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Worksheetscpa sample questions
Total questions: 60
Worksheet time: 3600secs
Name
Class
Date
1.
Which taxpayers may claim the §199A Qualified Business Income (QBI) deduction, subject to limitations?
a)
Employees on their W‑2 wages
b)
Tax‑exempt organizations only
c)
C corporations only
d)
Sole proprietors and pass‑through owners (e.g., S corp/partnership partners)
2.
Which item is excluded from QBI calculation?
a)
Ordinary business income from a Schedule C
b)
Qualified REIT dividends
c)
Capital gains and losses
d)
Income from a publicly traded partnership (PTP)
3.
Like‑kind exchange (post‑TCJA) nonrecognition generally applies to which property?
a)
Real property held for productive use or investment
b)
Stocks and partnership interests
c)
Inventory
d)
Tangible personal property
4.
Which statement best distinguishes §179 expensing from bonus depreciation?
a)
§179 applies only to buildings; bonus applies only to land
b)
§179 is limited by taxable income and applies per taxpayer; bonus is not income‑limited and applies per class of property
c)
§179 reduces AMT only; bonus affects regular tax only
d)
Bonus is elective but §179 is mandatory
5.
Unrecaptured §1250 gain from real property is generally characterized as:
a)
Excluded gain under §121
b)
Nonrecognition income under §1031
c)
Ordinary income under §1245
d)
Capital gain subject to a special maximum rate cap separate from §1231 gain
6.
Under the wash sale rules, a taxpayer sells stock at a loss and repurchases substantially identical stock within 30 days. The loss:
a)
Is disallowed and added to the basis of the replacement shares
b)
Is fully deductible in the year of sale
c)
Is disallowed permanently with no basis effect
d)
Becomes a capital loss carryback
7.
Passive activity loss (PAL) rules generally:
a)
Permit passive losses to offset wages
b)
Disallow net passive losses against non‑passive income, suspending them until offset by passive income or disposition
c)
Do not apply to rental real estate activities
d)
Permit passive losses to offset portfolio income
8.
Which taxpayer may avoid PAL treatment on rental real estate by meeting specific hour and participation tests?
a)
Any individual with W‑2 wages over a threshold
b)
A passive limited partner
c)
Any shareholder in an S corporation
d)
A real estate professional
9.
At‑risk rules limit losses to:
a)
The amount the taxpayer has at risk in the activity, including certain debts personally liable for
b)
Taxpayer’s net worth
c)
Total partnership liabilities allocated to the partner, regardless of recourse
d)
Fair market value of partnership assets
10.
Post‑2018 NOLs for individuals and corporations generally:
a)
Carry forward indefinitely, subject to a taxable income limitation (exceptions exist)
b)
Expire after 20 years with no percentage limitation
c)
Carry back five years only
d)
May be carried forward only if generated by §1231 losses
11.
A shareholder of an S corporation can deduct losses only to the extent of:
a)
Stock basis plus debt basis (loans directly from the shareholder to the S corp)
b)
Accumulated adjustments account (AAA) balance
c)
Fair market value of corporate assets
d)
Corporate bank loans guaranteed by the shareholder
12.
Partnership basis increases for which item?
a)
Cash distributions received
b)
Nondeductible expenses
c)
Partner’s share of partnership income and increases in partnership liabilities
d)
Separately stated losses
13.
Corporate distributions to shareholders are generally dividends to the extent of:
a)
Retained earnings under GAAP
b)
Accumulated depreciation
c)
Current and accumulated earnings & profits (E&P)
d)
Cash balance at year‑end
14.
In an S corporation, the ordering of items affecting distributions generally considers which account first?
a)
Other Adjustments Account (OAA) before AAA
b)
AAA (Accumulated Adjustments Account)
c)
E&P before AAA
d)
PTI (Previously Taxed Income under Subchapter C)
15.
§351 transfer to a corporation requires what for nonrecognition?
a)
Transferors in control (≥80%) immediately after the exchange and property contributed for stock
b)
Only cash can be transferred
c)
Corporation must have no prior E&P
d)
At least two transferors and a written agreement
16.
§721 contributions to a partnership generally result in:
a)
No gain or loss recognized by either the partner or the partnership
b)
Ordinary income to the partner equal to FMV of contributed property
c)
Gain recognition to the partner
d)
Loss recognition to the partnership
17.
A built‑in gains (BIG) tax may apply to an S corporation that:
a)
Has no E&P and makes no distributions
b)
Was previously a C corporation and disposes of appreciated property during the recognition period
c)
Was always an S corporation since formation
d)
Has only one class of stock
18.
A §754 election allows a partnership to:
a)
Convert nonrecourse liabilities to recourse
b)
Elect out of the at‑risk rules
c)
Adjust the inside basis of partnership assets when there is a transfer or distribution that causes disparities
d)
Claim bonus depreciation on all property
19.
Contributed built‑in gain property under §704(c) is generally:
a)
Allocated to the partner with the smallest capital account
b)
Ignored after contribution
c)
Allocated pro rata to all partners
d)
Allocated so the built‑in gain is taxed to the contributing partner when recognized
20.
Self‑employment (SE) tax generally applies to:
a)
S corporation distributions to shareholders
b)
Partnership ordinary business income allocated to general partners
c)
Capital gains recognized by a limited partner
d)
Portfolio income (interest/dividends) of individuals
21.
Which is a factor favoring C corporation choice over pass‑through?
a)
Wanting QBI deduction to reduce individual tax
b)
Desire to retain earnings without current tax to owners
c)
Ability for owners to deduct losses against other income
d)
Avoiding potential double taxation of dividends
22.
Which statement about the kiddie tax is correct?
a)
Earned income of children is taxed at the parents’ rate
b)
It applies only to capital gains
c)
All income of minors is tax‑free
d)
Unearned income of certain children is taxed at the parents’ marginal rate (subject to thresholds)
23.
Related‑party loss rules under §267 generally:
a)
Disallow losses on sales between related parties
b)
Convert losses to §1231 gains
c)
Allow capital loss carryback against the related party
d)
Allow ordinary loss up to basis on all related‑party sales
24.
§179 expensing is limited by:
a)
Gross receipts test only
b)
Total assets on the balance sheet
c)
Number of employees
d)
Taxable income from active trades or businesses (excess carries over)
25.
Home office deduction for a sole proprietor generally requires:
a)
Employee status with W‑2 job
b)
Regular and exclusive use of a portion of the home as the principal place of business or to meet clients
c)
Ownership of the home for at least two years
d)
Any occasional business use of the home
26.
Hobby loss rules generally:
a)
Disallow deducting hobby losses against other income
b)
Allow unlimited deductions if the activity has some income
c)
Allow hobby losses to create NOLs
d)
Permit full deduction of hobby expenses above the line
27.
Under ASC 606 tax implications, advance payments received for goods/services are generally:
a)
Taxable only when cash is spent
b)
Not taxable until revenue is recognized for book
c)
Taxable upon receipt unless a specific deferral method is elected and applicable
d)
Always tax‑exempt
28.
In general, an individual’s capital loss deduction limit is:
a)
Unlimited against ordinary income
b)
None; only against capital gains
c)
$1,500 MFJ
d)
$3,000 against ordinary income, with excess carried forward
29.
Installment sale reporting is generally NOT available for:
a)
Casual sales of real property
b)
Dealer sales of inventory
c)
Sales of a partnership interest (non‑dealer)
d)
Sales of business property with payments over time
30.
Basis of property received in a like‑kind exchange is generally:
a)
Always zero
b)
Original seller’s basis plus depreciation taken by buyer
c)
FMV on the exchange date
d)
Carryover basis adjusted for boot and gain recognized
31.
Section 179 property disposed of before end of recovery period may cause:
a)
§351 gain recognition
b)
Exclusion under §121
c)
Capital loss disallowance under wash sale rules
d)
§179 recapture of previously expensed amounts
32.
Sale of a principal residence may qualify for exclusion if tests are met. Which is TRUE?
a)
Exclusion applies regardless of use within the last 5 years
b)
Exclusion works for like‑kind exchanges only
c)
Up to $250k ($500k MFJ) of gain may be excluded if ownership/use tests are met
d)
Exclusion applies to all rental properties
33.
State and local tax (SALT) deduction for individuals (itemized) is generally:
a)
Unlimited
b)
Not allowed for any taxpayer
c)
Subject to a cap (limitations apply)
d)
Available only for sales tax
34.
American Opportunity Tax Credit (AOTC) vs Lifetime Learning Credit (LLC): which is TRUE?
a)
LLC covers only room and board
b)
AOTC is for first four years at least half‑time; LLC can apply to unlimited years/part‑time
c)
AOTC requires graduate‑level study; LLC is undergraduate only
d)
LLC is refundable; AOTC is nonrefundable
35.
Traditional vs Roth IRA contributions: which is TRUE?
a)
Roth contributions reduce AGI for all taxpayers
b)
Traditional IRA contributions may be deductible; Roth contributions are not deductible
c)
Traditional IRA contributions are never deductible
d)
Roth contributions are always deductible
36.
Health Savings Account (HSA) contributions are generally:
a)
An above‑the‑line deduction for eligible individuals enrolled in HDHPs
b)
Itemized deductions only
c)
Available regardless of insurance type
d)
Taxable fringe benefits
37.
Self‑employed health insurance premiums are generally:
a)
Deductible only if employer reimburses
b)
Itemized only
c)
Never deductible
d)
Deductible above‑the‑line up to earned income from the business
38.
Specified service trade or business (SSTB) under §199A includes:
a)
All manufacturing businesses
b)
Certain fields like health, law, accounting, consulting (subject to thresholds)
c)
All retail businesses
d)
All construction contractors
39.
Which item is typically EXCLUDED from W‑2 wages for purposes of the §199A wage limitation?
a)
Officer compensation from an S corporation
b)
Cash wages paid to employees
c)
Deferred compensation included in W‑2
d)
Guaranteed payments to partners
40.
Mid‑quarter MACRS convention may be required when:
a)
Real property is placed in service mid‑year
b)
>40% of depreciable property (other than real property) is placed in service in the last quarter
c)
Any asset is placed in service in Q4
d)
Bonus depreciation is elected
41.
Start‑up and organizational costs are generally:
a)
Fully deductible immediately regardless of amount
b)
Capitalized to inventory
c)
Nondeductible permanently
d)
Partially deductible in the first year with the remainder amortized over time
42.
Corporate dividends received deduction (DRD) generally:
a)
Applies to dividends from foreign individuals
b)
Is available to individuals on their 1099‑DIV
c)
Allows C corps a deduction for dividends from domestic corporations (percentages depend on ownership)
d)
Eliminates double taxation for S corps
43.
Which distribution ordering is typical for S corporations with both AAA and C‑corp E&P?
a)
First from E&P, then AAA
b)
All distributions are dividends regardless
c)
Ordering doesn’t matter for tax
d)
First from AAA, then from C‑corp E&P (subject to specific election rules)
44.
Partner receives a nonliquidating distribution of cash exceeding outside basis. Result?
a)
Gain recognition to the extent cash exceeds outside basis
b)
No gain; basis can go negative
c)
Ordinary income equal to total cash
d)
Loss recognition
45.
Sale of a partnership interest generally produces:
a)
Ordinary income in all cases
b)
Only §1231 gain
c)
No recognized gain/loss
d)
Capital gain/loss except for hot asset recharacterization
46.
Which is TRUE about S corp shareholder reasonable compensation?
a)
Shareholders who provide services should receive reasonable W‑2 wages before taking distributions
b)
Guaranteed payments are required
c)
Distributions alone are acceptable compensation
d)
Reasonable comp rules do not apply to S corps
47.
Which statement about estimated tax safe harbors for individuals is MOST accurate?
a)
Safe harbors are based on prior‑year or current‑year tax; specifics vary by income level
b)
Safe harbors apply to corporations only
c)
All taxpayers must pay 50% of current‑year tax to be safe
d)
Only prior‑year tax can be used
48.
Sale of depreciable personal property used in business typically results in:
a)
§1250 unrecaptured gain only
b)
§1245 ordinary income recapture up to accumulated depreciation
c)
No recognized gain or loss
d)
Pure capital gain with no recapture
49.
Guaranteed payments to partners are generally:
a)
Capital contributions
b)
Deductible by the partnership and ordinary income to the recipient partner
c)
Nontaxable distributions
d)
Excluded from SE tax
50.
Which statement about §754 election EFFECT is correct?
a)
It only applies in liquidation of the partnership
b)
It produces partner‑specific inside basis adjustments under §743(b) on transfers
c)
It converts all partnership capital accounts to tax basis
d)
It eliminates §704(c) layers
51.
Which fringe benefit treatment is correct?
a)
Qualified transportation fringes are never deductible by employers
b)
De minimis benefits are fully taxable to employees
c)
Employer HSA contributions are always taxable wages
d)
De minimis fringe benefits are generally excludable from employee income
52.
Which item INCREASES an S corp shareholder’s stock basis?
a)
Cash distributions
b)
Tax‑exempt interest income allocated to the shareholder
c)
Share of ordinary loss
d)
Nondeductible penalties paid by the S corp
53.
Which sale is generally NOT eligible for §121 home gain exclusion?
a)
Second home used as a vacation property
b)
Sale due to qualified change in employment allowing partial exclusion
c)
Sale of a principal residence for which ownership/use tests are met
d)
Principal residence owned/used 2 of last 5 years
54.
Which statement about education incentives is correct?
a)
AOTC can be used for unlimited years
b)
LLC is refundable
c)
LLC can be claimed for one or more courses, not limited to four years
d)
AOTC never covers course materials
55.
For a sole proprietor, the deductible portion of self‑employment tax is:
a)
An above‑the‑line deduction for one‑half of SE tax
b)
Only deductible against self‑employment income as an itemized deduction
c)
An itemized deduction
d)
Not deductible
56.
Partnership liability allocations: nonrecourse debt is generally allocated:
a)
According to profit‑sharing ratios (subject to regs)
b)
Only to limited partners
c)
Not allocated at all
d)
Only to partners with personal liability
57.
Which is TRUE about QBI and wages?
a)
Wages have no relevance to §199A
b)
W‑2 wages paid by an S corp to a shareholder can count for the wage/UBIA limitation; guaranteed payments do not
c)
Portfolio income increases the wage limit
d)
Guaranteed payments count as W‑2 wages
58.
Disposition of a passive activity with a fully taxable sale generally:
a)
Frees suspended passive losses to offset any income
b)
Requires amending prior returns
c)
Eliminates all prior year losses with no tax effect
d)
Requires reclassifying losses as capital losses
59.
Charitable contributions by C corporations are:
a)
Deductible only for services, not cash or property
b)
Never deductible
c)
Generally deductible (subject to percentage limits and carryforward rules)
d)
Deductible only as dividends received
60.
Which is TRUE regarding inventory methods for small businesses after recent reforms?
a)
Cash method is prohibited if inventory exists
b)
UNICAP applies to service businesses only
c)
Eligible small businesses may use the cash method and be exempt from UNICAP, subject to gross‑receipts tests
d)
All businesses must use accrual and capitalize all indirect costs
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