Cpa 2014 Reg Aicpa Questions

2014 AICPA DISCLOSED QUESTIONS -- REGULATION
The following pages contain all of the new multiple-choice questions released by the AICPA in
2014. Our editors have added correct and incorrect answer explanations and renumbered and
organized the questions to conform to our study units.
These questions are presented in this PDF in our Review book format, with the answers and answer
explanations to the right of each question. Gleim recommends that candidates answer these questions
in our CPA Test Prep instead of via this PDF in order to emulate a more realistic test-taking experience.
Material from Uniform CPA Examination, Selected Questions and Unofficial Answers,
Copyright 1974-2014 by the American Institute of Certified Public Accountants, Inc., is reprinted
and/or adapted with permission. Visit the AICPAs website at www.aicpa.org for more information.
1
Copyright 2014 Gleim Publications, Inc. and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com
Study Unit 1, Subunit 2
Shore, a paid tax return preparer, was given three
partnership Schedule K-1 forms by client Fuller. Fuller
is a limited partner in each of the partnerships. The
K-1s disclosed small pass-through losses allocated to
Fuller. Fuller had passive income in excess of these
losses from other partnerships. According to the
AICPA Statements on Standards for Tax Services,
assuming that no at-risk limitations apply, what is
Shores professional responsibility regarding the
reporting of these partnership losses on Fullers
federal income tax return?
A. To verify the clients basis by examining
clients records from the initial investment to
the present.
B. To accept the information without further
inquiry unless Shore has reason to believe that
the information is incorrect.
C. To verify the initial investment in each
partnership entity unless Shore has reason to
believe that the information is incorrect.
D. To request the complete partnership returns of
the partnership entities unless Shore has
reason to believe that the information is
incorrect.
Answer (B) is correct.
REQUIRED: The tax preparers professional responsibility
under the SSTS for the reporting of partnership losses.
DISCUSSION: In good faith, a member may rely, without
verification, on information provided by the taxpayer or third
parties. Reasonable inquiries should be made if information
appears to be incorrect, incomplete, or inconsistent on its face or
on the basis of other facts known, and prior returns should be
consulted whenever feasible (TS 300).
Answer (A) is incorrect. Verification is unnecessary, but the
member should make reasonable inquiries if the information
appears to be incorrect, incomplete, or inconsistent. Answer (C)
is incorrect. The member should make reasonable inquiries if the
information appears to be incorrect, incomplete, or inconsistent.
Answer (D) is incorrect. Prior returns should be consulted
whenever feasible.
Which of the following bodies has the authority to
suspend or revoke a CPAs license for acts
discreditable to the profession?
A. The state society of certified public
accountants.
B. The state board of accountancy.
C. The Public Company Accounting Oversight
Board.
D. The American Institute of Certified Public
Accountants.
REQUIRED: The body with the authority to suspend or
revoke a CPAs license for acts discreditable.
DISCUSSION: State boards can suspend or revoke
licensure through administrative processes, such as board
hearings.
Answer (A) is incorrect. State CPA societies are voluntary,
private entities that can admonish, suspend, or expel their own
members, but they cannot suspend or revoke a CPA license.
Answer (C) is incorrect. The PCAOB has no injunctive power, but
it may initiate administrative proceedings. It may not suspend or
revoke a CPA license. Answer (D) is incorrect. The AICPA
Professional Ethics Division investigates ethics violations.
However, it generally imposes sanctions only in less serious
cases. The Joint Trial Board handles more serious infractions.
Expulsion from the AICPA does not bar the individual from
practice of public accounting. Thus, violation of a rule established
by a board of accountancy is more serious than expulsion from
the AICPA.
2
Under Regulation D, Rule 505, of the Securities
Act of 1933, which of the following statements is
correct regarding a $3,000,000 stock offering sold
only to accredited investors?
A. The issuer may sell the stock to only 35
accredited investors.
B. The issuer may make the offering through a
general advertising.
C. The issuer must supply all accredited investors
with financial information.
D. The issuer must notify the SEC within 15 days
after the first sale of the offering.
Answer (D) is correct.
REQUIRED: The true statement about a stock offering sold
only to accredited investors under Rule 505.
DISCUSSION: Various procedural rules generally must be
followed to qualify for an exemption under Regulation D, some of
which do not apply to certain exemptions. However, a
requirement to notify the SEC by filing Form D within 15 days of
the first offering applies to all 3 exemptions (Rule 504, Rule 505,
and Rule 506).
Answer (A) is incorrect. Under Rule 505, the issue may be
purchased by an unlimited number of accredited investors.
Answer (B) is incorrect. Under Rule 505, no general solicitation
or advertising is permitted. Answer (C) is incorrect. The issuer
must supply all nonaccredited (not accredited) investors with
material information about the issuer, its business, and the
securities being offered prior to the sale.
Pick, CPA, was engaged by Edge Corp. to audit
Edges financial statements. Pick, in performing the
audit and rendering an unmodified opinion,
intentionally ignored several material omissions in the
financial statements. Edge included Picks auditors
report in its annual filing with the SEC and in its
annual stockholders report. Drane purchased shares
of Edge stock based on Dranes review of the past
performance of the stock and current-year financial
statements. When the omissions in the financial
statements became known, the value of Edge stock
declined and Drane suffered a loss. Under the
provisions of Rule 10b-5 of the Securities Exchange
Act of 1934, what will be the result of a suit by Drane
against Pick?
A. Drane will win because Pick acted with intent.
B. Drane will win because Pick was negligent.
C. Drane will lose because only Edge is liable.
D. Drane will lose because the stock purchased
was not part of a new issue.
Answer (A) is correct.
REQUIRED: The result of a suit under Rule 10b-5 by an
investor against an auditor who intentionally ignored material
omissions in the financial statements of the investee.
DISCUSSION: Rule 10b-5 states that it is illegal for any
person, directly or indirectly, to use interstate commerce or a
national securities exchange to defraud anyone in connection
with the purchase or sale of any security, whether or not required
to be registered. It is most often applied to insider trading and
corporate misstatements. A person may violate Rule 10b-5
without actively participating in the purchase or sale of the
security. All that is required is that the partys activity be
connected with the purchase or sale. Liability is only to actual
purchasers or sellers. They need not be in privity with the
defendant. The SEC or a private party may sue. A plaintiff must
prove each of the following: (1) an oral or written misstatement or
omission of a material fact or other fraud; (2) its connection with
any purchase or sale of securities; (3) the defendants intent to
deceive, manipulate, or defraud (scienter); (4) reliance on the
misstatement (but a private plaintiff ordinarily need not prove
reliance in omission cases); and (5) loss caused by the reliance.
Accordingly, the auditor is liable for fraud because (s)he
intentionally ignored material omissions in the financial
statements that constituted written misstatements of material
facts related to a purchase of securities that resulted in loss.
Answer (B) is incorrect. The defendant-auditor intentionally
ignored material omissions in the financial statements. Thus, the
auditors actions are fraudulent, not negligent. Answer (C) is
incorrect. The defendant-auditor is liable for intentional
concealment of material misstatement of the financial
statements. The auditor is therefore liable for fraud. Answer (D) is
incorrect. Rule 10b-5 applies to the purchase or sale of any
security, whether or not required to be registered.
3
Under the common law, which of the following
defenses, if used by a CPA, would best avoid liability
in an action for negligence brought by a client?
A. The client was contributorily negligent.
B. The client was comparatively negligent.
C. The accuracy of the CPAs report was not
guaranteed.
D. The CPAs negligence was not the proximate
cause of the clients losses.
REQUIRED: The best defense by a CPA against a clients
negligence claim.
DISCUSSION: A plaintiff-client must prove all of the following
elements of negligence: (1) the accountant owed the client a
duty, (2) the accountant breached this duty, (3) the accountants
breach actually and proximately caused the clients injury, and
(4) the client suffered damages. Proximate cause is a chain of
causation that is not interrupted by a new, independent cause.
Moreover, the injury would not have occurred without the
proximate cause. However, actual causation is insufficient. The
injury also must have been reasonably foreseeable. Thus, the
concept of proximate cause limits liability to foreseeable
damages. Accordingly, lack of proof of proximate cause
precludes any recovery of damages.
Answer (A) is incorrect. Contributory negligence is not
recognized as a defense in a substantial majority of states. Most
states have adopted a comparative negligence approach that
allows a contributorily negligent plaintiff to recover a percentage
of the damages. Answer (B) is incorrect. The client is liable for
his or her percentage of the damages in a state that applies the
comparative negligence rule. Answer (C) is incorrect. A CPAs
report offers reasonable assurance, not a guarantee.
Which of the following pairs of elements must a
client prove to hold an accountant liable for common
law negligence?
A. Freedom from contributory negligence and
privity.
B. Breach of the accountants duty of care and
loss.
C. Willful misrepresentation and breach of the
accountants duty of care.
D. Scienter and a violation of GAAP.
REQUIRED: The elements to be proved to hold an
accountant liable for negligence.
DISCUSSION: To hold an accountant liable for negligence,
the plaintiff-client must prove all of the following elements of
negligence: (1) the accountant owed the client a duty of
reasonable care and diligence, (2) the accountant breached this
duty, (3) the accountants breach actually and proximately
caused the clients injury, and (4) the client suffered damages
(loss).
Answer (A) is incorrect. Comparative, not contributory,
negligence is recognized in most states. It is a defense to liability,
not an element of the tort of negligence. Moreover, in most
states, privity of contract no longer is required for a plaintiff to
hold an accountant liable for negligence. The majority rule is that
an accountant is liable to foreseen users and users within a class
of foreseen users. Answer (C) is incorrect. Willful
misrepresentation is an element of fraud, not negligence.
Answer (D) is incorrect. Scienter is actual or implied knowledge
of fraud. It is an element of fraud, not common law negligence.
Compliance with GAAP is a defense to negligence.
American Corp. retained Baker, CPA, to conduct
an audit of its financial statements to obtain a bank
line of credit. American signed an engagement letter
drafted by Baker that included a disclaimer provision.
As a result of Bakers failure to detect a material
misstatement in Americans financial statements, the
audit report contained an unmodified opinion. Based
on Americans audited financial statements, National
extended credit to American. American filed a petition
in bankruptcy shortly thereafter. National sued Baker
for damages based on common law fraud. What
would be Bakers best defense?
A. Baker acted with due diligence in conducting
the audit.
B. Baker included a disclaimer provision in the
engagement letter with American.
C. National was not in privity with Baker.
D. Baker lacked the intent to deceive.
REQUIRED: The auditors best defense to a claim of fraud
made by a third-party user of the audited financial statements
who relied on them to extend credit to the client.
DISCUSSION: A finding of fraud requires proof that the
misrepresentation was made with knowledge of, or reckless
disregard for, its falsity. Thus, proving that the accountant lacked
the intent to deceive is the best defense to a claim of fraud.
Answer (A) is incorrect. Because failure to exercise due care
is not an element of fraud, proof that the accountant acted with
due diligence is not the best defense. Answer (B) is incorrect.
Liability for fraud cannot be disclaimed. Answer (C) is incorrect.
Liability for fraud is to all reasonably foreseeable users.
A foreseeable user is any person the accountant should have
foreseen would be injured by justifiable reliance on the
misrepresentation. Privity is not required. National is a
foreseeable user because Baker should have reasonably
foreseen that Americans financial statements would be used to
obtain credit from a bank.
4
Baker, an unmarried individual, sold a personal
residence, which has an adjusted basis of $70,000,
for $165,000. Baker owned and lived in the residence
for 7 years. Selling expenses were $10,000. Four
weeks prior to the sale, Baker paid a handyman
$1,000 to paint and fix-up the residence. What is the
amount of Bakers recognized gain?
A. $0
B. $84,000
C. $85,000
D. $95,000
REQUIRED: The amount of gain recognized on sale of a
principal residence.
DISCUSSION: While the correct amount of realized gain is
$85,000, IRC Sec. 121 excludes the gain on the sale of a
principal residence, up to $250,000 per taxpayer, subject to
certain rules and limitations. As none of the facts would lead us
to reduce this exclusion, no gain is recognized on the disposition
of the home.
Answer (B) is incorrect. The costs incurred to paint and
repair the home are not capital improvements and would not
increase the basis of the home. Answer (C) is incorrect. While
$85,000 is the correct amount of realized gain ($165,000 amount
realized, less $10,000 selling expenses, less $70,000 adjusted
basis), the amount of recognized gain differs due to the exclusion
amount on the sale of a principal residence. Answer (D) is
incorrect. Selling expenses are treated as a reduction in the
amount realized to the seller of property and would decrease the
gain realized on the disposition of the home.
Nan, a cash basis taxpayer, borrowed money from
a bank and signed a 10-year interest-bearing note on
business property on January 1 of the current year.
The cash flow from Nans business enabled Nan to
prepay the first three years of interest attributable to
the note on December 31 of the current year. How
should Nan treat the prepayment of interest for tax
purposes?
A. Deduct the entire amount as a current
expense.
B. Deduct the current years interest and amortize
the balance over the next two years.
C. Capitalize the interest and amortize the
balance over the 10-year loan period.
D. Capitalize the interest as part of the basis of
the business property.
REQUIRED: Nans appropriate treatment for the prepayment
of interest on business property.
DISCUSSION: Despite being a cash-basis taxpayer, the
interest expense must be apportioned to the periods to which it is
attributable. As the first three years portion is paid in Year 1, the
Year 1 portion is currently deductible. The remainder must be
deducted in the year to which it is attributable (Year 2 in Year 2,
and Year 3 in Year 3), regardless of when paid.
Answer (A) is incorrect. The interest expense must be
allocated to the period which it benefited and may not be entirely
deducted presently. Answer (C) is incorrect. As the prepayment
of interest does not benefit the periods after the end of Year 3, it
is not reasonable to allocate the interest to periods beyond
Year 3. Answer (D) is incorrect. The appropriate treatment for the
prepayment of interest on business property is to capitalize and
amortize the interest in the period to which it applies.
Which of the following statements is correct
regarding the deductibility of donations made to
qualifying charities by a cash-basis individual
taxpayer?
A. A contemporaneous written acknowledgment
is required for donations of $100.
B. A charitable contribution deduction is not
allowed for the value of services rendered to a
charity.
C. A qualified appraisal for real property
donations is not required to be attached to the
tax return unless the property value exceeds
$10,000.
D. The charitable contribution deduction for
long-term appreciated stock is limited to 50%
of adjusted gross income.
REQUIRED: The correct statement regarding charitable
contributions.
DISCUSSION: The costs of services rendered to a charity
(such as legal advice, accounting assistance, or volunteering
time) as a donation are not deductible as a charitable
contribution. However, any expenses incurred in the rendering of
those services (such as travel costs, mileage, supplies, etc.) are
deductible.
Answer (A) is incorrect. Donations of $250 or more continue
to require substantiation by a written receipt from the
organization (the bank record alone is not sufficient). Answer (C)
is incorrect. A qualified appraisal for real property donations is
required to be attached to the tax return for property valued over
$5,000. Answer (D) is incorrect. Donations of appreciated capital
gain property are limited to 30% of AGI, assuming they are made
to 50% limit organizations. Otherwise, the donation may be
limited to 20%.
5
Pat, a single taxpayer, has adjusted gross
income of $40,000 in the current year. During the
year, a hurricane causes $4,100 damage to Pats
personal use car on which Pat has no insurance. Pat
purchased the car for $20,000. Immediately before
the hurricane, the cars fair market value was $11,000
and immediately after the hurricane its fair market
value was $6,900. What amount should Pat deduct as
a casualty loss for the current year after all threshold
limitations are applied?
A. $4,100
B. $4,000
C. $100
D. $0
REQUIRED: The current-year deduction amount for the
casualty loss.
DISCUSSION: Only casualty losses in excess of 10% of AGI
may be deducted after applying the $100 floor. Generally,
casualty losses are deductible to the extent of the lesser of the
decline in FMV or adjusted basis (less insurance
reimbursements) due to the event. In this case, both the amount
of the damage and the decline in FMV are $4,100. After applying
the $100 floor, the remaining casualty loss is $4,000. Subject to
the 10% AGI limitation, the loss is reduced by $4,000 ($40,000
10%) to $0.
Answer (A) is incorrect. The amount of $4,100 is the decline
in fair market value as well as the amount of the casualty loss
before application of the $100 floor. Answer (B) is incorrect. The
amount of $4,000 is the decline in fair market value as well as the
amount of the casualty loss after the application of the $100 floor,
but before the application of the 10% of AGI limitation.
Answer (C) is incorrect. The amount of $100 is the casualty loss
floor that must be subtracted from each casualty loss before
applying any other limitations.
Which of the following is not a deduction to arrive
at adjusted gross income?
A. Alimony payments.
B. Trade or business expenses.
C. Capital losses in excess of capital gains.
D. Unreimbursed employee business expenses.
REQUIRED: The below-the-line (from AGI) deduction.
DISCUSSION: Unreimbursed employee expenses are a
deduction from AGI, as an itemized deduction (below-the-line).
Answer (A) is incorrect. Alimony is an above-the-line
deduction (for AGI). Answer (B) is incorrect. Trade or business
expenses are deducted on Schedule C, which is listed
above-the-line (a deduction for AGI). Answer (C) is incorrect.
Capital losses in excess of capital gains are deducted on
Schedule D, which is listed above-the-line (a deduction for AGI).
When computing alternative minimum tax, the
individual taxpayer may take a deduction for which of
the following items?
A. State income taxes.
B. Personal and dependency exemptions.
C. Miscellaneous itemized deductions in excess
of 2% of adjusted gross income floor.
D. Casualty losses.
REQUIRED: The allowable deduction for an individual
against alternative minimum taxable income.
DISCUSSION: Casualty losses are allowed as deductions
against alternative minimum taxable income (AMTI), subject to
limitations.
Answer (A) is incorrect. State income taxes are not permitted
as a deduction against alternative minimum taxable income
(AMTI). Answer (B) is incorrect. Personal and dependency
exemptions must be added back in the computation of alternative
minimum taxable income (AMTI). Answer (C) is incorrect.
Miscellaneous itemized deductions subject to the 2% floor are
not permitted as deductions against alternative minimum taxable
income (AMTI), subject to limitations.
6
Dietz is a passive investor in three activities
which have been profitable in previous years. The
profit and losses for the current year are as follows:
Gain (Loss)
Activity X $(30,000)
Activity Y (50,000)
Activity Z 20,000
Total $(60,000)
What amount of suspended loss should Dietz allocate
to Activity X?
A. $18,000
B. $20,000
C. $22,500
D. $30,000
Answer (C) is correct.
REQUIRED: The allocable amount of suspended passive
losses to Activity X.
DISCUSSION: The passive activity income is allocated pro
rata between the two activities with passive losses. As Activity X
accounts for 37.5% ($30,000 $80,000 total loss) of the passive
losses, it is allocated $7,500 ($20,000 37.5%) of the passive
activity income. This results in a net $22,500 ($30,000 $7,500)
passive activity loss allocable to Activity X.
Answer (A) is incorrect. The passive activity income must be
used to offset some of the passive activity loss from Activity X.
Answer (B) is incorrect. The amount of $20,000 is the passive
activity income, not the amount of the loss allocable to Activity X.
Answer (D) is incorrect. A portion of the passive activity income
must be used to offset the passive losses from Activity X.
The Jacksons, who file a joint return, actively
participate in a solely-owned rental real estate activity
that produces a $30,000 loss during the current year.
Their adjusted gross income was $120,000 before
considering the rental activity. How much of the rental
loss, if any, are the Jacksons entitled to deduct?
A. $0
B. $15,000
C. $25,000
D. $30,000
REQUIRED: The amount of deductible rental loss on rental
real estate.
DISCUSSION: Generally, an active participant in rental real
estate may deduct up to $25,000 per year in rental real estate
losses. For taxpayers whose MAGI exceeds $100,000, the
amount of the active real estate loss deduction is reduced for
50% of the excess of MAGI over $100,000. For the Jacksons,
this means the currently deductible portion of real estate losses is
$15,000 {$25,000 [($120,000 MAGI $100,000 base amount)
50% limitation]}.
Answer (A) is incorrect. A portion of the rental real estate
loss is deductible. Answer (C) is incorrect. This is the correct
general amount for active real estate loss deduction. However,
the Jacksons are subject to high-income limitations. Answer (D)
is incorrect. The full amount of the loss is not deductible.
Which of the following types of costs are required
to be capitalized under the Uniform Capitalization
Rules of Code Sec. 263A?
A. Marketing.
B. Distribution.
C. Warehousing.
D. Office maintenance.
REQUIRED: Expense required to be capitalized for UNICAP.
DISCUSSION: UNICAP rules require the capitalization of all
expenses necessary to bring the asset to its intended use.
Storage of an asset prior to its intended use would qualify as a
cost incurred to bring it to its full use and should be capitalized
under UNICAP.
Answer (A) is incorrect. UNICAP rules require the
capitalization of all expenses necessary to bring the asset to its
intended use. Marketing expenses would be an expense incurred
in the sale of goods or services, not in the implementation of the
asset. Answer (B) is incorrect. UNICAP rules require the
intended use. Distribution costs would be attributable to the sale
of goods and services, not to the acquisition and implementation
of an asset. Answer (D) is incorrect. UNICAP rules require the
intended use. Office maintenance is an indirect expense
allocable to all of the operations of the business equally, not a
particular asset.
7
An individual reports the following capital
transactions in the current year:
Short-term capital gain $ 1,000
Short-term capital loss 11,000
Long-term capital gain 10,000
Long-term capital loss 6,000
What amount is deducted in arriving at adjusted gross
income?
A. $10,000
B. $6,000
C. $3,000
D. $0
REQUIRED: The amount of net capital loss from multiple
transactions.
DISCUSSION: The net short-term capital loss for the year is
$6,000. This is partially deductible in the current year, as
individuals are permitted to use up to $3,000 of capital losses to
offset ordinary income each year.
Answer (A) is incorrect. The short-term losses for the year
must first be used to offset long-term capital gain. Answer (B) is
incorrect. This is the correct amount of net short-term capital
loss. However, the full amount is not deductible against ordinary
income during the year. Answer (D) is incorrect. While
corporations are not permitted to offset ordinary income with
capital losses, individuals are permitted to deduct a portion of
their short-term capital loss carryforward against ordinary income
each year.
On March 1 of the previous year, a parent sold
stock with a cost of $8,000 to their child for $6,000, its
fair market value. On September 30 of the current
year, the child sold the same stock for $7,000 to
Hancock, who is unrelated to the parent and child.
What is the proper treatment for these transactions?
A. Parent has a $2,000 recognized loss and child
has $1,000 recognized gain.
B. Parent has $2,000 recognized loss and child
has $0 recognized gain.
C. Parent has $0 recognized loss and child has
$1,000 recognized gain.
D. Parent has $0 recognized loss and child has
$0 recognized gain.
REQUIRED: The proper treatment for related party stock
sales.
DISCUSSION: With a related party stock sale, the original
related seller is not permitted to recognize any realized loss on
the disposition. However, if the recipient of that stock
subsequently disposes of it at a gain, they are permitted to
reduce any gain realized by the amount of the disallowed loss. In
this case, $2,000 ($6,000 amount realized, less $8,000 adjusted
basis) of loss is realized to the parent on the initial disposition.
The child takes a $6,000 fair market value basis. Upon
subsequent disposition, the child realizes a $1,000 gain on the
sale of the shares ($7,000 amount realized, less $6,000 adjusted
basis). However, this is reduced to $0 by the disallowed loss to
the parent. The remaining $1,000 loss ($2,000 disallowed loss,
less $1,000 used to offset the childs gain) is permanently lost.
Answer (A) is incorrect. The recognition of losses on related
party stock sales is not permitted, and the childs gain should not
be fully recognized. Answer (B) is incorrect. The recognition of
losses on related party stock sales is not permitted. Answer (C) is
incorrect. The parents disallowed loss is allowed to offset the
childs subsequently realized gain.
Prime Corporations building was destroyed by a
tornado. The fair market value of the building at the
time of the tornado was $400,000, and its adjusted
basis was $350,000. The insurance proceeds totaled
$500,000 as follows:
$400,000 for the building.
$100,000 for lost profits during rebuilding.
Prime does not defer any gain under the involuntary
conversion provisions of Code Sec. 1033. What
amount of the insurance proceeds is taxable to
Prime?
A. $0
B. $50,000
C. $100,000
D. $150,000
REQUIRED: The amount of insurance proceeds taxable due
to an involuntary conversion.
DISCUSSION: The lost profits during rebuilding would be
taxable whether received from customers or insurance proceeds,
as they represent business income (or a replacement thereof).
As Prime does not elect involuntary conversion treatment, the
conversion of the building to cash is treated as a sale of the
property. The amount realized on the disposition (the insurance
proceeds) is $400,000, less the $350,000 adjusted basis on the
property. Accordingly, the taxable income from insurance
proceeds is equal to $150,000 ($100,000 lost profits + $50,000
gain on building).
Answer (A) is incorrect. A portion of the insurance proceeds
is taxable to Prime. Answer (B) is incorrect. This is the correct
amount of insurance proceeds recognized on the building as
taxable income. However, the lost profits during rebuilding must
also be considered. Answer (C) is incorrect. The lost profits
during rebuilding would be taxable whether received from
customers or insurance proceeds. However, a portion of the
buildings proceeds is also taxable.
8
A sole proprietor of a farm implement store sold a
truck for $15,000 that had been used to make service
calls. Three years ago, the truck cost $30,000, and
$21,360 depreciation was taken. What is the
appropriate classification of the $6,360 gain for tax
purposes?
A. Ordinary gain.
B. Section 1231 (Property Used in the Trade or
Business and Involuntary Conversions) gain.
C. Long-term capital gain.
D. Short-term capital gain.
REQUIRED: The appropriate characterization of an amount
received on disposition of business property.
DISCUSSION: As the property is depreciable, personal,
trade or business property, it is subject to the Section 1245
recapture rules. These rules provide that any gain realized, to the
extent of the lesser of gain realized or depreciation taken, is
characterized as ordinary income. In this case, depreciation
exceeds the realized gain, so the entire portion should be
characterized as ordinary income.
Answer (B) is incorrect. While it is correct that the property is
Section 1231 property (if not subject to other characterization
rules), the recapture provisions must be applied to determine if
any take priority. Answer (C) is incorrect. Capital assets explicitly
exclude trade or business property. Answer (D) is incorrect. The
definition of a capital asset expressly excludes trade or business
property.
Which of the following corporations would be
taxed as a personal service corporation?
A. A real estate brokerage.
B. A catering service.
C. An architecture and engineering firm.
D. A groundskeeping firm.
REQUIRED: The activity that would qualify a corporation as
a personal service corporation.
DISCUSSION: Personal service corporations are
corporations that derive substantially all (roughly 95%) of their
gross receipts from personal service activities (health, law,
engineering, accounting, actuarial science, consulting, or
performing arts). Accordingly, an architecture and engineering
firm would be classified as a personal service corporation.
Answer (A) is incorrect. A real estate brokerage is not
considered a personal service activity when determining personal
service corporation status. Answer (B) is incorrect. A catering
service is not considered a personal service activity for the PSC
rules. Answer (D) is incorrect. Groundskeeping is not one of the
activities that would subject a corporation to personal service
corporation rules.
What is the maximum amount of capital losses in
excess of capital gains that a C corporation may
deduct in a year?
A. $0
B. $3,000
C. $5,000
D. $10,000
REQUIRED: The maximum recognizable amount of
C corporation capital losses.
DISCUSSION: Unlike individuals, a corporation is not
permitted to offset ordinary income with net short-term capital
losses. Instead, they are suspended and carried forward.
Answer (B) is incorrect. Unlike individuals, a deduction for
net capital losses is not allowed to offset ordinary income.
Answer (C) is incorrect. A corporation may not deduct net capital
losses against ordinary income. Answer (D) is incorrect. A
corporation is not permitted a deduction for capital losses in
excess of capital gains against ordinary income.
9
A corporate taxpayers capital gains and losses
are as follows:
Short-term capital gain $ 7,000
Short-term capital loss (43,000)
Long-term capital gain 9,000
Long-term capital loss (21,000)
What amount of capital loss deduction is the taxpayer
entitled to use to offset against ordinary income?
A. $0
B. $3,000
C. $12,000
D. $48,000
REQUIRED: The amount of capital loss deduction for a
corporate taxpayer.
DISCUSSION: Corporate taxpayers are not permitted to
deduct net capital loss against ordinary income.
Answer (B) is incorrect. Unlike an individual, a corporate
taxpayer is not permitted a deduction of capital loss against
ordinary income. Answer (C) is incorrect. A corporate taxpayer is
not permitted to deduct capital loss against ordinary income.
Answer (D) is incorrect. Capital loss may not be used to offset
ordinary income for corporate taxpayers.
Porter, the sole shareholder of Preston Corp.,
transferred property to the corporation as a
contribution to capital. Two years later, Corley
transferred property to the corporation in exchange for
a 10% interest in corporate stock. The property
transferred was valued as follows:
Porters
transfer
Corleys
transfer
Basis $ 50,000 $250,000
Fair market value 200,000 500,000
What amount represents the corporations basis in the
property received?
A. $700,000
B. $550,000
C. $450,000
D. $300,000
REQUIRED: The basis to the corporation in property
received upon contribution.
DISCUSSION: Under Sec. 351, a shareholder or
shareholders who control more than 80% of a corporation may
contribute property to a corporation without recognition of gain or
loss by either party. The corporation takes a carryover basis in
the property, and the taxpayer takes a substituted (equal to the
basis given up) basis in the shares of the corporation received.
However, the contribution by a shareholder who does not qualify
under Sec. 351 would trigger recognition of gain to the
shareholder, and the corporation would take a FMV basis in the
property. In this question, the first contribution would result in a
carryover (AB) basis to the corporation of $50,000, and the
second would be at a FMV of $500,000. Accordingly, the total is
$550,000 of basis held by the corporation after contributions.
Answer (A) is incorrect. The amount of the basis to the
corporation is not simply the fair market value. Answer (C) is
incorrect. The basis amount on the contribution of property upon
formation (or as the sole shareholder) is not fair market value.
Answer (D) is incorrect. The basis to the corporation is not simply
the amount of the adjusted basis in the hands of the
shareholders.
At the beginning of the year, Data, a
C corporation, had a $45,000 deficit in accumulated
earnings and profits. For the current year, Data
reported earnings and profits of $15,000. Data
distributed $18,000 to its shareholders during the
current year. What amount of the distribution is
treated as a taxable dividend?
A. $0
B. $3,000
C. $15,000
D. $18,000
REQUIRED: The amount of the taxable dividend from Data
Corporation.
DISCUSSION: A distribution is taxable as a dividend to the
extent of earnings and profits. In this case, the C corporation has
$15,000 of current E&P to use in characterizing a distribution as
a dividend. The remaining $3,000 is treated as a return of basis
to the extent that the shareholder has stock basis remaining. Any
excess over the shareholders stock basis is treated as capital
gain. Note that the treatment indicated here ignores the deficit in
accumulated E&P. Depending on whether accumulated E&P is
positive or negative and current E&P is positive or negative,
different ordering rules apply in determining the amount of a
taxable dividend and the remaining distributions character.
Answer (A) is incorrect. A portion of the distribution is taxable
as a dividend. Answer (B) is incorrect. Earnings and profits is
used to determine the amount of a distribution taxable as a
dividend, not the amount excluded from dividend treatment.
Answer (D) is incorrect. The whole distribution is not taxable as a
dividend, after E&P calculations.
10
Beech Corp., an accrual-basis, calendar-year
S corporation, has been an S corporation since its
inception. At the beginning of the current year, Gold
owned 50% of the 100 issued shares of Beech stock,
and had a $3,000 tax basis in the Beech stock. During
the current year, Beech had $200,000 in net business
income and $4,000 in Oak County municipal bond
interest income. Beech made no distributions to its
shareholders. What was Golds tax basis in Beech
stock at year end?
A. $102,000
B. $103,000
C. $104,000
D. $105,000
REQUIRED: Golds tax basis in Beech stock.
DISCUSSION: The shareholders stock basis would be
$105,000 [$3,000 beginning basis + $100,000 income allocation
($200,000 50% ownership interest) + $2,000 municipal interest
($4,000 50% ownership interest)]. The stock basis is increased
for the portion of the municipal interest in order for that income to
never be subject to taxation. If the basis was not increased, when
the interest was later sold, gain would be realized on the portion
of the business attributable to that income.
Answer (A) is incorrect. The shareholders stock basis must
be increased for their portion (50%) of the municipal bond
interest. Answer (B) is incorrect. The shareholders stock basis
must be adjusted for the municipal interest. Answer (C) is
incorrect. The shareholders stock basis must be adjusted for
their portion (50%) of the municipal bond interest.
Which of the following increases the accumulated
adjustments account of an S corporation?
A. Capital contributions by the shareholders.
B. Distribution to shareholders.
C. Interest and dividends.
D. Charitable contributions.
REQUIRED: The amounts that increase the accumulated
adjustments account of an S corporation.
DISCUSSION: Interest and dividends received by an S
corporation increase the accumulated adjustments account
(AAA) of the S corporation.
Answer (A) is incorrect. The capital contribution to an S
corporation by a shareholder would not increase the accumulated
adjustments account (AAA) of an S corporation. Answer (B) is
incorrect. Distributions to a shareholder would not increase the
accumulated adjustments account (AAA) of an S corporation.
Answer (D) is incorrect. Charitable contributions made do not
increase the accumulated adjustments account (AAA) of an S
corporation.
Anderson and Decker are equal members in
Andek, an LLC, which has not elected to be treated
as a corporation. Anderson contributes $7,000 cash,
and Decker contributes a machine with an adjusted
basis of $5,000 and fair market value of $10,000,
subject to a liability of $3,000. What is Deckers basis
in Andek?
A. $2,000
B. $3,500
C. $5,000
D. $10,000
REQUIRED: Deckers basis in a partnership from capital
contributions.
DISCUSSION: As Decker contributed property to a
non-electing LLC, it is treated as a general partnership for federal
tax purposes. The beginning basis in a partners partnership
interest is the basis of property contributed, less any liabilities to
which the property is subject, plus the partners share of
partnership liabilities. In this case, Deckers basis is $3,500
[$5,000 contributed property basis $3,000 associated liability +
$1,500 liability assumed (50% partnership interest $3,000
partnership liability contributed)].
Answer (A) is incorrect. Deckers basis is increased for his
proportionate share of partnership liabilities, including those he
contributes. Answer (C) is incorrect. The liability associated with
the property will also affect the basis Decker takes in his Andek
LLC interest. Answer (D) is incorrect. The basis, not FMV, of
property contributed is the starting number for the basis
calculation. The liability must also be considered.
11
Johnson, an individual, has a 50% interest in
DEF Partnership. Johnsons adjusted basis at the
beginning of the year was $14,000. The partnerships
ordinary income for the current year was $6,000.
Johnson received a non-liquidating distribution of
$8,000 cash and property with an adjusted basis of
$12,000 and a fair market value of $15,000. What is
the basis of the distributed property, other than cash,
to Johnson?
A. $6,000
B. $9,000
C. $12,000
D. $15,000
REQUIRED: Johnsons basis in distributed property from
DEF partnership.
DISCUSSION: The basis of the property distributed in a
non-liquidating distribution is the lesser of remaining basis in the
partner's partnership interest (after cash is distributed) and the
adjusted basis of the property. In this case, the basis in the
partnership interest is $9,000 [$14,000 beginning + $3,000
ordinary income allocation ($6,000 ordinary income 50%
partnership interest) $8,000 cash distributed]. In the event that
the cash exceeded the adjusted basis of the partnership interest,
gain may have been recognized and the partner's basis in the
property would increase to $0.
Answer (A) is incorrect. This is the amount of the ordinary
income of the partnership for the year and does not directly
impact the basis in the property distributed. Answer (C) is
incorrect. The basis of the property is the lesser of remaining
basis in the partners partnership interest (after cash is
distributed) and the adjusted basis of the property. The remaining
partnership basis is not $12,000. Answer (D) is incorrect. The
basis of the property is not FMV when distributed.
Able, an individual, is a partner in CD Partnership
with an adjusted basis of $30,000 for Ables
partnership interest. Able received a non-liquidating
distribution of $25,000 cash and property with an
adjusted basis of $7,000 and a fair market value of
$10,000. What amount of gain should Able
recognize?
A. $0
B. $2,000
C. $5,000
D. $12,000
REQUIRED: The gain recognized by Able on the
non-liquidating distribution of property.
DISCUSSION: Gain would be recognized if the FMV of cash
exceeded Ables basis in the partnership interest. However, this
is not the case. Instead, the cash is distributed at FMV and the
basis in the partnership interest is reduced by the amount of the
cash. Then, any remaining basis in the partnership interest is
allocated to the property distributed, up to the lesser of the
adjusted basis of the property in the hands of the partnership or
the amount of partnership interest basis to be allocated. In this
case, $5,000 of partnership interest basis is allocated to the
property distributed.
Answer (B) is incorrect. Gain is not recognized when
property is distributed in excess of partnership basis. The basis in
the hands of the recipient is simply computed with respect to the
remaining basis in the partnership interest. Answer (C) is
incorrect. Gain is not computed as the excess of partnership
basis over cash distributed. Answer (D) is incorrect. The amount
of $12,000 is not the correct amount of gain recognized on the
distribution of the property.
Belson and Forman decided to terminate North
partnership. On the date of termination, Norths
balance sheet was as follows:
Adjusted
Basis
Cash $2,000
Equipment (fair market value $4,000) 6,000
Capital Belson 4,000
Capital Forman 4,000
Formans outside basis is $2,000. The partnership
assets were distributed equally between the partners.
What is Formans tax basis in the property received?
A. $1,000
B. $4,000
C. $6,000
D. $10,000
REQUIRED: Formans tax basis in the property received on
the termination of the partnership.
DISCUSSION: After the cash is distributed, Forman has
$1,000 ($2,000 beginning basis $1,000 cash received) in basis
remaining. This is allocated to the property distributed, up to the
adjusted basis of the property in the hands of the partnership.
Answer (B) is incorrect. The basis of the property is not set to
the FMV of the property in the hands of the partnership.
Answer (C) is incorrect. The basis of the property is limited to the
lesser of basis in the partnership interest or the adjusted basis in
the hands of the partnership. Answer (D) is incorrect. The basis
in the property is not the sum of the fair market value and the
adjusted basis in the hands of the partnership.
12
Which of the following correctly lists the order,
from earliest to latest, that U.S. legislative bodies
consider new tax legislation?
A. House of Representatives, U.S. Senate, Joint
Conference Committee.
B. Joint Conference Committee, House of
Representatives, Senate Finance Committee.
C. U.S. Senate, Joint Conference Committee,
House of Representatives.
D. House of Representatives, Joint Conference
Committee, U.S. Senate.
REQUIRED: The correct order, from earliest to latest, that
U.S. legislative bodies consider new tax legislation.
DISCUSSION: Tax bills are reviewed in the House Ways
and Means Committee before being considered by the full
House. The House version is referred to the Senate Finance
Committee before being considered by the full Senate. If the
Senate approves the House version as is, the bill is next
presented to the President. However, the Senate often revises
the House version, which requires a review by a joint
House-Senate committee. The joint committee version must be
approved first by the House and then by the Senate, before
reaching the President.
Answer (B) is incorrect. Bills for raising revenue do not
originate in the Joint Conference Committee. Answer (C) is
incorrect. Bills for raising revenue do not originate in the U.S.
Senate. Answer (D) is incorrect. Tax bills do not go before the
Joint Conference Committee before they go before the U.S.
Senate.
A taxpayer has had one issue under audit by the
Internal Revenue Service for several years. Unless
the taxpayer agrees otherwise, the IRS has at most
how many years to assess taxes after the taxpayers
return was filed?
A. Three.
B. Four.
C. Five.
D. Seven.
REQUIRED: The statute of limitations for assessment of tax
liability by the IRS.
DISCUSSION: The statute of limitations for assessment of
tax liability (except in the case of fraud or other special
exceptions) is generally 3 years from the date the return is filed.
Note that an early return is treated as filed on the due date.
Answer (B) is incorrect. Under normal circumstances, the
IRS does not have 4 years to assess liability. Answer (C) is
incorrect. Five years is not the correct statute of limitations to
assess tax liability. Answer (D) is incorrect. Under normal
circumstances, the IRS has fewer than 7 years to assess liability.
After which of the following situations would it
usually not be necessary to notify third parties of the
termination of an agencys existence?
A. The achieving of the agencys purpose.
B. The destruction of the subject matter of the
agency.
C. A termination by mutual agreement.
D. A termination by the principal.
REQUIRED: The situation in which notice to third parties of
termination of an agencys existence is not necessary.
DISCUSSION: Destruction of the subject matter of the
agency makes fulfilling the purpose of the agency impossible.
Thus, it terminates the agency by operation of law. Because most
terminations by operation of law terminate apparent authority,
notice to third parties of termination of the agencys existence is
usually not necessary.
Answer (A) is incorrect. Achieving the agencys purpose
results in termination by an act of the parties. Because the
apparent authority of the agent continues to exist until the third
party receives notice of the termination, notice to third parties of
the agencys existence may be necessary. Answer (C) is
incorrect. Termination by mutual agreement is by an act of the
parties. Because the apparent authority of the agent continues to
exist until the third party receives notice of the termination, notice
to third parties of the agencys termination may be necessary.
Answer (D) is incorrect. Termination by the principal would result
in termination by an act of the parties. Because the apparent
authority of the agent continues to exist until the third party
receives notice of the termination, notice to third parties of the
agencys termination may be necessary.
13
Taso Corp. sells laptop computers to the public.
Taso sold and delivered a laptop to Cara on credit.
Cara gave Taso a purchase money security interest in
the laptop by executing and delivering to Taso a
promissory note for the purchase price and a security
agreement covering the laptop. Cara purchased the
laptop for personal use. Taso did not file a financing
statement. Under the Secured Transactions Article of
the UCC, is Tasos security interest perfected?
A. No, because the laptop is a consumer good.
B. No, because Taso failed to file a financing
statement.
C. Yes, because it was perfected at the time of
attachment.
D. Yes, because Taso retained possession of the
collateral.
REQUIRED: The reason, if any, that a purchase money
security interest in goods sold to a consumer is perfected.
DISCUSSION: A PMSI in consumer goods ordinarily is
automatically perfected without filing or possession. Thus, it
becomes effective at the time of attachment.
Answer (A) is incorrect. Because the laptop is a consumer
good, the PMSI is perfected upon attachment. Answer (B) is
incorrect. Filing is not necessary for the perfection of a PMSI in
consumer goods. Answer (D) is incorrect. Possession is not
necessary for the perfection of a PMSI in consumer goods.
Under the Secured Transactions Article of the
UCC, a financing statement generally must contain
A. The signature of a witness to the execution of
the financing statement.
B. The dollar amount of the consideration
provided by the secured party.
C. The date the underlying debt will be paid.
D. The name of the debtor.
REQUIRED: The content of a financing statement.
DISCUSSION: The financing statement must contain (1) the
name of the debtor, (2) the name of the secured party (or
representative), and (3) an indication of the covered collateral
(UCC 9-502).
Answer (A) is incorrect. The financing statement is not
required to be witnessed. Answer (B) is incorrect. The financing
statement is not required to state the consideration provided by
the secured party. Answer (C) is incorrect. The financing
statement is not required to contain the date the underlying debt
will be paid.
Under the Secured Transactions Article of the
UCC, if a secured creditor rightfully repossesses and
sells a debtors collateral, which of the following
obligations is the first to be paid from the proceeds of
the sale?
A. The debt owed any creditor with a subordinate
security interest in the collateral.
B. The balance of the debt owed the primary
secured creditor.
C. The reasonable expenses incurred by the sale.
D. The refund of the debtors payments made
prior to the date of the sale.
REQUIRED: The first obligation to be paid from the proceeds
of the sale of rightfully repossessed collateral.
DISCUSSION: After repossession, the secured party may
dispose of the collateral by public or private proceedings. The
proceeds of collection or enforcement are applied in the following
order: (1) payment of reasonable expenses of collection or
enforcement, (2) satisfaction of the debt owed to the secured
party under whose security interest the collection or enforcement
is made, (3) satisfaction of the debts owed to subordinate
secured parties, and (4) payment of any surplus to the debtor.
Answer (A) is incorrect. Creditors with subordinate interests
have claims inferior to (1) the reasonable expenses incurred by
the sale and (2) the interest of the secured creditor. Answer (B) is
incorrect. The balance of the debt owed the primary secured
creditor is paid only after the reasonable expenses incurred by
the sale. Answer (D) is incorrect. The debtor receives only
payment of any surplus proceeds after the sale.
14
Hall forged Crandalls signature on a promissory
note dated April 1, Year 3. The note was for $5,000
and was payable to bearer on demand. Hall offered to
sell the note to Corn for $4,000. Corn knew that
Crandall had been out of the country since Year 1. In
addition, Corn knew that Crandalls name and
signature were misspelled, and that Hall had a
questionable reputation. Despite this, Corn purchased
the note for $4,000. Under the Negotiable Instruments
Article of the UCC, what are Corns rights under the
note?
A. Corn is a holder in due course and may
enforce the note against Hall and Crandall.
B. Corn is a holder in due course under the
shelter rule and may enforce the note only
against Hall.
C. Corn is a holder and may enforce the note
against Hall.
D. Corn is a holder and may enforce the note
against Crandall.
REQUIRED: The rights of a purchaser of a bearer
promissory note with a forged payors signature.
DISCUSSION: Corn is a holder as a person in possession of
a bearer negotiable instrument. The note presumably was
negotiated by Hall to Corn by transfer of possession without an
endorsement. However, Corn is not a holder in due course
because Corn had notice of an unauthorized signature and other
circumstances that established a defense to the instrument
(e.g., misspellings and purchase at a deep discount).
Accordingly, Corn only has the rights of a holder, but Hall has
contractual liability to Corn as a signer of the promissory note.
An unauthorized signature operates as the signature of the
unauthorized signer in favor of a person who pays in good faith
or takes for value. Moreover, the transferor of an instrument for
consideration but without an endorsement is liable for breach of
transfer warranties to the immediate transferee. The transferor
warrants that (1) the warrantor (Hall) is entitled to enforce the
instrument, (2) all signatures are authentic and authorized,
(3) the instrument has not been altered, (4) no defense or claim
of any party is good against the warrantor, and (5) the warrantor
has no knowledge of insolvency proceedings against the maker
of the note.
Answer (A) is incorrect. Corn was aware of Halls forgery and
cannot be a holder in due course. Also, because the signature
was a forgery, Crandall is not liable. Answer (B) is incorrect. Corn
did not obtain the note from a holder in due course and is
therefore not a holder in due course under the shelter rule.
Answer (D) is incorrect. Crandall is not liable because the
signature was forged.
Under the Negotiable Instruments Article of the
UCC, which of the following defenses by the maker of
a negotiable instrument can be successfully asserted
against a holder in due course?
A. Fraud in the execution.
B. Fraud in the inducement.
C. Breach of the underlying contract.
D. Lack of consideration by the original payee.
REQUIRED: The defense effective against a holder in due
course.
DISCUSSION: Fraud in the execution is a real defense. It is
committed against the signer of the instrument when (s)he is
induced to sign without knowledge and a reasonable opportunity
to learn its character and essential terms. Real defenses are
effective against a holder in due course.
Answer (B) is incorrect. Fraud in the inducement is a
personal defense. It occurs when, although the defrauded party
is aware of entering into a contract and its terms, the underlying
consideration is misrepresented. Personal defenses are not
effective against a holder in due course. Answer (C) is incorrect.
Traditional contract defenses, such as breach of contract, are
personal defenses. Personal defenses are not effective against a
holder in due course. Answer (D) is incorrect. Traditional contract
defenses, such as lack of consideration, are personal defenses.
Personal defenses are not effective against a holder in due
course.
15
Roland applied to Berkley Bank for a $100,000
loan. As a condition to granting the loan, Berkley
requested a document of title evidencing Rolands
ownership of several paintings Roland had in storage.
Under the Documents of Title Article of the UCC,
which of the following documents is not a document
of title evidencing Rolands current ownership of the
paintings?
A. A warehouse receipt.
B. A bill of lading.
C. An appraisal.
D. An electronic document of title.
REQUIRED: The item not a document of title evidencing
current ownership.
DISCUSSION: A document of title has three functions: (1) it
is a receipt for goods, (2) it is a contract for the storage or
transport of goods between a bailor (one who entrusts personal
property to another) and a bailee (one who receives such
property to hold in trust), and (3) it is evidence of title to the
goods. An appraisal is an indication of value, not proof of
ownership.
Answer (A) is incorrect. A warehouse receipt is a document
of title issued by a warehouser to the person who deposits goods
for storage. Thus, a warehouse receipt evidences ownership.
Answer (B) is incorrect. A bill of lading is a document of title
issued by a person engaged in the business of carrying goods.
Thus, a bill of lading evidences ownership. Answer (D) is
incorrect. A document of title may be in electronic or tangible
form. An electronic document of title is evidenced by a record of
information shared in an electronic medium, not inscribed on a
tangible medium.
16

Cpa 2014 Reg Aicpa Questions

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cpa 2014 Reg Aicpa Questions

Uploaded by

Copyright:

Available Formats

2014 AICPA DISCLOSED QUESTIONS -- REGULATION

You might also like