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IRS Enrolled Agent Exam Unit 4 Questions and Answers 100% Pass £10.41
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IRS Enrolled Agent Exam Unit 4 Questions and Answers 100% Pass
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IRS Enrolled Agent Exam Unit 4 Questions and Answers 100% Pass Debby broke her leg in a car accident in 2014 and was unable to work for three months. She received an accident settlement of $13,000 from her insurance company. during this time, she received $7,500 of sick pay from her employer. I...

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  • January 8, 2025
  • 10
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • irs enrolled agent exam unit 4 questions and answe

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  • EA - Enrolled Agent
  • EA - Enrolled Agent

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EmilyCharlene

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IRS Enrolled Agent Exam Unit 4
Questions and Answers 100% Pass

Debby broke her leg in a car accident in 2014 and was unable to work for three months. She received an

accident settlement of $13,000 from her insurance company. during this time, she received $7,500 of sick

pay from her employer. In addition, she received $5,000 from the accident policy she had purchased

herself. How much of this income is taxable to Debby?


A. $5,000


B. $7,500


C. $12,500


D. $18,000 - ✔✔B. Only Debby's sick pay is taxable as wages. Sick pay from an employer is taxable like

wages and is therefore included in Debby's gross income. Settlements for personal injuries from an

accident are not taxable. If a taxpayer pays the full cost of an accident insurance plan, the benefits for

personal injury or illness are not included in income. If the employer pays the cost of an accident

insurance plan, the amounts are taxable to the employee.


Income was constructively received in 2014 in each of the following situations except:


A. Wages were deposited in the taxpayer's bank account on December 26, 2014, but were not withdrawn

by the taxpayer until January 3, 2015.


B. A taxpayer was informed his check for services rendered was available on December 15, 2014. The

taxpayer did not pick up the check until January 30, 2015.




Emily Charlene © 2025, All Rights Reserved.

, 2|Page


C. A taxpayer received a check by mail on December 31, 2014, but did not deposit the check until January

5, 2015.


D. A taxpayer's home was sold on December 28, 2014. The payment was not received by her until January

2, 2015, when the escrow company released the funds. - ✔✔D. A taxpayer does not need physical

possession of income in order to have constructive receipt. However, income is not considered

constructively received if the taxpayer cannot access the funds because of restrictions. Since the taxpayer's

control of the receipt of the funds in the escrow account was substantially limited until the transaction

had closed, the taxpayer did not constructively receive the income until the following year.


Marisol received the following income and fringe benefits in 2014:


Wages -- $30,000


End of year bonus -- 2,000


Parking pass per month -- 90


Employer contributions to her 401(k) plan -- 900


FMV free gym on her employer's premises -- 500


How much income must Marisol report on her 2014 tax return?


A. $30,000


B. $32,000


C. $32,500


D. $34,480 - ✔✔B. Only the wages and the bonus are taxable ($30,000 + $2,000). The parking pass is a

notaxable transportation benefit, and the employer contributions are not taxable until Marisol withdraws

the money from her retirement account. Marisol does not have to report the use of the gym because it is

on the employer's premises and therefore not taxable.



Emily Charlene © 2025, All Rights Reserved.

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