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Enrolled Agent Practice Exam Questions Part 1 with correct Answers
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Enrolled Agent Practice Exam QuestionsPart 1 with correct Answers
Which iof ithe ifollowing iis iincome iin irespect iof ia idecedent?
A) iCash ireceived ifrom ia igrandmother's iestate.
B) iRoyalties ireceived ion ithe ideceased ifather's ipublished ibook; ithe iright ito ireceive
ithese iroyalties iwas idistributed ifrom ithe ifather's iestate.
C) iCertificate iof ideposit ireceived ias ia igift.
D) iBoth icash ireceived ifrom ia igrandmother's iestate iand iroyalties ireceived ion ithe
ideceased ifather's ipublished ibook; ithe iright ito ireceive ithese iroyalties iwas idistributed
ifrom ithe ifather's iestate. i- iCorrect iAnswers i-B) iRoyalties ireceived ion ithe ideceased
ifather's ipublished ibook; ithe iright ito ireceive ithese iroyalties iwas idistributed ifrom ithe
ifather's iestate.
Income iin irespect iof ia idecedent iis ithe iamount ithat iis iearned iby ithe itaxpayer ibut inot
ireceived iprior ito ihis ior iher ideath inor iaccrued iprior ito ihis ior iher ideath iif ion ithe
iaccrual imethod, iso iit iis inot iincluded iin ithe idecedent's ifinal ireturn. iIncome iin irespect
iof ia idecedent iis iincluded iin ithe irecipient's i(e.g., ithe iestate's) iincome iin ithe iyear
ireceived ior iaccrued.
Which iof ithe ifollowing irecipients iof imoney imust iinclude ithe ifunds ireceived iin ihis itotal
iincome?
A) iA icar ipool idriver iwho iis igiven imoneterm-0y iby ihis ipassengers ifor ihighway itolls.
B) iAn ielected iofficial iwho iis igiven imoney iby ia ireal iestate ideveloper ito iinfluence ihis
ivote.
C) iA ihomeowner iwho iis igiven ia isubsidy iby ia ipublic iutility ifor ithe ipurchase iof ia inew
ihot iwater iheater.
D) iA itaxpayer iwho iinherits ione ihundred isilver idollars iin ia ibequest. i- iCorrect iAnswers
i-B) iAn ielected iofficial iwho iis igiven imoney iby ia ireal iestate ideveloper ito iinfluence ihis
ivote.
A ibribe iis iincome. iIn ifact, iall iincome ifrom iillegal iactivities, isuch ias imoney ifrom
idealing iillegal idrugs, imust ibe iincluded ion ia itaxpayer's i1040, ieither ion iLine i8 i(from
iSchedule i1) ior ion iSchedule iC. iMonies ireceived ifrom icar ipool ipassengers iare
ireimbursements. iA isubsidy ipaid iby ia ipublic iutility ifor ienergy iconservation iis iexcluded
ifrom iincome. iA ibequest iis ialso iexcluded ifrom iincome ieven iif ithe ibequest iis icash.
Minnie's itax ireturn ishows ithe ifollowing iincome:
-$800 iwages
,-$6,490 iunemployment icompensation
-$1,000 ialimony ireceived iunder ithe iterms iof ia idivorce idecree ifinalized ibefore i2019
-$8,000 irental iincome ifrom iapartment ibuildings ishe iowns
What iis iMinnie's iearned iincome ifor ithe ipurpose iof idetermining ihow imuch ishe ican
icontribute ito ian iIRA?
A) i$800
B) i$7,290
C) i$1,800
D) i$16,290 i- iCorrect iAnswers i-C) i$800 i
Generally, icompensation iis ithe iamount iearned ifrom iworking. iCompensation iincludes
iwages, isalaries, itips, iprofessional ifees, ibonuses, iand iother iamounts iindividuals
ireceive ifor iproviding ipersonal iservices. iFor iIRA ipurposes, icompensation iincludes
iamounts iconsidered itaxable ialimony iand inontaxable icombat ipay.
Minnie's iearned iincome ifor ithe ipurpose iof idetermining ihow imuch ishe ican icontribute
ito ian iIRA iis i$1,800. iOnly iwages iof i$800 iand itaxable ialimony iof i$1,000 icount ias
icompensation ifor iIRA ipurposes, iso ithey iset ithe ilimit ifor ithe iallowable icontribution
iamount.
Qualified idividends iare isubject ito ione iof ithree imaximum itax irates. iWhich ithree itax
irates iare iused ifor iqualified idividends?
A) i15% i/ i25% i/ i37%
B) i0% i/ i15% i/ i20%
C) i15% i/ i28% i/ i37%
D) i18% i/ i20% i/ i25% i- iCorrect iAnswers i-B) i0% i/ i15% i/ i20%
Qualified idividends iare isubject ito ithe isame i0%, i15% ior i20% imaximum itax irate ithat
iapplies ito inet icapital igain. iQualified idividends iare isubject ito ithe i20% itax irate iif ithe
iregular itax irate ithat iwould iapply iis i37%.
Qualified ibusiness iincome i(QBI) iis:
A) ithe iamount iof iqualified iitems iof iincome iand igain ifrom ia iqualified itrade ior ibusiness.
B) ithe inet iamount iof iqualified iitems iof iincome, igain, ideduction iand iloss ifrom ia
iqualified itrade ior ibusiness.
C) ithe iamount iof iqualified iitems iof iincome iand igain ifrom ia iqualified itrade ior
ibusiness, ionly ito ithe iextent iincluded iin itaxable iincome.
D) ithe inet iamount iof iqualified iitems iof iincome, igain, ideduction iand iloss ifrom ia
iqualified itrade ior ibusiness, ionly ito ithe iextent iincluded ior iallowed iin ithe idetermination
iof itaxable iincome ifor ithe iyear. i- iCorrect iAnswers i-D) ithe inet iamount iof iqualified
iitems iof iincome, igain, ideduction iand iloss ifrom ia iqualified itrade ior ibusiness, ionly ito
ithe iextent iincluded ior iallowed iin ithe idetermination iof itaxable iincome ifor ithe iyear.
Qualified ibusiness iincome i(QBI) iis ithe inet iamount iof iqualified iitems iof iincome, igain,
ideduction iand iloss ifrom ia iqualified itrade ior ibusiness. iQualified iitems iof igain ior iloss
iare itaken iinto iaccount ito idetermine iQBI ior iqualified ibusiness iloss ionly ito ithe iextent
iincluded ior iallowed iin ithe idetermination iof itaxable iincome ifor ithe iyear.
Exception: iDisallowed ilosses ior ideductions iallowed iin ithe itaxable iyear iare igenerally
itaken iinto iaccount ifor ipurposes iof icomputing iQBI iexcept ito ithe iextent ithe ilosses ior
,ideductions iwere idisallowed, isuspended, ilimited, ior icarried iover ifrom itaxable iyears
iending ibefore iJanuary i1, i2018
Lucille ibought ia ihouse iin i2000 iand ilived iin iit iuntil ishe isold iit iin i2020. iShe ihad ia igain
iof i$300,000 ifrom ithe isale iof iher ihouse. iShortly iafter ithe isale, ishe imarried iMichael,
iwho icoincidentally ialso isold ihis iprimary iresidence iin i2020 iafter iten iyears iof
iownership. iHe ihad ia igain iof i$100,000 ifrom ithe isale iof ihis ihome. iCan iLucille iand
iMichael iexclude itheir ientire igains ifrom itheir iincome?
A) iYes, ibecause ithey iare imarried.
B) iYes, ibecause ithey ieach imet ithe iuse iand iownership itests iindependently.
C) iNo, ibecause ithey iwere inot imarried iwhen ithey isold itheir ihouses.
D) iNo, ibecause ithey icannot iexclude imore ithan i$250,000 ifor iLucille's ihome. i- iCorrect
iAnswers i-D) iNo, ibecause ithey icannot iexclude imore ithan i$250,000 ifor iLucille's ihome.
The i$500,000 imaximum iexclusion ifor icertain ijoint ireturns idoes inot iapply ibecause
iLucille iand iMichael ido inot ijointly imeet ithe iuse itest ifor ithe isame ihome. iThe
iownership iand iuse itests iare imet iindependently i(for itheir iown ihomes). iThe imaximum
iexclusion ithat ican ibe iclaimed iby ithe icouple iis ithe itotal iof ithe imaximum iexclusions
ithat ieach ispouse iwould iqualify ifor iif inot imarried iand ithe iamounts iwere ifigured
iseparately. iThey icannot iexclude ithe ientire igain iof i$300,000 ion iLucille's ihome ias ia
iresult, ias ithe iexclusion ifor ithat ihome iis ilimited ito i$250,000.
Taxpayers iwho iare imarried iand ifile ia ijoint ireturn ifor ithe iyear ican iexclude iup ito
i$500,000 iof ithe igain ion ithe isale iof ia imain ihome iif iall iof ithe ifollowing iare itrue:
-Either ispouse imeets ithe iownership itest.
-Both imeet ithe iuse itest.
-During ithe i2-year iperiod iending ion ithe idate iof ithe isale, ineither iyou inor iyour ispouse
iexcluded igain ifrom ithe isale iof ianother ihome.
If ieither ispouse idoes inot isatisfy iall ithese irequirements, ithe imaximum iexclusion ithat
ican ibe iclaimed iby ithe icouple iis ithe itotal iof ithe imaximum iexclusions ithat ieach
ispouse iwould iqualify ifor iif inot imarried iand ithe iamounts iwere ifigured iseparately. iFor
ithis ipurpose, ieach ispouse iis itreated ias iowning ithe iproperty iduring ithe iperiod ithat
ieither ispouse iowned ithe iproperty.
Which iof ithe ifollowing iis itrue iregarding ia inonbusiness ibad idebt?
A) iIt iis ideductible ias ia ishort-term icapital iloss.
B) iIt iis inot ideductible.
C) iIt iis ideductible ionly iif iyou iitemize.
D) iIt iis ideductible ias ia ilong-term icapital iloss. i- iCorrect iAnswers i-A) iIt iis ideductible ias
ia ishort-term icapital iloss.
All inon-business ibad idebts iare ishort iterm icapital ilosses iand iare iclaimed ion iForm
i8949. iThe iamount iof itime ithe imoney ihas ibeen iowed ito iyou idoes inot imatter.
Elton ideclared ibankruptcy iin ithe icurrent iyear. iIncluded iin ithe iliabilities idischarged iin
ithe ibankruptcy iwas ia i$15,000 ipersonal iloan iElton ihad ireceived ifrom ihis ifriend,
iEdward, itwo iyears iago. iHow iwould iEdward itreat ithis ifor itax ipurposes?
A) iOrdinary iloss ion iForm i4797
B) iLong-term icapital iloss ion iSchedule iD
, C) iShort-term icapital iloss ion iSchedule iD
D) iInvestment iexpense isubject ito i2% imiscellaneous iitemized ideduction ilimitation i-
iCorrect iAnswers i-C) iShort-term icapital iloss ion iSchedule iD
All inon-business ibad idebts iare ishort iterm icapital ilosses iand iare iclaimed ion iSchedule
iD. iThe iamount iof itime ithe imoney ihas ibeen iowed ito iyou idoes inot imatter.
Form i4137 irequires ithat:
A) iAll iemployers iare irepresented ion iseparate ilines.
B) iAll itips iare iincluded.
C) iThe icurrent isocial isecurity iand iMedicare itax irate iis iused.
D) iAll iof ithe iabove. i- iCorrect iAnswers i-D) iAll iof ithe iabove.
Use iForm i4137 ionly ito ifigure ithe isocial isecurity iand iMedicare itax iowed ion itips iyou
idid inot ireport ito iyour iemployer. iIncluding iany iallocated itips ishown ion iyour iForm(s)
iW-2 ithat iyou imust ireport ias iincome.
Complete ia iseparate iline ifor ieach iemployer.
Indicate iall itips ion ithe iform, iincluding itips ialready ireported.
Scholarships iand ifellowships iawarded ito idegree icandidates iare inot itaxable iunless
ithey iare iused ifor:
A) iTuition
B) iRoom iand iboard
C) iBooks
D) iSupplies irequired ifor ithe icourse iof istudy i- iCorrect iAnswers i-B) iRoom iand iboard
For idegree icandidates; ischolarships iand ifellowships iare iconsidered itaxable iincome ito
ithe iextent ithe iproceeds iare iused ifor iroom, iboard ior itravel.
How ido inon-deductible icontributions ito ian iIRA iaffect ithe itaxpayer's ibasis iin ithe iIRA?
A) iNon-deductible icontributions iincrease ibasis.
B) iNon-deductible icontributions ihave ino ieffect ion ibasis.
C) iNon-deductible icontributions idecrease ibasis.
D) iNon-deductible icontributions idecrease ibasis ibut inot ibelow izero. i- iCorrect iAnswers
i-A) iNon-deductible icontributions iincrease ibasis.
Non-deductible icontributions iincrease ibasis. iOrdinarily, ia itaxpayer ihas ino icost ibasis
iin ihis itraditional iIRA iand iall idistributions iare ifully itaxable. iIf ia itaxpayer imade inon-
deductible icontributions ito ihis iIRA, iany idistribution imight ihave ia icomponent ithat iis ia
ireturn iof itaxpayer's icapital. iSo, ia itaxpayer iwho imade inon-deductible icontributions ito
ihis iIRA iwill ihave ia icost ibasis iin ihis iIRA. iFurther inondeductible icontributions iwill
iincrease ihis ibasis.
There iis ia ipenalty ifor inot ireporting itips ito ian iemployer ias irequired. iThe ipenalty iis:
A) iEqual ito i50% iof ithe isocial isecurity iand iMedicare itax idue ion ithose itips.
B) iEqual ito i50% iof ithe itips ithat iwere inot ireported.
C) iEqual ito i20% iof ithe isocial isecurity iand iMedicare itax idue ion ithose itips.
D) iEqual ito i10% iof ithe itips ithat iwere inot ireported. i- iCorrect iAnswers i-A) iEqual ito
i50% iof ithe isocial isecurity iand iMedicare itax idue ion ithose itips.
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