10 exam-style questions with answers and explanations, straight from our 1,030-question bank. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
The REG exam has 80 questions and runs 4 hours.
These 10 free REG questions are organized by exam domain, so you can see how each part of the Uniform CPA Examination: Taxation and Regulation (REG) blueprint is tested. Reveal the answer and explanation under each question.
A CPA preparing a client's current-year return learns that the client's previously filed return omitted taxable interest. The client has not authorized any disclosure to the IRS. Under Treasury Circular 230, what must the CPA do first?
Correct answer: C - Promptly advise the client of the omission and its consequences
A taxpayer received a statutory notice of deficiency at a U.S. address. The Tax Court petition deadline printed on the notice is 10 days away. The taxpayer disputes the deficiency and cannot pay it in full. Which action preserves prepayment judicial review?
Correct answer: A - File a petition with the U.S. Tax Court by the stated deadline
During an IRS examination of a client's timely filed original return, a CPA is retained to contest the examining agent's proposed deficiency. The fee is 15% of any reduction in that proposed deficiency and is not unconscionable. Under Circular 230, how is the fee treated?
Correct answer: D - Permitted under the IRS-examination exception
Northstar routinely allowed Lee, its purchasing manager, to order inventory from Metro Supply. Northstar privately revoked Lee's authority but gave Metro no notice. The next day, Lee placed an order of the usual type and amount. Which result is most likely?
Correct answer: B - Northstar is bound because Lee's apparent authority continued as to Metro
A merchant signed a writing promising to keep an offer to sell goods open for six months. The offeree gave no consideration. Four months later, before acceptance, the offeree received a revocation. What is the legal effect?
Correct answer: B - The revocation is effective because firm-offer protection lasted no more than three months
A consumer buys a new refrigerator from an appliance retailer in the ordinary course of business. The retailer's inventory is subject to a perfected security interest created by the retailer. The consumer knows the lender has a lien but does not know the sale violates any agreement. Who has the superior claim to the refrigerator?
Correct answer: D - The consumer, as a buyer in ordinary course
A closely held corporation with no realistic prospect of reorganization files a voluntary Chapter 7 case. After the trustee liquidates the corporation's assets, substantial unsecured debt remains. Which statement correctly describes the corporation's position?
Correct answer: A - The corporation does not receive a Chapter 7 discharge
An individual receives stock by gift when the donor's adjusted basis is $80,000 and the stock's fair market value is $50,000. No gift tax was paid. The donee later sells the stock for $65,000 in an arm's-length sale. What tax result follows?
Correct answer: C - No gain or loss because the sale price lies between the two bases
A return-review diagnostic shows that 42% of the aggregate basis of qualifying personal property placed in service during the year was placed in service from October through December. The computation excludes real property and property expensed under section 179, and no other exclusion from the test applies. Tax software used the half-year convention for every asset. What should replace that treatment?
Correct answer: D - Apply the mid-quarter convention to all affected personal property placed in service that year
A settlement allocates $90,000 to compensatory damages for physical injuries, $20,000 to punitive damages, and $5,000 to interest on the award. There is no wrongful-death-law exception. Which components are taxable?
Correct answer: C - The punitive damages and the interest
The REG exam also covers these domains. Drill them in the full free practice test:
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