refund of the excess.

Methods, Earned income tax credit, Alimony

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CPA tax questions

Article Abstract:

Official questions from the uniform examination for CPAs and unofficial answers are presented. The questions cover the areas of partnership terminations, capital losses, and advance rental payments. Partnerships terminate when operations or the partnership's business are discontinued or when half or more of the total interest in capital and profits are exchanged or sold within a year. Corporations must compute both short- and long-term capital losses just as individuals do, and if a different figure is arrived at, they must be further combined to derive an excess capital loss or gain. Taxpayers must include advance rental payments in their gross income regardless of their accounting method.

Testing, Accountants, Partnership, Partnerships, Rents (Property), Business losses

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• Abstracts: CPA tax questions. part 2

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