CPA Exam: Regulation (Tax & Law)

To qualify for the 'Qualifying Surviving Spouse' (formerly Qualifying Widow/er) filing status, for how many years after the spouse's death can the taxpayer use this status?

Two years following the year of the spouse's death, provided the taxpayer maintains a household for a dependent child.

Are life insurance proceeds received by a beneficiary due to the death of the insured generally included in gross income?

No, life insurance proceeds paid by reason of death are generally excluded from gross income.

What is the maximum annual deduction for student loan interest as an adjustment to reach Adjusted Gross Income (AGI)?

The maximum deduction is $2,500 per year, subject to phase-out based on AGI.

For itemized deductions, what is the threshold for deducting unreimbursed medical expenses?

Medical expenses are deductible only to the extent they exceed 7.5% of the taxpayer's Adjusted Gross Income (AGI).

What is the primary difference between a refundable tax credit and a non-refundable tax credit?

A refundable credit can reduce tax liability below zero and result in a refund, whereas a non-refundable credit can only reduce tax liability to zero.

Which of the following is considered a tax preference item for the Alternative Minimum Tax (AMT) calculation?

Private activity bond interest (tax-exempt interest from certain private activity bonds).

Under Section 351, what percentage of stock must the transferors own immediately after the exchange for the transaction to be tax-free?

The transferors must own at least 80% of the total combined voting power and 80% of all other classes of stock.

What is the maximum number of shareholders an S-corporation is permitted to have?

An S-corporation is limited to 100 shareholders (family members can be treated as one shareholder).

How does a partner's share of partnership recourse debt affect their tax basis in the partnership?

Recourse debt increases the partner's basis because the partner bears the economic risk of loss.

On which IRS form or schedule does a sole proprietor report their business income and expenses?

Schedule C (Profit or Loss from Business).