Preparing for the CPA REG exam requires more than just memorizing multiple-choice questions—it demands the ability to solve complex, real-world problems through Task-Based Simulations (TBS). In this CPA REG TBS Part 3 (Scenarios 11–15) set, we cover essential topics like partnership basis adjustments, dividends received deduction (DRD), alternative minimum tax (AMT), estate tax valuation, and like-kind exchanges. Each scenario is designed to mirror the structure of the actual exam, giving you practical experience and confidence. With detailed step-by-step explanations, these simulations will help you strengthen your problem-solving skills and maximize your CPA REG exam performance.
📘 CPA REG Task-Based Simulations (TBS) – Part 3 (Scenarios 11–15)
Scenario 11: Partnership Basis Adjustment
Question:
John contributes property with an adjusted basis of $20,000 and FMV of $35,000 to a partnership in exchange for a 50% interest. The partnership assumes John’s $10,000 mortgage on the property. What is John’s basis in the partnership?
Answer & Explanation:
- Adjusted basis of property contributed = $20,000
- Less: debt assumed by partnership (50% shared with partner) = $5,000 relief
- John’s new basis = $20,000 – $5,000 = $15,000
Explanation:
When debt is transferred to a partnership, the partner gets relief, but because he shares liability with other partners, he only reduces basis by half the assumed liability.
Scenario 12: Corporate Dividends Received Deduction (DRD)
Question:
A corporation receives $100,000 in dividends from a 25%-owned domestic corporation. What amount of dividends received deduction (DRD) can the corporation claim?
Answer & Explanation:
- DRD for 25% ownership = 65%
- DRD = $100,000 × 65% = $65,000
Explanation:
The IRS allows corporations to deduct a portion of dividends received to mitigate double taxation. At 25% ownership, the DRD rate is 65%.
Scenario 13: Individual Alternative Minimum Tax (AMT)
Question:
Sarah’s taxable income is $120,000. She has $30,000 in preference items. Calculate her AMT if the exemption is $81,300 and the AMT tax rate is 26%.
Answer & Explanation:
- AMTI = $120,000 + $30,000 = $150,000
- Less exemption = $150,000 – $81,300 = $68,700
- AMT = $68,700 × 26% = $17,862
Explanation:
AMT ensures higher-income individuals pay a minimum level of tax by adding back preference items and applying separate rates.
Scenario 14: Estate Tax Valuation
Question:
An estate includes the following:
- FMV of assets = $4,000,000
- Debts and expenses = $500,000
- Unified credit = $4,625,800
What is the estate tax due?
Answer & Explanation:
- Taxable estate = $4,000,000 – $500,000 = $3,500,000
- Since unified credit ($4,625,800) > taxable estate, No estate tax due
Explanation:
The unified credit effectively shelters estates up to the federal exclusion amount, meaning smaller estates owe no tax.
Scenario 15: Like-Kind Exchange
Question:
Company A exchanges real estate with an adjusted basis of $200,000 for another property worth $230,000. Company A also receives $20,000 cash. What is the recognized gain?
Answer & Explanation:
- Realized gain = FMV received ($230,000 + $20,000 cash) – basis ($200,000) = $50,000
- Recognized gain limited to cash received = $20,000
Explanation:
In like-kind exchanges, realized gains are deferred except to the extent of “boot” (cash or non-like-kind property) received.
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This concludes CPA REG TBS Part 3 (Scenarios 11–15). By working through these practice problems, you have reinforced your knowledge in taxation, partnerships, DRD, AMT, estate taxation, and like-kind exchanges—all vital areas tested on the CPA exam. Continue practicing with our other REG TBS sets to build confidence and accuracy. Consistent practice is the key to success in mastering both MCQs and TBS. Keep pushing forward, and you’ll be fully prepared to excel in the CPA REG section.
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