All questions pertain to Tax Year 2016 unless noted.

Lesson 1 1. Some returns are not eligible for the Internal Revenue Service electronic filing program. Which item listed below is

generally eligible to be filed through the Internal Revenue Service electronic filing program?A. Form 1040AB. Form 990TC. Tax returns for prior yearsD. Amended tax returns

2. Federal law requires paid tax return preparers to electronically file Federal income tax returns if they file howmany combined 1040, 1040A, 1040EZ and 1041 returns during the year?

A. 5 or moreB. 7 or moreC. 9 or moreD. 11 or more

3. All of the following are true regarding the Preparer Tax Identification Number (PTIN) except:A. New regulations require all paid tax return preparers and enrolled agents to obtain a Preparer Tax

Identification Number (PTIN) before preparing any Federal tax returnsB. A tax preparer must renew his or her PTIN every year during the renewal seasonC. Failure to have a current PTIN could result in the imposition of Internal Revenue Code section 6695

penalties, injunction, and/or disciplinary action by the IRS Office of Professional ResponsibilityD. The PTIN is not required for CPAs if they prepare for compensation all or substantially all of a Federal

tax return or claim for refund

4. As a tax preparer you work with a client named Mary on her 2016 tax return and there are no issues. However,during that process you realize Mary was due a refund in 2015 but did not file a return. Which of the followingstatements applies to Mary with respect to her 2015 refund?

A. Mary cannot apply for a refund for the year 2015 as it is too lateB. Mary has up to three years from the date the tax return was due to file a 2015 return to obtain her refundC. Mary has up to four years from the date the tax return was due to file a 2015 return to obtain her refundD. Mary has up to five years from the date the tax return was due to file a 2015 return to obtain her refund

5. In working with a client named Fred, you realize that he did not report income that he should have on a return. Fredreported $10,000 of income on the return but should have reported $13,500. What is Fred’s obligation goingforward regarding this incident?

A. Fred must maintain records for 5 years from the year the return was filedB. Fred must maintain records for 6 years from the year the return was filedC. Fred must maintain records for 8 years from the year the return was filedD. Fred must maintain records for 10 years from the year the return was filed

6. Under the cash method, a taxpayer includes in his or her gross income all items of income actually or constructivelyreceived during the tax year. If he or she receives property and services, the taxpayer must include what amountin income?

A. Fair market value (FMV)B. Purchase priceC. CostD. Adjusted basis

7. Agnes Green was a single, calendar year taxpayer. She died on March 6, 2016. Her final income tax return mustbe filed by which date?

A. April 15, 2016B. January 1, 2017C. March 6, 2017D. April 15, 2017

8. Taxpayers can make payments by electronic funds withdrawal (EFW) for all of the following except:A. Form 4868 - Application for Automatic Extension of Time to File U.S. Individual Income Tax ReturnB. Form 2350 - Application for Extension of Time to File U.S. Income Tax Return for Citizens and Resident

Aliens Abroad Who Expect to Qualify for Special Tax TreatmentC. Form 1040-ES - Estimated Tax for Individuals (Taxpayers can make up to four estimated tax payments

at the time that they electronically file the Form 1040 series return)D. Form 433-F - Collection Information Statement

9. For the 2016 tax year, Michael had wages of $52,000. What amount will be withheld from his earnings for theFederal Insurance Contributions Act (FICA)?

A. $3,224B. $3,978C. $5,408D. $6,448

10. Captain Margaret Jones entered Afghanistan on December 1, 2014. She remained there through March 31, 2016,when she departed for the United States. She was not injured and did not return to the combat zone. What dateis her 2016 tax return due if she does not file Form 4868?

A. January 1, 2017B. April 15, 2017C. June 15, 2017D. October 15, 2017

11. If an individual taxpayer files on a fiscal year basis (a year ending on the last day of any month except December),and his or her fiscal year ends June 30. What is the due date of the tax return?

A. September 1B. October 1C. October 15D. December 31

12. When a taxpayer is using a debit or credit card for payment all of the following are true except:A. If the taxpayer made an overpayment, IRS will refund it after the return is processedB. The taxpayer can make Federal tax deposits with a debit or credit cardC. Making an electronic payment eliminates the need to use a voucherD. High balance payments of $100,000 or greater may require special coordination with the service provider

chosen

13. For which of the following unpaid debts may the Bureau of Fiscal Service (BFS) apply part or all of a tax refund topay that debt?

A. Past-due child supportB. Federal agency non-tax debtsC. State income tax obligationsD. All of the above

14. The taxpayer is considered to have reasonable cause for the period covered by an automatic extension if at leastwhat percentage of the actual tax liability is paid before the regular due date of the return through withholding,estimated tax payments, or payments made with Form 4868 - Application for Automatic Extension of Time To FileU.S. Individual Income Tax Return?

A. 75%B. 80%C. 85%D. 90%

15. To figure whether she should pay estimated tax for 2016, Jane determines her expected adjusted gross income(AGI) for 2016 will be $82,800. Her AGI for 2015 was $73,700. Her total tax on her 2015 return (Form 1040, line61) was $9,001. Using the 2016 Estimated Tax Worksheet she figures her total 2016 estimated tax to be $11,015.Her tax expected to be withheld in 2016 is $10,000. She will file as head of household and expects no refundablecredits in 2016. All of the following are true regarding Jane’s estimated taxes except:

A. She expects to owe at least $1,000 for 2016 after subtracting her withholding from her expected total taxB. She expects her income tax withholding to be at least 90% of the tax to be shown on her 2016 returnC. Jane does not need to pay estimated taxD. Jane will need to pay estimated tax

16. The taxpayer will owe a penalty for any 2016 payment period for which his or her estimated tax payment plus hisor her withholding for the period and overpayments for previous periods was less than what percent of his or her2015 tax?

A. 20%B. 21%C. 22.5%D. 25%

17. The taxpayer does not owe a penalty for underpayment of the estimated tax if the total tax shown on his or herreturn minus the amount he or she paid through withholding (including excess Social Security and tier 1 railroadretirement (RRTA) tax withholding) is less than what amount?

A. $500B. $1,000C. $1,500D. $2,000

18. Using the short method in Part III of Form 2210, Alvaro determines his total underpayment for 2015 was $2,000.If he meets all other conditions and the entire amount was paid on or after April 15, 2016, what is the amount ofhis underpayment penalty?

A. $0B. $40C. $45D. $52

19. If the taxpayer thinks he or she owes the estimated tax penalty, but does not want to figure it when he or she filesthe tax return, the taxpayer may not have to. Generally, the IRS will figure the penalty for him or her and send abill. The taxpayer only needs to figure his or her penalty in which of the following situations?

A. The taxpayer is requesting a waiver of part, but not all, of the penaltyB. The taxpayer is using the annualized income installment method to figure the penaltyC. The taxpayer is treating the Federal income tax withheld from his or her income as paid on the dates

actually withheldD. All of the above

20. Ray, who is single and 22 years old, was unemployed for a few months during 2015. He earned $6,700 in wagesbefore he was laid off, and he received $1,400 in unemployment compensation afterwards. He had no otherincome. Even though he had gross income of $8,100, he did not have to pay income tax because his gross incomewas less than the filing requirement for a single person under age 65. He filed a return only to have his withheldincome tax refunded to him. In 2016, Ray began regular work as an independent contractor and earned $28,000.Ray made no estimated tax payments in 2016 and he did owe tax at the end of the year. What amount does Rayowe for the underpayment penalty in 2016?

A. $0B. $555C. $558D. $630

21. The payment transaction limit for which a taxpayer can use a debit or credit card to make a payment for a Form1040 tax return, for the current tax year, is how many times per year?

A. 1 time per yearB. 2 times per yearC. 3 times per yearD. 4 times per year

22. What is the user fee when a taxpayer enters into a standard installment agreement or a payroll deductionagreement with the IRS allowing for periodic partial payments of taxes owed?

A. $50B. $125C. $225D. $300

23. If a taxpayer files a claim for a loss from worthless securities or bad debt deduction, he or she must keep recordsthat support items shown for how many years after the return was filed?

A. 5 yearsB. 7 yearsC. 8 yearsD. No limit

Lesson 2 24. Which of the following Federal tax forms could a single filing taxpayer use if his or her taxable income is $175,000?

A. Form 1040EZB. Form 1040AC. Form 1040D. All of the above

25. An individual can use Form 1040NR-EZ instead of Form 1040NR if all of the following items apply except:A. The taxpayer does not claim any dependentsB. The taxpayer cannot be claimed as a dependent on another person's U.S. tax returnC. The taxpayer does not claim any tax creditsD. If the taxpayer was married, he or she claims an exemption for his or her spouse

26. Emily Smith files her tax return on the basis of a fiscal year. Her records show that she received income inNovember 2015 and February 2016 from which there was backup withholding ($100 and $50, respectively). Emilytakes credit for what amount of backup withholding on her tax return for the fiscal year ending September 30,2016?

A. $0B. $50C. $100D. $150

27. Andy originally reported $21,000 as his adjusted gross income on his 2015 Form 1040. He received another FormW-2 for $500 after he filed his return. Which of the following is true?

A. Andy should file another Form 1040 for 2015B. Andy should re-file Form 1040 for 2015C. Andy should include the $500 on his 2016 Form 1040D. Andy should use Form 1040X - Amended U.S. Individual Income Tax Return to correct the Form 1040

28. As a wage earner, the taxpayer pays Federal income tax by having it withheld from his or her pay during the year.The withholding is based on the number of allowances he or she claims when filing Form W-4 - Employee'sWithholding Allowance Certificate, with an employer. All of the following are true regarding the completion of FormW-4 except:

A. A taxpayer can claim any number of allowancesB. If the taxpayer has not changed jobs, he or she generally does not have to give his or her employer a new

Form W-4 each yearC. The taxpayer should try to have his or her withholding match his or her actual tax liabilityD. If an employer cannot withhold enough additional tax from the taxpayer’s wages, he or she may need to

make estimated tax payments

29. Meg Green works in a store and earns $46,000 a year. Her husband, John, works full-time in manufacturing andearns $68,000 a year. In 2016, they will also have $184 in taxable interest and $1,000 of other taxable income.They expect to file a joint income tax return. Meg and John complete Worksheets 1, 4, and 7 of Form W-4. Line5 of Worksheet 7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Allof the following are true regarding their new Form W-4 except:

A. They can divide the $4,459 any way they wantB. They can enter an additional amount on either of their Forms W-4C. They can divide the additional amount between themD. They must apply the additional withholding amount to Meg’s taxable income

30. Which of the following statements regarding tip income is true?A. If the taxpayer is an indirectly tipped employee (for example, a busser or bartender) he or she is not

required to report tips to an employerB. Any tips the taxpayer reported to an employer are to be included in the wages in box 1 (Wages, tips, other

compensation) of his or her Form W-2C. If the only tips a taxpayer receives in a month are charged tips (for example, credit and debit card charges)

distributed to him or her by an employer, he or she not required to report these tips to the employerD. If the only tips a taxpayer receives in a month are cash tips, he or she is not required to report these tips

to the employer

31. Every employer engaged in a trade or business who pays remuneration, including noncash payments of whatamount or more for the year for services performed by an employee must file a Form W-2 - Wage and TaxStatement for each employee (assuming no income, Social Security, or Medicare tax was withheld)?

A. $500B. $600C. $700D. $800

32. In certain situations, the taxpayer will receive two W-2 forms in place of the original incorrect form. This will happenfor which of the following reasons?

A. The taxpayer’s identification number is wrong or missingB. The taxpayer’s name and address are wrongC. The taxpayer received the wrong type of formD. All of the above

33. Company ABC provides a dependent care assistance flexible spending arrangement to its employees through acafeteria plan. In addition, it provides occasional on-site dependent care to its employees at no cost. Emily, anemployee of Company ABC, had $4,500 deducted from her pay for the dependent care flexible spendingarrangement. In addition, Emily used the on-site dependent care several times. The fair market value of the on-site care was $700. Emily's Form W-2 should report $5,200 of dependent care assistance in Box 10. If all otherconditions are met, what is the maximum amount excludable from gross income for the dependent care expensesEmily can report on her tax return?

A. $700B. $2,500C. $4,500D. $5,000

34. All of the following are true regarding the 1099 series forms except:A. If the taxpayer received the types of income reported on some forms in the 1099 series, he or she may

not be able to use Form 1040A or Form 1040EZB. Most forms in the 1099 series should be furnished to the taxpayer by January 31C. The requirement to file 1099 series forms is mandated by the Internal Revenue ServiceD. Estates and trusts that make reportable transactions during the calendar year are not required to file 1099

series forms

Lesson 3 35. Randall lived apart from his spouse from July 10 to December 31, but he was not divorced or legally separated at

the end of the year. What filing status is Randall eligible to use on his tax return?A. SingleB. Head of HouseholdC. Married, filing separatelyD. None of the above

36. If the taxpayer is a U.S. citizen or resident, whether he or she must file a return depends on which of the followingfactors?

A. Gross incomeB. Filing statusC. AgeD. All of the above

37. Eduardo, who is 64 years of age and single, received wages of $15,000, interest income of $3,000, dividends of$2,000, municipal bond interest of $7,000 and state unemployment compensation of $3,000. What is Eduardo’sFederal gross income?

A. $15,000B. $18,000C. $23,000D. $27,000

38. All of the following are requirements to claim head of household filing status except:A. The taxpayer’s parent must live in his or her home at least 6 monthsB. The taxpayer is unmarried or considered unmarried on the last day of the yearC. A qualifying person lived with the taxpayer over half the yearD. The taxpayer’s spouse did not live in his or her home during the last 6 months of the tax year

39. Which of the following are adjustments to Federal gross income?A. Interest paid on delinquent credit card billsB. Interest on a personal loanC. Interest from car paymentsD. Moving expenses

40. If the taxpayer files a separate return in a community property state, he or she and his or her spouse must eachreport half of their combined community income and deductions in addition to their separate income anddeductions. Each of the taxpayers must complete and attach which form to the Form 1040 showing how he or shefigured the amount he or she is reporting on the return?

A. Form 8889B. Form 8917C. Form 8949D. Form 8958

41. Mike is unmarried. His dependent daughter, Sara, lived with him all year. Property taxes of $1,000 and mortgageinterest of $4,000 on the home where he and Sara live are divided equally with his ex-wife. Mike paid the utilitiesof $100 per month. What portion of the yearly household expenses allows him to qualify for head of householdfiling status?

A. $1,000B. $2,500C. $3,700D. $5,600

42. During the current year, Tom Jackson, who is 50 years old and single, maintained his home in which he and hiswidowed father, age 75, resided. His father had $2,650 interest income from a savings account and also received$3,000 from Social Security during the current year. Tom provided 60% of his father’s total support for the currentyear. What is Tom’s filing status for the current year, and how many exemptions should he claim on his tax return?

A. Head of household and two exemptionsB. Head of household and one exemptionC. Single and two exemptionsD. Single and one exemption

43. Mrs. Walter’s husband died in 2014. She has not remarried and has maintained a home for herself and herdependent son, whose personal exemption she can claim. In the summer of 2016, the son was killed in anautomobile accident. What is Mrs. Walter’s filing status for 2016?

A. Married filing separatelyB. SingleC. Qualifying widow with dependent childD. Head of household

44. It is important to use the correct filing status when filing the taxpayer’s income tax return. It can impact the taxbenefits he or she receives, the amount of his or her standard deduction and the amount of taxes he or she pays.All of the following statements regarding filing status are true except:

A. If more than one filing status fits the taxpayer, he or she should choose the one that allows him or her topay the lowest taxes

B. If a married couple decides to file their returns separately, each person’s filing status would generally beMarried Filing Separately

C. The Head of Household status generally applies if the taxpayer is not married and has paid more thanhalf the cost of maintaining a home for him or herself and claims an exemption for a qualifying person

D. Qualifying Widow(er) with Dependent Child status only applies for the year the taxpayer’s spouse passesaway and the taxpayer must have a dependent child and meet certain other conditions

45. Henry Wright retired this year after 30 years of civil service. He and his wife were domiciled in a communityproperty state during the past 15 years. If Mr. Wright receives $1,000 a month in retirement pay, what amount ofthe retirement pay is considered community income?

A. $0B. $100C. $500D. $1,000

46. Herb and Wanda timely filed their 2014 joint income tax return on April 15, 2015. Herb died in March 2016, andthe executor of Herb's will transferred all of the estate's assets to Wanda. In August 2016, the IRS assessed adeficiency for the 2014 return. The items causing the deficiency belong to Herb. All of the following are trueregarding the tax deficiency except:

A. Wanda is solely liable for the deficiency as the spouse of the decedentB. Wanda is relieved of the deficiency under the innocent spouse relief provisionsC. Herb's estate remains solely liable for the deficiencyD. The IRS may collect the deficiency from Wanda to the extent permitted under Federal transferee liability

47. At the time Sherry signed her joint return, she knew that her spouse did not report $5,000 of gambling winnings.The IRS examined the tax return several months after she filed it and determined that her spouse's unreportedgambling winnings were actually $25,000. Sherry established that she did not know about, and had no reason toknow about, the additional $20,000 because of the way her spouse handled gambling winnings. If Sherry meetsthe other requirements, what amount of the understated income will qualify for innocent spouse relief?

A. $2,500B. $5,000C. $10,000D. $20,000

48. Jeff and Riley were married for 35 years when Riley died in July of 2016. The couple have two children who are 6and 10 years old. Which of the following applies to Jeff regarding filing status?

A. Jeff can file using any status he wants for the next 3 yearsB. Since Jeff’s spouse died during the year, he may be entitled to the special qualifying widower with

dependent child benefits for tax year 2017 and 2018C. Since Jeff’s spouse died during the year, he may be entitled to the special qualifying widower with

dependent child benefits for tax year 2016 onlyD. Since Jeff’s spouse died during the year, he may be entitled to the special qualifying widower with

dependent child benefits for tax year 2017 only

49. Aidan is unmarried. His mother, for whom he can claim an exemption, lived in an apartment by herself. She diedon September 2. The cost of the upkeep of her apartment for the year until her death was $6,000. Aidan and hisbrother both paid support and their mother had no income. Aidan would qualify to file as head of household if hepaid what amount of his mother’s support?

A. $1,000B. $1,500C. $2,000D. $4,000

Lesson 4 50. The taxpayer is generally allowed one exemption for him or herself. If married, he or she may be allowed an

exemption for his or her spouse if which of the following is true?A. His or her spouse is considered the taxpayer’s dependentB. The taxpayer and his or her spouse are filing a joint returnC. Another taxpayer is entitled to claim his or her spouse as a dependentD. The taxpayer and his or her spouse file a separate return and his or her spouse had gross income less

than $5,000

51. Charlie and Marianne are both over 65. Their adjusted gross income is $100,000. During the year their 35-year-old single son, Lenny, lived with them while attending college and earned $4,500. Charlie’s mother, Elizabeth,lived with them until June 1 when she was placed in a nursing home for an indefinite period of time to receivemedical care. Elizabeth received no income and was supported solely by Charlie and Marianne. Determine thenumber of exemptions Charlie and Marianne can claim on their joint return.

A. 1B. 2C. 3D. 4

52. In meeting the gross income test for claiming his father as a dependent, James must consider the income receivedby his father. This income included gross rents of $3,000 (expenses were $2,000), municipal bond interest of$1,000, dividends of $1,500, and Social Security of $4,000. What is James' father's gross income for the qualifyingrelative test purposes?

A. $1,500B. $3,000C. $4,500D. $5,500

53. Sally is trying to determine if her sister Heather, for whom she provided more than half of the support in 2016,meets the qualifying relative test. Heather is 35 years old and earned $3,500. Which statement determines ifHeather meets the qualifying relative test?

A. Heather meets the qualifying relative test because she is under the age of 65B. Heather meets the qualifying relative test because she earned less than $4,050C. Heather fails the qualifying relative test because she is over the age of 24D. Heather fails the qualifying relative test because she earned $3,500

54. Drew gets married in January of 2016 and provides support for his stepdaughter Melissa who is 26 years old.Melissa does not earn any income in 2016 since she is a full-time graduate student. Which of the following is trueregarding Melissa as a qualifying relative?

A. Melissa qualifies based on her age of 26B. Melissa qualifies based on her earned incomeC. Melissa qualified because there is no age limit on qualifying relativesD. Both B and C are correct

55. Rick and Tina are married and filing a joint tax return for 2016. Their two children (Sarah, age 13 and Mike, age10) and Tina’s mother lived with them all year. During 2016, Rick and Tina provided all the support for their childrenand more than half of the support for Tina's mother. The children each had interest income of less than $400.Tina's mother received $3,500 from a taxable pension, $2,500 of dividends, and $2,000 of interest income. Howmany exemptions can Rick and Tina claim on their 2016 tax return?

A. 3B. 4C. 5D. 6

56. A taxpayer can claim an exemption for a person who files a joint return if that person and his or her spouse file thejoint return only to claim which of the following?

A. American Opportunity CreditB. Lifetime Learning CreditC. Estimated tax paidD. Interest paid

57. Rubén and Jeanette’s 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and noother income. Neither is required to file a tax return. They do not have a child and they meet all other tests. Taxeswere taken out of their pay so they file a joint return only to get a refund of the withheld taxes. Additionally, Rubénand Jeanette provide more than half of the support for their son and daughter-in-law. How many exemptions canRuben and Jeanette claim on their 2016 income tax return?

A. 1B. 2C. 3D. 4

58. A taxpayer can claim a person as a dependent if the person meets all other tests and is a resident of whichcountry?

A. MexicoB. HondurasC. PanamaD. Guatemala

59. A taxpayer can generally claim all of the following persons as a dependent except:A. U.S. citizen B. U.S. resident alien C. U.S. nationalD. Foreign student brought to the U.S. under a qualified international education exchange program

60. A group can enter into a multiple-support agreement if no one person in the group contributes over whatpercentage of the dependent's support?

A. 30%B. 40%C. 45%D. 50%

61. Ken and his brother, Wes, each provide 20% of their mother's support for the year. The remaining 60% of hersupport is provided equally by two persons who are not related to her. She does not live with either of these twopeople. Who can claim the exemption for Ken and Wes’ mother?

A. KenB. WesC. Ken and WesD. No one can claim the exemption

62. A child is treated as a qualifying child or a qualifying relative of the noncustodial parent if all other criteria are metand the noncustodial parent provides at least what amount for the child’s support during the year?

A. $250B. $400C. $500D. $600

63. Tim and Gail are divorced. In 2016, their child lived with Tim 190 nights and with Gail 165 nights. Their child alsospent ten nights with Tim’s parents during the summer. Who is the custodial parent?

A. TimB. GailC. Both Tim and GailD. Neither Tim nor Gail

64. If a child is a qualifying child of two persons, only one person can actually treat the child as a qualifying child andtake all of the following tax benefits (provided the person is eligible for each benefit) except:

A. The exemption for the childB. The Additional Child Tax CreditC. The Child Tax CreditD. The Credit for Child and Dependent Care Expenses

65. Lisa and her 2-year-old daughter, Courtney, lived with Lisa’s mother all year. Lisa is 25 years old and unmarried.Her mother's AGI is $18,000. Courtney's father did not live with Lisa or her daughter and she has not signed Form8832 (or a similar statement) to release the child's exemption to the noncustodial parent. If Lisa does not claimCourtney as a qualifying child, her mother can treat her as a qualifying child to claim certain tax benefits unlessLisa has an adjusted gross income (AGI) of what amount?

A. $5,000B. $7,500C. $10,000D. $20,000

66. Veronica has adjusted gross income of $310,350 in 2016 and she files as head of household and claims twopersonal exemptions: one for herself plus one for her daughter. For 2016, Veronica's personal exemptions arereduced by what amount?

A. $0B. $800C. $1,620D. $2,100

67. Sean and Dianne are a married couple filing jointly. For 2016, their adjusted gross income (AGI) is $452,000. For2016, Sean and Dianne’s personal exemptions total what amount?

A. $0B. $5,200C. $7,300D. $8,000

68. Larry, 46, and Donna, 33, are filing a joint return for 2016. Neither is blind, and neither can be claimed as adependent. They decide not to itemize their deductions. Their standard deduction is what amount?

A. $9,100B. $12,600C. $13,600D. $14,800

69. Terry, age 67, and his wife, Diana, age 61, are planning to file a joint return for 2016. Neither is blind nor can beclaimed as a dependent. If they do not itemize deductions their standard deduction is what amount?

A. $9,100B. $12,600C. $13,850D. $14,800

70. What is the amount of the 2016 standard deduction for a head of household taxpayer, who is 72 years old andcompletely blind?

A. $12,400B. $12,600C. $13,600D. $14,800

71. Matt is 46 years old and has a certified statement from his optometrist on December 1, 2016, that confirms he cansee no better than 20/250. For tax year 2016, which is correct?

A. Matt is not eligible for the higher standard deduction for blindness as he is only partially blindB. Matt is eligible for the higher standard deduction for blindness in 2016C. Matt is eligible for the higher standard deduction for blindness in 2017, the first full year of his blindnessD. Matt is not eligible for the higher standard deduction for blindness as he can see better than 20/300

72. When determining the standard deduction for an individual who can be claimed as a dependent on anotherperson's tax return earned income is defined as all of the following except:

A. WagesB. TipsC. InterestD. Fellowship grant that the taxpayer must include in his or her gross income

73. Michael is single. His parents can claim an exemption for him on their 2016 tax return. He has interest income of$780 and wages of $150. He has no itemized deductions. What is Michael’s standard deduction?

A. $150B. $350C. $500D. $1,050

74. A taxpayer’s standard deduction is zero and he or she should itemize any deductions for all of the following reasonsexcept:

A. He or she is filing a tax return for a short tax year because of a change in his or her annual accountingperiod

B. He or she is a nonresident alien during the yearC. His or her filing status is married filing separately, and the taxpayer’s spouse itemizes deductions on his

or her returnD. An exemption for the taxpayer can be claimed on another person's return

75. Jody, age 42, is married filing separately. Her husband, Eric, age 45, itemizes deductions on his return. What isJody’s standard deduction?

A. $0B. $6,300C. $9,300D. $12,600

Lesson 5 76. Taxable earned income includes which of the following?

A. Interest and dividendsB. Unemployment benefitsC. AlimonyD. Tips

77. While on vacation in Las Vegas Jennifer, who is from Utah, wins a progressive jackpot playing cards worth $15,875at the Casino Royale. What implication does she encounter when she goes to collect her prize?

A. The State of Utah withholds 25% of her winningsB. The Casino Royale withholds 15% of her winnings when she collects her prizeC. The Casino Royale withholds 25% of her winnings when she collects her prizeD. The Casino Royale withholds 30% of her winnings when she collects her prize

78. Anne is a full-time student at UCLA buts works part-time as a waitress at a diner near her dormitory. She earnsan hourly wage but also receives tips as part of her compensation. Last month she collected $51 in tips whileworking night shifts in the diner. What obligation does she have regarding these tips?

A. Anne must report the tips to her employer because they exceeded $20 for the monthB. Anne does not have to report the tips to her employer because they did not exceed $100 for the monthC. Anne must report the tips to her employer because they exceeded $50 for the monthD. Anne’s employer is responsible for keeping track of tips

79. Which of the following is canceled debt that qualifies for exception to inclusion in gross income?A. Cancellation of qualified farm indebtednessB. Debt canceled during insolvencyC. Cancellation of qualified real property business indebtednessD. A qualified purchase price reduction given by a seller

80. A trust’s fiduciary (or one of the joint fiduciaries) must file Form 1041 for a domestic trust taxable under Section641 that has a gross income for the tax year of what amount?

A. Gross income of $600 or moreB. Gross income of $700 or moreC. Gross income of $800 or moreD. Gross income of $900 or more

81. The IRS defines sick pay as any amount paid under a plan for employees because of an employee’s temporaryabsence from work due to injury, sickness or disability. The sick pay may be paid by either the employer or by athird party, such as an insurance company. Based on this definition, the IRS classifies which of the followingbenefits paid to employees as sick pay?

A. Long-Term Disability Insurance (LTD)B. Short-Term Disability Insurance (STD)C. State Disability Insurance (SDI)D. All of the above

82. A taxpayer must include in his or her income sick pay benefits received from all of the following payers except:A. A welfare fundB. A state sickness or disability fundC. An association of employers or employeesD. An insurance company, if the taxpayer paid the premiums on the accident or health insurance policy

83. Paul Casey retired from the U.S. Navy in 2009. He receives a military pension based on his years of service. OnAugust 3, 2015, he received a determination of service-connected disability retroactive to 2009. Which of thefollowing is true regarding Paul’s claim for a refund for taxes paid on his pension?

A. Paul cannot file a claim a refund for the taxes paid on his pension for any yearB. Under the special limitation period, Paul can file a claim for a refund for taxes paid on his pension for 2011

as long as he files the claim by August 3, 2016C. Paul can file a claim for a refund for taxes paid on his pension for 2009 and 2010D. Paul can only file a claim for a refund for taxes paid on his pension for 2014

84. Sally receives $300 each month for sick pay from her employer for the three months she is on sick leave. Whatamount will she need to include as income on her tax return?

A. $0B. $300C. $600D. $900

85. Herman is covered by a cafeteria plan by his employer. His adjusted gross income (AGI) is $100,000. He paidunreimbursed medical premiums in the amount of $10,500 and he itemizes deductions. What amount will Hermanbe able to deduct for his medical insurance premium expenses?

A. $500B. $1,000C. $3,000D. $5,250

86. Carol pays $500 a month for the premiums on her health insurance policy and receives a monthly reimbursementof the same amount from her employer and is required to use it for those premiums. What amount of thereimbursement is considered taxable income?

A. $0B. $100C. $250D. $275

87. Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watchvalued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500.Assuming that the requirements for qualified plan awards are otherwise satisfied, Ben must include what amountin his income?

A. $0B. $150C. $1,600D. $1,750

88. Penelope Summers received certain income benefits in 2016. She received $1,400 of state unemploymentinsurance benefits, $2,000 from a Federal Unemployment Trust Fund and $3,700 workers’ compensation receivedfor an occupational injury. What amount of the compensation must Penelope include in her income?

A. $1,400B. $3,400C. $3,700D. $5,700

89. Perry returns to work after qualifying for workers' compensation. He receives $1,000 a month for performing lightduties. What percentage of his salary payments is taxable?

A. 0%B. 50%C. 75%D. 100%

90. Lana receives a $3,000 disability payment from an accident insurance plan paid for by her employer. What amountwill she need to include as income on her tax return?

A. $0B. $1,000C. $2,000D. $3,000

91. A minister performing ministerial services is taxed on wages, offerings, and on any fees received for performingwhich of the following services?

A. MarriagesB. BaptismsC. FuneralsD. All of the above

92. Under what circumstance would a taxpayer not include any amounts he or she receives for his or her disabilityfrom a health or accident insurance plan as income on his or her tax return?

A. The accident or health insurance plan was paid for entirely by his or her employerB. He or she pays the entire cost of a health or accident insurance planC. Both the taxpayer and his or her employer have paid the premiums for the planD. He or she pays the premiums of a health or accident insurance plan through a cafeteria plan at his or her

place of employment, and the amount of the premium was not included as taxable income to the taxpayer

93. Jim has a primary residence that he uses as his home. Twice a year he rents it out for local sporting events for atotal of 7 days in each instance. How is Jim’s home treated for tax purposes given these circumstances?

A. Jim must treat his home as a rental because he rents it for more than 10 days a yearB. Jim must treat his home as a rental because he rents it for more than 12 days a yearC. Jim must treat his home as a rental because he rents it for at least 14 days a yearD. Jim uses the dwelling as a home and rents it for less than 15 days during the year so Jim may treat the

home as his main home and there is no tax implication

94. Which of the following are examples of expenses that may be deducted from total rental income?A. Fixing leaks in the plumbingB. Putting a recreation room in an unfinished basementC. Paneling a den that previously had wallpaperD. Adding a bathroom or a spare bedroom

95. On April 6, 2016 Ben purchased a house to use as residential rental property. He made extensive repairs to thehouse and had it ready for rent on July 5, 2016. He began to advertise the house for rent in July and actuallyrented it beginning September 1, 2016. When is the house considered to be placed in service for the purposes ofrental expenses?

A. January 1, 2016B. April 6, 2016C. July 5, 2016D. September 1, 2016

Lesson 6 96. What form of income is not specified by contract and is not necessarily paid at regular intervals, but depends upon

the decision of the corporate directors to make a distribution?A. InterestB. DividendsC. CommissionsD. Salaries

97. Mike owns Big Box Co. common stock, which he bought in 1985. He was paid a dividend of $500 for the year.These qualified dividends are generally taxed at what tax rate?

A. Individual tax rateB. Long-term capital gains tax ratesC. Corporate tax ratesD. All of the above

98. Some dividends may not be qualified dividends even if they are shown in box 1b of Form 1099-DIV. Which of thefollowing is a qualified dividend?

A. Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U.S. buildingand loan associations, U.S. savings and loan associations, Federal savings and loan associations, andsimilar financial institutions

B. Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during thecorporation's tax year in which the dividends were paid or during the corporation's previous tax year

C. Dividends paid from a stock held for more than 60 days during the 121-day period that begins 60 daysbefore the ex-dividend date

D. Dividends paid by a corporation on employer securities held on the date of record by an employee stockownership plan (ESOP) maintained by that corporation

99. If a taxpayer uses the cash basis method, when would he or she report interest income?A. In the year receivedB. The year it is earnedC. When the funds are withdrawnD. When entered in passbook

100. On September 1, 2014, Steve loaned Brett $2,000 at 12% interest compounded annually. Steve is not in thebusiness of lending money. The note stated that principal and interest would be due on August 31, 2016. In 2016,Steve received $2,508.80 ($2,000 principal and $508.80 interest). Steve uses the cash method of accounting.What amount must Steve include in income on his 2016 income tax return?

A. $0B. $508.80C. $1,254.40D. $2,508.80

101. Hillary deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimumdeposit required to buy a 6-month certificate of deposit. The certificate earned $575 at maturity in 2016, but sheonly received $265, which represented the $575 she earned minus $310 interest charged on the $5,000 loan. Thebank gives Hillary a Form 1099-INT for 2016 showing the $575 interest she earned. The bank also gives her astatement showing that she paid $310 interest for 2016. What amount must Hillary include in her income?

A. $0B. $265C. $310D. $575

102. Which of the following, if any, are dividends that are qualified dividends?A. Capital gain distributionsB. Dividends paid on deposits from a credit unionC. Dividends paid by a corporation on employer securities held on the date of record by an employee stock

ownership plan (ESOP) maintained by that corporationD. None of the above

103. Allison opens a savings account at her local bank and deposits $800. The account earns $20 interest. She alsoreceives a $15 calculator. No other interest is credited to her account during the year and the Form 1099-INT shereceives shows $35 interest for the year. What amount of interest income must Allison report on her tax return?

A. $0B. $10C. $15D. $35

104. Sylvia bought stock in 2003 for $100. In 2006, she received a non-dividend distribution of $80. She did not includethis amount in her income, but she reduced the basis of her stock to $20. She received a non-dividend distributionof $30 in 2016. What amount must Sylvia report as a long-term capital gain for 2016?

A. $10B. $20C. $30D. $80

105. Interest income can be excluded on qualified U.S. Savings Bonds, either a series EE bond issued after 1989 ora series I bond, redeemed for which of the following reasons?

A. Qualified higher education expensesB. Transfer to a trustC. Ownership transferD. Distribution from a retirement or profit-sharing plan

106. Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokeragehouses. Generally, amounts a taxpayer receives from money market funds should be reported as which of thefollowing?

A. InterestB. DividendsC. Short-term capital gainD. Long-term capital gain

107. The taxpayer generally must include interest in his or her income when he or she actually receives it for acertificate of deposit or any other deferred interest account that pays interest in a single payment at maturity andmatures in how many year(s) or less?

A. One yearB. Two yearsC. Three yearsD. Four years

108. The discount on which of the following discounted debt instruments is generally not taxable?A. U.S. Treasury bonds B. Corporate bondsC. Municipal bondsD. Certificates of deposit

109. The interest on which of the following dividends is generally not taxable?A. Exempt-interest dividends from a mutual fundB. Cooperative banks dividendsC. Credit unions dividendsD. Federal savings and loan associations dividends

110. Nonresident aliens are not taxed on certain kinds of interest income provided that such interest income arisesfrom which of the following sources?

A. U.S. savings and loan association B. U.S. credit union C. U.S. insurance companyD. All of the above

111. Interest on a state or local government obligation may be tax exempt for all of the following except:A. Interest on a debt evidenced only by an ordinary written agreement of purchase and saleB. Interest paid by an insurer on default by the stateC. Interest paid by an insurer on default by a political subdivisionD. Interest paid on Federally guaranteed state obligations

112. $100 of interest was credited on Linda’s frozen deposit during the year. She withdrew $80 but could not withdrawany more as of the end of the year. Linda must include what amount in her income for the current tax year?

A. $0B. $20C. $80D. $100

113. A payor is required to file Form 1099-DIV - Dividends and Distributions, for each person:A. To whom he or she has paid dividends (including capital gain dividends and exempt-interest dividends)

and other distributions on stock of $500 or moreB. For whom he or she has withheld and paid any foreign tax on dividends and other distributions on stock

of $500 or moreC. For whom he or she has withheld any Federal income tax on dividends under the backup withholding

rules of $500 or moreD. None of the above

Lesson 7 114. Laura sold her house. Her amount realized after selling expenses was $385,000. At the time of the sale, the

adjusted basis for the house was $300,000. If all of other conditions are met, what is the gain on the sale of herhouse?

A. $0B. $42,500C. $85,000D. $300,000

115. Which of the following statements is false regarding Form 8949 - Sales and Other Dispositions of Capital Assets?A. The taxpayer uses Form 8949 to report sales and exchanges of capital assetsB. Form 8949 allows the taxpayer and the IRS to reconcile amounts that were reported to him or her and the

IRS on Form 1099-B or 1099-S (or substitute statement) with the amounts he or she reports on his or herincome tax return

C. If all Forms 1099-B the taxpayer received (and all substitute statements) show basis was reported to theIRS and if no correction or adjustment is needed, the taxpayer must always file Form 8949 and attach astatement of these transactions

D. Corporations and partnerships use Form 8949 to report undistributed long-term capital gains from Form2439

116. The individual taxpayer uses Schedule D for all of the following except:A. To report nonbusiness bad debtsB. To figure the overall gain or loss from transactions reported on Form 8949C. To report a gain from Form 2439D. To report a gain or loss from Form 4684

117. The taxpayer should keep accurate records that show the basis of a property and, if applicable, the adjustedbasis of the property should show which of the following?

A. The purchase priceB. The cost of improvementsC. DepreciationD. All of the above

118. Mateo bought machinery on December 4, 2015. On June 4, 2016, he traded this machinery for other machineryin a nontaxable exchange. On December 6, 2016, Mateo sold the machinery he got in the exchange. His holdingperiod for this machinery began on which date?

A. December 4, 2015B. December 5, 2015C. June 4, 2016D. June 5, 2016

119. Which of the following is considered a taxpayer’s capital asset?A. Taxpayer’s houseB. Real estate used in the trade or businessC. Depreciable property used in the trade or businessD. Supplies regularly used in the trade or business

120. The taxpayer can elect to treat musical compositions and copyrights in musical works as capital assets when heor she sells or exchange them if certain conditions apply. The taxpayer must make the election within what timeperiod of the due date (including extensions) of the income tax return for the tax year of the sale or exchange?

A. On or before the due dateB. 30 days after the due date of the returnC. 90 days after the due date of the returnD. 6 months after the due date of the return

121. In 2011 Lois purchased a painting for $5,000 at a local art gallery. She decided to sell the painting in 2016 andfinds a buyer willing to pay $12,000. What is the maximum capital gains rate and maximum amount she may owe?

A. 22% capital gains rate and $1,540 owedB. 24% capital gains rate and $1,680 owedC. 26% capital gains rate and $1,820 owedD. 28% capital gains rate and $1,960 owed

122. Gwen inherited 100 shares of SuperShoes stock when her mother died on October 21, 2014; the fair marketvalue of the stock was $20 per share. Her mother paid $200 per share when she purchased the stock March 1,2005. If Gwen sells all 100 shares for $50 per share on July 3, 2016, how should she report the sale on her incometax return for 2016?

A. $3,000 long-term capital gainB. $3,000 short-term capital gainC. $12,000 long-term capital gainD. $15,000 short-term capital loss

123. John and Jill Jones sold stock that resulted in a short-term capital loss of $5,000. They had no other capitaltransactions during the year. Their taxable income was $10,000. How much of the capital loss is deductible ontheir joint return and how much must be carried over to the next year?

A. $0 loss; $5,000 carryoverB. $1,500 loss; $1,500 carryoverC. $3,000 loss; $0 carryoverD. $3,000 loss; $2,000 carryover

124. Brandt exchanged his collection of stamp albums for a tractor from Virgil in September 2016. The fair marketvalue of the stamp albums is $3,000. The tractor has the same $3,000 fair market value. The collection of stampscost Brandt $2,000 over the years to assemble. How should Brandt report this transaction on his 2016 tax return?

A. He reports it as a capital transaction with a $0 gainB. He is not required to report it because it is not taxableC. He attaches a statement to his return explaining that the exchange was for something of equal valueD. He reports a $1,000 capital gain

125. On a joint return in most situations, what is the maximum amount of gain a taxpayer could exclude from the saleof his or her home?

A. $200,000B. $300,000C. $400,000D. $500,000

126. Christian owns two homes, one in Oregon and one in New Hampshire. In 2012 and 2013, he lived in the Oregonhome. In 2014 and 2015, he lived in the New Hampshire home. In 2016, he lived again in the Oregon home.Which of the following statements is true regarding Christian’s eligibility to exclude the gain on the sale of hishomes in 2016?

A. He would be eligible to partially exclude the gain from the sale of the Oregon home in 2016B. He would not be eligible to exclude the gain from the sale of the New Hampshire home in 2016C. He would not be eligible to exclude the gain from the sale of the Oregon home in 2016D. He would be eligible to exclude the gain from the sale of either home in 2016

127. Naomi bought and moved into a house in July 2012. She lived there for 13 months and then moved in with afriend. She moved back into her own house in 2015 and lived there for 12 months until she sold it in July 2016.Which of the following is true regarding Naomi’s exclusion for the sale of her home?

A. Naomi meets the ownership test but not the use testB. Naomi meets the use test but not the ownership testC. Naomi meets both the ownership and use testsD. Naomi does not qualify for a partial or the entire exclusion

128. Greg bought a home on May 5, 2011. After living in it for 6 months, he moved out. He never lived in the homeagain and sold it at a gain on June 28, 2016. Greg did not sell the home because of change of employment, healthissues, or any unforeseeable event. Based on the ownership and use tests which of the following is true regardingGreg’s exclusion of the gain on the sale of his home?

A. He is entitled to claim the entire maximum exclusion of gain from the saleB. He is entitled to claim a reduced exclusion of gain from the saleC. He cannot exclude any part of his gain on the saleD. The sale of Greg’s home is considered a like-kind exchange.

129. To “elect out” of the installment method of payment, a taxpayer reports the full amount of the gain on Form 8949- Sales and Other Dispositions of Capital Assets on a timely filed return (including extensions) for the year of thesale. If the original return was filed on time, a taxpayer can make the election on an amended return filed no laterthan how many months after the due date of the return (excluding extensions)?

A. 3 monthsB. 4 monthsC. 5 monthsD. 6 months

Lesson 8 130. The income earned from a sole proprietorship is subject to Medicare and Social Security contributions. What is

the wage base limit for the 2.9% Medicare tax?A. $55,050B. $117,000C. $118,500D. No Limitation

131. Which of the following statements about taxation of a sole proprietorship is correct?A. Any income to the business is treated as income to the business ownerB. It may be possible to defer income and therefore income tax to a different tax yearC. They are not required to make quarterly payments of estimated tax liability, to both the state and to the

Federal governmentD. The income earned from a sole proprietorship is not subject to income and self-employment tax

132. In which of the following situations does a taxpayer have to recapture the depreciation deduction (meaning he orshe includes in income part or all of the depreciation he or she deducted in previous years)?

A. If his or her business use of listed property falls to 50% or less in a tax year after the tax year, he or sheplaced the property in service

B. If he or she takes a Section 179 deduction for an asset and before the end of the asset's recovery periodthe percentage of business use drops to 50% or less

C. If he or she sells or exchanges depreciable property at a gainD. All of the above

133. When determining whether an individual is an independent contractor or an employee, which of the following canbe used to make this determination?

A. If the individual is compensated for services provided then they are an employeeB. If the individual is compensated for services provided then they are an independent contractorC. If the individual withholds taxes on a payment for services then the individual is an independent contractorD. If an employer withholds income taxes, withholds and pays Social Security and Medicare taxes, and pays

unemployment tax on wages paid, then the individual is an employee

134. Generally, if the taxpayer is an independent contractor he or she is considered self-employed, and should reportincome (nonemployee compensation) on which form?

A. Schedule A (Form 1040)B. Schedule B (Form 1040)C. Schedule C (Form 1040)D. Schedule D (Form 1040)

135. When considering whether an activity is a hobby or a business, which of the following is correct?A. A hobby is defined as an activity done regularly in one's leisure time for pleasure and does not result in a

profitB. Schedule C can be used to report income derived from a hobbyC. An activity is a business if it makes a profit during at least three of the last five tax years, including the

current yearD. All of the above

136. Dustin is a sole-proprietor who owns a small business that makes business cards for other companies. He startedthe company in 2016 and had $4,800 in total business expenses for the year. Which of the following applies toDustin’s small business?

A. Dustin must use Schedule C when filing the business returnB. Dustin can use Schedule C-EZ because he had less than $5,000 of expensesC. Dustin can use Schedule A because he had less than $5,000 of expensesD. Dustin does not have to file a Schedule C or C-EZ because his business had less than $5,000 in expenses

137. Which of the following statements is correct regarding Schedule C and C-EZ?A. Small businesses with business expenses of $7,000 or less may be able to file Schedule C-EZ instead of

Schedule CB. Schedule C is used only to report profit from a businessC. Schedule C is used to report profit or loss from a businessD. Small businesses with less than 10 employees should use Schedule C-EZ

138. Kirk decides to use the simplified option for his home office deduction on his 2016 income tax return. He figureshe uses 200 square feet of his home for business. What is his allowable home office deduction?

A. $0B. $600C. $1,000D. $2,000

139. Liberty is calculating her cost of goods sold to enter on her Schedule C. Her inventory at the beginning of theyear amounted to $50,000. Her cost for labor and materials was $20,000. She had no other costs. Her inventoryat the end of the year totaled $58,000. What amount for cost of goods sold will Liberty enter on her Schedule C?

A. $12,000B. $20,000C. $25,000D. $50,000

140. A taxpayer can generally deduct premiums he or she pays for all of the following kinds of insurance related tobusiness except:

A. Medical and dental insurance for him or herself and his or her familyB. Liability insuranceC. Insurance to secure a loanD. Workers’ Compensation insurance

141. In 2016, Noelle, a self-employed landscaper who uses the cash method of accounting, signed a 3-year healthinsurance contract. She paid premiums of $500 for 2016, $550 for 2017, and $600 for 2018 when she signed thecontract. What amount can she deduct for the premiums on her 2016 income tax return?

A. $0B. $250C. $500D. $1,050

142. The general rule is that taxpayers who use a part of the home for legitimate business purposes can deductexpenses allocable to that portion of the home used for those business purposes. To meet this qualification all ofthe following must apply except:

A. Part of the home is exclusively used on a regular basis as the principal place of business for any of thetrades or businesses

B. Part of the home is exclusively used on a regular basis as a place of business used by patients, clients orcustomers to meet or deal with the taxpayer in the normal course of the trade or business

C. Part of the home is exclusively used on a regular basis in connection with the trade or business if it is aseparate structure that is not attached to the home

D. Part of the home is used on a regular basis as a home office and family room used by the rest of thefamily for entertainment

143. Travel expenses are the ordinary and necessary expenses of traveling away from home for business. Which ofthe following kinds of travel expenses are not applicable for deduction on Schedule C or C-EZ?

A. Cost of a hotel stay in the general area in which the taxpayer’s business is locatedB. Cost of travel by car between the taxpayer’s tax home and the out-of-town business destinationC. Cost of business calls while on the business tripD. Costs of dry cleaning and laundry while on the business trip

144. The taxpayer can deduct any expenses paid or incurred for a membership at all of the following organizationsexcept:

A. Civic or public service organizationsB. Airline and hotel clubsC. Professional organizations (such as bar and medical associations)D. Trade associations

145. Alicia’s home is used as a daycare Monday through Friday for 12 hours per day for 250 days during the year. Itis also used on 50 Saturdays for 8 hours per day. What is the total number of hours that the house was used fordaycare during the year that Alicia can include on Form 8829 - Expenses for Business Use of Your Home?

A. 0 hoursB. 1,700 hoursC. 3,000 hoursD. 3,400 hours

146. Mona is self-employed working as a fortune teller. Her net income from this activity was $250 in tax year 2016.Which of the following is true regarding her self-employment (SE) tax for the year?

A. She has SE tax because she was self-employedB. She has SE tax because net income was earnedC. She has no SE tax since net income was less than $400D. She has no SE tax because net income was less than $1,000

147. All of the following are true when reporting car and truck expenses on Schedule C except:A. Placing the company logo, displays, or advertisements on a vehicle changes the use from personal to

business useB. If the taxpayer owns or leases five or more cars that are used for business at the same time, he or she

must use the actual expense methodC. If the taxpayer takes the standard mileage rate, multiply the number of business miles driven by 54 centsD. If the taxpayer takes the standard mileage rate, add to the total amount any amounts for parking fees and

tolls

148. Harvey is the sole proprietor of a flower shop. He drove his van 20,000 miles during the year. 16,000 miles werefor delivering flowers to customers and 4,000 miles were for personal use. Instead of figuring actual expenses,Harvey decides to use the standard mileage rate to figure the deductible costs of operating his van. What amountcan Harvey claim as the cost of operating his van as a business expense?

A. $0B. $4,600C. $8,640D. $9,820

149. Carl, a single filer, has $145,000 in self-employment income and $130,000 in wages. Carl’s wages do not exceed$200,000. Carl’s employer did not withhold Additional Medicare Tax. Therefore, Carl is liable to pay AdditionalMedicare Tax on what amount of self-employment income?

A. $0B. $75,000C. $130,000D. $145,000

150. When determining earnings subject to SE tax, the taxpayer may want to use one of the optional methods whetherthey have a small net profit or loss and which of the following conditions applies?

A. They are eligible to receive the Additional Child Tax CreditB. They can claim a Credit for Dependent or Child Care ExpensesC. Taxpayer wants to receive a Credit for Social Security Benefit CoverageD. All of the above

151. Victor has a farm that he operates. He also derives $7,000 per year in income from nonfarm activities. Whatmethod or methods can Victor use to report the income from his nonfarm activities?

A. Victor can use the farm and nonfarm methods whichever is most beneficial to himB. Victor must use the farm-only method for all income earnedC. Victor must use the nonfarm method for all income earnedD. Victor can use the nonfarm optional method for earnings that do not come from farming activities and only

if he has used this method less than 5 years

152. Which of the following business expenses related to advertising is not allowed as a deductible expense?A. Promoting a business through paid advertisements on the internetB. Business cardsC. Promotional itemsD. Advertising with the intention of influencing political legislation

Lesson 9 153. Jessica paid $1,500 for electricity during the tax year. She used one-third of the electricity for personal purposes

and two-thirds for farming. Under these circumstances, Jessica can deduct what amount of her electricity expenseas a farm business expense?

A. $0B. $500C. $750D. $1,000

154. Phil used his rental property for personal use for 7 days and rented it for 63 days. In most cases, what percentageof his expenses are not rental expenses and cannot be deducted on Schedule E?

A. 10%B. 20%C. 50%D. 90%

155. Kai signs a 10-year lease to rent a property. In the first year, he receives $5,000 for the first year's rent and$5,000 as rent for the last year of the lease. What amount must Kai include in income in the first year?

A. $0B. $2,500C. $5,000D. 10,000

156. Larry rents his townhouse to Sue for $1,400 a month. At the beginning of the lease he asked for a $2,000 securitydeposit. When Sue moved out at the end of the lease Larry used $1,400 of the security deposit for the last month’srent. What amount of the security deposit will Larry need to include in rental income on his tax return?

A. $0B. $1,000C. $1,400D. $2,000

157. Wendy is a single taxpayer with adjusted gross income of $92,300 for tax year 2016. She has rental income of$55,000 and rental expenses of $80,000. What can Wendy report on her tax return given this situation?

A. She can deduct $10,000 because her rental expenses exceeded her rental incomeB. She can deduct $15,000 because her rental expenses exceeded her rental incomeC. She can deduct $25,000 because her rental expenses exceeded her rental incomeD. She can deduct $30,000 because her rental expenses exceeded her rental income

158. A taxpayer should keep adequate records to prove his or her expenses or have sufficient evidence that willsupport his or her own statement. This documentary evidence ordinarily will be considered adequate if it showsall of the following except:

A. The amount of the expenseB. The dateC. The placeD. The method of payment

Lesson 10 159. A taxpayer can depreciate property under all of the following circumstances except:

A. He or she made a down payment to purchase rental property and assumed the previous owner's mortgageB. He or she bought a new van that he or she will use only for his or her courier business and he or she will

be making payments on the van over the next 5 yearsC. He or she bears the burden of exhaustion of the capital investment in a leased propertyD. He or she leases property from someone to use in his or her trade or business or for the production of

income

160. To figure the basis of property a taxpayer receives as a gift, it is necessary to have which of the following?A. Adjusted basis to the donor just before it was given to the taxpayerB. The Fair Market Value (FMV) at the time it was given to the taxpayerC. Any gift tax paid on the propertyD. All of the above

161. Alyssa is an attorney. She maintains a library for use in her profession. She also buys technical books andjournals for use in her business. Which of the following is true regarding Alyssa’s depreciable property?

A. She can depreciate any books and journals that have a useful life that extends substantially beyond theyear she placed them in service

B. She cannot depreciate her libraryC. She can depreciate all of her technical books and journals regardless of useful lifeD. She can depreciate her library but none of her technical books and journals

162. Dave buys a building for $20,000 cash and assumes a mortgage of $80,000 on it, what is his basis in theproperty?

A. $0B. $20,000C. $80,000D. $100,000

163. Under final regulations, a self-employed taxpayer may elect to apply a de minimis safe harbor to amounts he orshe paid to acquire or produce tangible property to the extent such amounts are deducted by him or her forfinancial accounting purposes or in keeping his or her books and records. For taxable years beginning on or afterJanuary 1, 2016, the Internal Revenue Service increased the de minimis safe harbor threshold to what amountper invoice or item for self-employed taxpayers without applicable financial statements?

A. $500B. $1,000C. $2,000D. $2,500

164. Ken Larch is a tailor. He bought two industrial sewing machines from his father. He placed both machines inservice in the same year he bought them. All of the following are true except:

A. The sewing machines do not qualify as Section 179 propertyB. Ken cannot claim a Section 179 deduction for the cost of these machinesC. Ken can claim a partial Section 179 deductionD. The asset must be used at least 50% of the time for business in the first year it is placed in service to

qualify for a Section 179 deduction

Lesson 11 165. Sandy is a single taxpayer who collected Social Security benefits of $22,000. The Social Security benefits were

her only income for the tax year. What is the amount of taxes she will owe when she files her income tax return?A. $0B. $2,200C. $5,500D. $11,000

166. In 2015, Joelle received $3,000 in Social Security benefits, and in 2016 she received $2,700. In March 2016, theSocial Security Administration (SSA) notified her that she should have received only $2,500 in benefits in 2016.During 2016, she repaid $500 to SSA. The Form SSA-1099 she received for 2016 shows what amount for her netbenefits?

A. $500B. $2,200C. $2,500D. $2,700

167. George, who is 34 years old and single, earns $24,000 in 2016. His IRA contributions for 2016 are limited to whatamount?

A. $0B. $1,000C. $3,500D. $5,500

168. Danny, an unmarried college student working part-time, earns $3,500 in 2016. His IRA contributions for 2016 arelimited to what amount?

A. $0B. $1,000C. $3,500D. $5,500

169. Wayne, age 53, and Janet, age 51, are married and file a joint return. Wayne is covered by an employerretirement plan. In 2016, Wayne had compensation of $50,000 and Janet had compensation of $175,000. TheirAGI was $200,000. What is the amount of the deductible contribution that can be made for Janet to her traditionalIRA for 2016?

A. $0B. $2,500C. $3,000D. $5,000

170. The pension or annuity payments that a taxpayer receives are fully taxable if he or she has no cost in the contractbecause of which of the following situations?

A. The taxpayer did not pay anything or is not considered to have paid anything for the pension or annuity.Amounts withheld from his or her pay on a tax-deferred basis are not considered part of the cost of thepension or annuity payment

B. The taxpayer’s employer did not withhold contributions from his or her salaryC. The taxpayer received all of his or her contributions tax free in prior yearsD. All of the above

171. Sarah, age 52, is married with no taxable compensation for 2016. She and her husband reported taxablecompensation of $60,000 on their 2016 joint income tax return. Sarah may contribute what amount to her IRA for2016?

A. $0B. $1,000C. $5,500D. $6,500

172. Elizabeth works for the Rockland Quarry Company, a small business with 50 employees. Rockland has decidedto establish a SIMPLE IRA plan for its employees and will match its employees’ contributions dollar-for-dollar upto 3% of each employee’s compensation. Elizabeth has a yearly compensation of $50,000 and contributes 5% ofher compensation to her SIMPLE IRA. What is the total contribution to Elizabeth’s SIMPLE IRA for 2016?

A. $0B. $2,000C. $2,500D. $4,000

173. Joe is 57 years old and unemployed. He decides to take an early withdrawal or distribution from his IRA to makeends meet. Which of the following apply to Joe as a result of this transaction?

A. Joe incurs a 10% Federal penalty because he withdrew funds for an unqualified purpose before he was 59½ years old

B. Joe incurs a 15% Federal penalty because he withdrew funds for an unqualified purpose before he was 59½ years old

C. Joe incurs a 20% Federal penalty because he withdrew funds for an unqualified purpose before he was 59½ years old

D. Joe does not incur a penalty because he is over the age of 55

174. Peter is 38 years old and has just purchased his first home. In order to come up with the down payment hewithdraws $10,000 from a traditional IRA account he set up when he was 18. Which of the following applies toPeter as a result of this transaction?

A. He incurs a 10% Federal penalty for withdrawing funds before he is 59 ½ years oldB. He incurs no penalty since he is a first time homebuyer, used the funds for this purpose, and did not

exceed the maximum withdrawal amount of $10,000C. He incurs a 15% Federal penalty for withdrawing funds before he was 59 ½ years oldD. He incurs a 20% Federal penalty for withdrawing funds before he was 59 ½ years old

175. Lori and Mike, both 42 years old, have been married for 20 years and have two children ages 14 and 17. Mikehas worked at Computer Corp. while Lori stayed home taking care of the kids. Once both the kids entered highschool Lori decided she wanted to go back to college and finish her degree. Mike uses his IRA funds to pay forthe tuition, books, supplies and associated fees for Lori to return to college. Which of the following apply as a resultof this transaction?

A. They incur a 10% Federal penalty for withdrawing funds before 59 ½ years oldB. They incur a 15% Federal penalty for withdrawing funds before 59 ½ years oldC. They incur a 20% Federal penalty for withdrawing funds before 59 ½ years oldD. They incur no penalty since the funds were used for a qualified higher educational expense and Lori is

Mike’s spouse

176. For a Roth IRA, a payment or distribution is not a qualified distribution if it is made less than how many tax yearsfrom the first tax year in which the individual made a contribution?

A. 2 yearsB. 3 yearsC. 4 yearsD. 5 years

177. Francisco, age 57, is a married, filing jointly taxpayer. His modified AGI for 2016 was $220,500. What is themaximum annual nondeductible contribution he can make to a Roth IRA in 2016?

A. $0B. $1,000C. $2,500D. $5,500

178. Which of the following a false statement regarding a direct rollover option distribution to another qualifiedretirement plan?

A. To be a direct eligible rollover, the taxpayer must pay withholding tax on the amount being rolled overB. On a direct eligible rollover, no tax will be withheld from any part of the distributionC. The taxpayer may choose to have any part or all of an eligible rollover distribution paid directly to another

retirement planD. If an eligible rollover distribution is paid from an employer-sponsored retirement plan to the taxpayer generally

there will be tax withheld

179. The IRA one-rollover-per-year rule applies to which of the following?A. Rollovers from a traditional IRA to a Roth IRA (conversions)B. Rollovers from a traditional IRA to another traditional IRAC. Trustee-to-trustee transfers to another IRAD. IRA-to-plan rollovers

Lesson 12 180. An exclusion is provided for premiums paid by an employer for "group-term" life insurance, up to what amount

for each employee?A. $25,000B. $30,000C. $40,000D. $50,000

181. Connie and her spouse, Mark, (both over 65) are filing a joint return for 2016. They both received Social Securitybenefits during the year. In January 2017, Connie received a Form SSA-1099 showing net benefits of $7,500 inbox 5. Mark received a Form SSA-1099 showing net benefits of $3,500 in box 5. Connie also received a taxablepension of $22,000 and interest income of $500. She did not have any tax-exempt interest income. What amountof Connie’s Social Security benefits is taxable for 2016?

A. $0B. $500C. $3,750D. $7,500

182. Heidi received a scholarship of $2,500. The scholarship was not received under either the National Health ServiceCorps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial AssistanceProgram. As a condition for receiving the scholarship, Heidi must serve as a part-time teaching assistant. Of the$2,500 scholarship, $1,000 represents payment for teaching. The provider of her scholarship gives Heidi a FormW-2 showing $1,000 as income. Her qualified education expenses were $2,000. Assuming that all other conditionsare met, what portion of Heidi’s scholarship is taxable?

A. $0B. $500C. $1,000D. $2,000

183. Wayne was a bona fide resident of Brazil for all of 2015 and 2016. He reports his income on the cash basis. In2015, he was paid $85,800 for work he did in Brazil during that year. He excluded all of the $85,800 from hisincome in 2015. In 2016, Wayne was paid $117,300 for his work in Brazil. $18,800 was for work he did in 2015and $98,500 was for work he did in 2016. What amount of the 2015 income received in 2016 can Wayne excludefrom his 2016 income tax return?

A. $0B. $10,900C. $15,000D. $18,800

184. An employer can exclude the value of lodging he or she furnishes to an employee from the employee's wagesfor all of the following reasons except:

A. It is furnished on the business premisesB. It is furnished for the employer’s convenienceC. The employee must accept it as a condition of employmentD. The employer will allow the employee to choose to receive additional pay instead of lodging

185. What is the maximum amount excludable from gross income for a dependent care assistance program for anemployee who is married filing jointly?

A. $5,000B. $6,000C. $7,000D. $8,000

186. Chad is employed as a flight attendant for a company that owns both an airline and a hotel chain. His employerallows him to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there isan unoccupied room) at no cost to him. What amounts must Chad include in his income?

A. The value of the flightB. The value of the hotel roomC. Both the value of the flight and the hotel roomD. Neither the value of the flight nor the hotel room

187. An employer cannot exclude from the wages of a highly compensated employee any part of the value of adiscount that is not available on the same terms to all employees. For this exclusion, a highly compensatedemployee for 2016 is an employee who was a 5% owner at any time during the year or the preceding year orreceived more than what amount in pay for the preceding year?

A. $100,000B. $120,000C. $125,000D. $145,000

188. In addition to the annual exclusion of $14,000, a taxpayer also can give which of the following without triggeringthe gift tax?

A. Gifts to a political organization for its useB. Gifts to cover educational expensesC. Gifts used to pay for medical expensesD. All of the above

189. When Aaron, age 25, graduated from college last year he had $5,000 left in his Coverdell ESA. He wanted togive this money to his younger sister, who was still in high school. Aaron contributed the same amount ($5,000)to his sister's Coverdell ESA within 60 days of the distribution. What amount of the distribution is taxable?

A. $0B. $1,000C. $2,500D. $5,000

190. In 2016, employers may reimburse bicycle commuters up to what amount per month tax free for each qualifiedbicycle commuting month a bicycle is used for transportation between the employee's home and place ofemployment?

A. $10B. $15C. $20D. $25

191. If the taxpayer’s employer provides him or her with a product or service and the cost of it is so small that it wouldbe unreasonable for the employer to account for it, the value is not included in the taxpayer’s income. In mostcases, this de minimis fringe benefit includes the value of all of the following except:

A. Cab fares home when working overtimeB. Discounts at company cafeteriasC. Holiday gifts that can easily be exchanged for cashD. Company picnics

192. Marisela has a high deductible health plan (HDHP) for her family all year in 2016. The annual deductible is$5,000. She can contribute up to what amount to her Archer MSA for the year?

A. $0B. $3,250C. $3,750D. $4,200

193. Using a company car for business purposes is not considered a fringe benefit, while personal use is a taxablefringe benefit. Personal use includes all of the following except:

A. Commuting to and from workB. Running errandsC. Allowing a family member who is not a company employee to use the vehicleD. Making company deliveries

194. Marco and Leigh Ann Green (husband and wife) moved from New Jersey to Oregon on May 1, 2016. Leigh Annimmediately found a job as a part-time substitute teacher, but only worked 23 weeks during the year. Marco, aself-employed solar heating unit salesman, could not continue in the same line of work after the move. In Oregonhe held one full-time job for 20 weeks, then at another full-time job for 6 more weeks during 2016. Marco expectsthat he will start a new full-time job as an employee of a landscaping company in January of 2017. Can Marcoand Leigh Ann claim a deduction for moving expenses on their 2016 jointly filed income tax return?

A. They cannot because Marco did not meet the 39-week test in 2016B. They can because Leigh Ann worked 23 weeks and Marco worked 26 weeks for a total of 49 weeksC. They can because Marco expects to meet the 39-week test in 2017D. They cannot because both Leigh Ann and Marco have to meet the 39-week test individually

195. Rich’s divorce decree calls for him to pay his former spouse $200 a month as child support and $150 a monthas alimony. If he pays the full amount of $4,200 during the year, Jeanna, his former spouse, can exclude whatamount from her income?

A. $150B. $200C. $1,800D. $2,400

196. Camilo is a self-employed roofer. He reported a profit of $30,000 on his Schedule C. He had other taxable incomeof $5,000. He paid $3,000 for hospitalization insurance. His self-employment tax was $4,656. He paid his formerwife $4,000 in court-ordered alimony and $4,000 in child support. What is the amount Camilo can deduct in arrivingat adjusted gross income (AGI)?

A. $5,328B. $9,328C. $13,656D. $15,656

197. Trent and Kim divorced on September 1, 2016. As part of the divorce decree, beginning in September, Trent wasto make payments to Kim of $1,000 a month for the balance of the year for recent medical expenses; child supportpayments of $1,000 per month, and $1,500 a month for the mortgage payment on a jointly-owned home. Kim andthe children will continue to live in the home. What is the amount that Trent can deduct as alimony for 2016?

A. $1,000B. $4,000C. $7,000D. $10,000

198. Generally, no gain or loss is recognized on a transfer of property from the taxpayer to (or in trust for the benefitof) his or her former spouse if the transfer is incident to their divorce. This rule applies even if the transfer was inexchange for all of the following except:

A. CashB. The release of marital rightsC. The assumption of liabilitiesD. Certain transfers in trust

199. If a separation decree says a taxpayer is to pay $2,000 a month in alimony, and he or she pays $2,200 in alimony,what is the amount that is deductible as alimony?

A. $0B. $1,000C. $1,100D. $2,000

200. The taxpayer can deduct alimony he or she paid, whether or not he or she itemizes deductions on the return. Ifthe taxpayer does not provide the spouse's Social Security number, the deduction may be disallowed and he orshe may have to pay a penalty for what amount?

A. $50B. $100C. $150D. $200

201. In tax year 2016, employers can generally exclude a maximum of what amount per month from the employee'swages for combined commuter highway vehicle transportation and transit passes?

A. $255B. $275C. $300D. $345

202. Participants in a cafeteria plan must be permitted to choose among at least how many taxable benefits (such ascash) and at least one qualified benefit?

A. OneB. TwoC. ThreeD. Four

203. Hal had previously worked in Dallas, TX for Tasty Chip Inc. but in 2016 he takes a new job 95 miles away atLuby’s in Waco, TX. Which of the following is true regarding the moving expense exclusion?

A. Hal is not eligible since the move is not more than 150 miles from his previous locationB. Hal is not eligible since the move is not more than 100 miles from his previous locationC. Hal is eligible since the move is greater than 50 miles from his previous locationD. Hal is eligible since the move required him to change companies

204. Chloe lived in Portland and accepted a job in Atlanta. Under an accountable plan, her employer reimbursed herfor her actual traveling expenses from Portland to Atlanta and the cost of moving her furniture to Atlanta. Chloe’semployer included $3,200 on her Form W-2, box 12, with Code P. However, Chloe’s allowable moving expenseswere $3,900. What amount can she deduct as moving expenses on Form 3903 - Moving Expenses?

A. $0B. $350C. $700D. $3,200

205. Generally, the amount a taxpayer may deduct for the Student Loan Interest Deduction is the lesser of whatamount or the amount of interest he or she actually paid?

A. $1,000B. $1,500C. $2,000D. $2,500

206. Renee works at Indigo Inc. and attends school part-time as part of her company’s educational assistanceprogram. In 2016 her company reimbursed her a total of $6,250 for tuition, books, supplies, fees, etc. related toher schooling. How much of this amount can Renee exclude from her gross income?

A. $0, this is a company sponsored benefit and does affect the individual’s returnB. $5,250, the maximum exclusion allowed under an employer’s educational assistance programC. $5,750 the maximum exclusion allowed under an employer’s educational assistance programD. $6,250 the maximum exclusion allowed under an employer’s educational assistance program

Lesson 13 207. Stan figured his adjusted gross income for 2016 was $40,000. He paid medical expenses of $2,500. What amount

of his medical expenses can he deduct on his tax return?A. $0B. $500C. $1,500D. $4,000

208. In 2016, Bill Jones drove 3,800 miles for medical reasons. He spent $500 for gas, $30 for oil, and $100 for tollsand parking. Using either actual expenses or standard mileage rate, what is the largest amount he can include forcar expenses in his medical expenses on his tax return?

A. $630B. $658C. $688D. $822

209. Which of the following expenses are not deductible as medical expenses?A. Insulin used for diabetesB. Wig, purchased upon the advice of a physician for the mental health of a patient who has lost all of his or

her hair from diseaseC. Swimming lessons, recommended by a doctor for improvement of general healthD. Acupuncture used for migraines

210. Susan is a 45-year-old single filing taxpayer. What is the maximum amount of qualified long-term care insurancepremiums she is allowed to include as medical expenses on Schedule A (Form 1040)?

A. $380B. $710C. $1,430D. $3,800

211. Which of the following items, generally, is deductible as a real estate tax?A. Property tax paid through an escrow account attached to a mortgage loanB. Taxes for local benefits, such as assessments for streetsC. Itemized charges for servicesD. Transfer taxes

212. Generally, the proceeds for all of the following transactions must be reported on Form 1099-S - Proceeds FromReal Estate Transactions except:

A. A burial plot or vaultB. Improved or unimproved land, including air spaceC. Inherently permanent structures, including any residential, commercial, or industrial buildingD. A condominium unit and its appurtenant fixtures and common elements, including land

213. Ron pays $25 each quarter for a state property tax based only on the value of his boat. What amount of thispersonal property tax is deductible on his Federal tax return?

A. $0B. $25C. $50D. $100

214. John and Peggy Harris sold their home on May 7. Through April 30, they made home mortgage interest paymentsof $1,220. The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to,but not including, the date of sale. What is the amount of their mortgage interest deduction?

A. $0B. $610C. $1,220D. $1,270

215. Mia pays $65 for a ticket to a dinner-dance at a church. Her entire $65 payment goes to the church. The ticket tothe dinner-dance has a fair market value of $25. When Mia buys the ticket, she knows its value is less than herpayment. What amount can Mia deduct as a charitable contribution to the church?

A. $0B. $25C. $40D. $65

216. Melissa is blind. She is self-employed and must use a reader to do her work. She uses the reader both duringher regular working hours at her place of work and outside her regular working hours away from her place of work.The reader's services are only for her work. Which of the following is true regarding Melissa’s work-relatedexpenses?

A. She cannot deduct her expenses for the reader because the expense is not for attendant care servicesat her place of work

B. She cannot deduct her expenses for the reader because she is self-employedC. She cannot deduct her expenses for the reader because she uses it away from her place of workD. She can deduct her expenses for the reader as an impairment-related work expense because it is an

expense in connection with her place of work that is necessary for her to be able to work

217. Jennifer received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. In earning this income, shehad $500 of expenses. Jennifer cannot specifically identify the amount of each expense item that is for eachincome item. What amount of interest expenses can Jennifer deduct from her tax return?

A. $0B. $100C. $400D. $500

218. Which of the following expenses that the taxpayer incurs as an investor is deductible?A. Fees the taxpayer pays to a broker, bank, trustee, or similar agent to collect investment income, such as

taxable bond or mortgage interestB. Transportation and other expenses the taxpayer pays to attend stockholders' meetings of companies in

which he or she has no interest other than owning stockC. Interest on money the taxpayer borrows to buy or carry a single-premium life insurance, endowment, or

annuity contractD. Interest on money the taxpayer borrows to buy or carry a life insurance, endowment, or annuity contract

if he or she plans to systematically borrow part or all of the increases in the cash value of the contract

219. If a taxpayer claimed an itemized deduction for a given year for qualified foreign taxes, he or she can chooseinstead to claim a foreign tax credit that will result in a refund for that year by filing an amended return on Form1040X within how many years from the original due date of his or her return?

A. Three yearsB. Five yearsC. Seven yearsD. Ten years

220. All of the following are true regarding the deduction for qualified foreign taxes except:A. Generally, a taxpayer can take either a deduction or a credit for income taxes imposed by a foreign countryB. A deduction or credit can also be taken for foreign income taxes paid on income that is exempt from U.S.

tax under the foreign earned income exclusion or the foreign housing exclusionC. A taxpayer can change his or her choice between a deduction or a credit for each year's taxesD. A taxpayer can figure his or her tax claiming the credit and claiming the deduction then fill out his or her

return the way that benefits him or her the most

221. Charitable contributions of what amount or more must be substantiated by a written acknowledgment from aqualified organization?

A. $250B. $300C. $350D. $400

222. Bill donated $100 to the American Red Cross, $200 to the Boy Scouts of America, and $300 to his neighborwhose home was destroyed by an earthquake. How much is Bill's deduction for charitable contributions?

A. $100B. $300C. $400D. $500

223. Anita donates a used car to a qualified organization. She bought it 3 years ago for $9,000. A used car guideshows the fair market value for this type of car is $6,000. However, Anita gets a Form 1098-C from the organizationshowing the car was sold for $2,900. The vehicle was neither used nor improved by the organization given norsold to a needy individual. If Anita itemizes her deductions, what amount can she deduct for her donation?

A. $0B. $500C. $2,900D. $6,000

224. A taxpayer contributing a qualified vehicle valued at over what amount must obtain from the charity a Form 1098-C Contributions of Motor Vehicles, Boats, and Airplanes?

A. $500B. $750C. $1,000D. $1,500

225. After an individual has figured the casualty or theft loss on personal-use property, he or she must reduce thatloss by what amount when figuring the deduction limits for personal-use property?

A. $100B. $150C. $200D. $250

226. In June, Alvaro discovered his house had been burglarized. His loss after insurance reimbursement was $2,000.His adjusted gross income for the year he discovered the theft is $29,500. What amount can Alvaro claim as atheft loss deduction?

A. $0B. $100C. $1,790D. $1,900

227. A hailstorm damages Royce’s home and his car. He determines the amount of loss to his home is $4,000 and$600 to his car. Since the losses are due to a single event, Royce combines the losses and reduces the combinedtotal by what amount (prior to reducing the total of the loss by 10% of his adjusted gross income)?

A. $0B. $100C. $200D. $500

228. Which of the following miscellaneous expenses, which may be tax deductible on the tax return, is subject to the2% floor?

A. Union dues and expensesB. Amortizable premium on taxable bondsC. Casualty and theft losses from income-producing propertyD. Federal estate tax on income in respect of a decedent

229. Which of the following fees (all of which are not ordinary and necessary expenses of a business or incomeproducing activity) is deductible for Federal income tax purposes?

A. Driver’s licenseB. Hunting licenseC. Marriage licenseD. Motor boat registration

230. Cindy’s state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight.She paid $32 based on the value ($1,500) and weight (3,400 lbs.) of her car. What amount can she deduct as apersonal property tax?

A. $0B. $15C. $16D. $17

231. A taxpayer must keep an accurate diary or similar record of wagering losses and winnings. The diary shouldcontain all of the following information except:

A. The date and type of the specific wager or wagering activityB. The name and address or location of the gambling establishmentC. The names of other persons present with the taxpayer at the gambling establishmentD. The number of days of wagering activity

232. Shannon won $1,000 in a poker tournament she entered in May. In July and September, she lost $600 and $700in two other tournaments. She reported $1,000 of gambling winnings on Form 1040. What amount can Shannondeduct as gambling losses for the year on Schedule A?

A. $600B. $700C. $1,000D. $1,300

233. Pablo borrowed $1,000 for a bona fide business loan on August 31, 2016, payable in 90 days at 12% interest.On November 30, 2016, he paid this with a new note for $1,030, due on March 1, 2017. If he uses the cash methodof accounting, what amount of interest can he deduct on his 2016 income tax return?

A. $0B. $10C. $20D. $25

234. A taxpayer can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limitif the damaged or stolen property was income-producing property held for investment including all of the followingexcept:

A. StocksB. NotesC. BondsD. Wristwatches

235. A car door is accidentally slammed on Muriel’s hand, breaking the setting of her diamond ring. The diamond fallsfrom the ring and is never found. Which of the following is true regarding the loss of the diamond?

A. She can deduct the loss based on the mere disappearance of money or propertyB. The loss of the diamond is a casualty because it resulted from an identifiable event that was sudden,

unexpected, or unusualC. The loss of the diamond is not a casualty because it resulted from an identifiable event that was sudden,

unexpected, or unusualD. Deductible casualty losses cannot result from an unusual event that is not a day-to-day occurrence

236. Deductible ordinary and necessary expenses that a taxpayer incurs going from one work place to another in thecourse of their employment, when not traveling away from home include which of the following?

A. Taxi between home office and work placeB. Cost of commuting to workC. Parking fees at workD. All of the above

237. Henry is a teacher who has satisfied the minimum requirements for teaching. His employer requires him to takean additional college course each year to keep his teaching job. The courses will not qualify Henry for a new tradeor business. All of the following are true regarding work-related education except:

A. The courses are qualifying work-related education even if Henry eventually receives a master's degreeB. The courses are qualifying work-related education even if Henry eventually receives an increase in salary

because of this extra educationC. The course requirement serves a bona fide business purpose of his employerD. The courses are not qualifying work-related education because they are not part of a program that will

qualify Henry for a new trade or business

238. Debra Smith is employed as a salesperson. She is not a statutory employee. Her adjusted gross income is$40,000, and she did not receive any reimbursement for her expenses. She has the following qualifyingmiscellaneous deductions:

x Entertainment expenses $500 x Transportation expenses $500 x Home office expenses $1,100 x Tax return preparation $200 x Investment counseling $300

Compute the amount of her allowable deduction she can take on her Form 2106-EZ for business expenses. A. $200B. $800C. $1,300D. $1,550

239. Lucy decided to itemize on her return. She has the following receipts:x Federal income tax $10,000 x State income tax $1,000 x County real estate tax $2,000 x Fee for her car inspection that she uses only personally $275 x Homeowners' association fees on her personal home $500

Compute the amount of the deduction she can take on her Schedule A, Itemized Deductions. A. $3,000B. $3,275C. $4,000D. $12,000

Lesson 14 240. Failure to meet due diligence requirements by a paid tax preparer in determining the taxpayer's eligibility for, and

the amount of, the Earned Income Credit (EIC) could result in a penalty of what amount?A. $100 for each failureB. $250 for each failureC. $300 for each failureD. $505 for each failure

241. A tax practitioner must keep the records described in Part IV of the due diligence checklist at the bottom of Form8867. He or she must keep those records for 3 years from the latest of all of the following dates except:

A. Due date of the tax returnB. Due date of the tax return including extensionsC. Date the return was filed (if the tax practitioner is a signing tax return preparer electronically filing the

return)D. Date the return was presented to the taxpayer for signature (if the tax practitioner is a signing tax return

preparer not electronically filing the return)

242. Brent is a single taxpayer who has one qualifying child. His adjusted gross income (AGI) is $57,550. Hisinvestment income for 2016 is $2,100. Which of the following statements is true regarding Brent’s ability to claimthe Earned Income Credit (EIC)?

A. He cannot claim the EIC because his investment income is not less than $2,000B. He cannot claim the EIC because his AGI is not less than $39,296C. He cannot claim the EIC because he only has one qualifying childD. He cannot claim the EIC because he is not married, filing jointly

243. When determining earned income, which of the following does not qualify for the Earned Income Credit?A. WagesB. SalariesC. TipsD. Unemployment compensation

244. For purposes of the Earned Income Credit, which of the following is a requirement for a qualifying child?A. Is over age 24 at the end of 2016 and not permanently and totally disabledB. Has lived with the taxpayer in the United States for at least 12 monthsC. Is filing a joint returnD. Meets the relationship test

245. All of the following child and dependent care expenses may qualify as work-related expenses for the Child andDependent Care Credit except:

A. Expenses for a child in nursery school, preschool, or similar programs for children below the level ofkindergarten

B. Expenses that allow the taxpayer to work or look for workC. The cost of sending a child to a day camp specializing in computer technologyD. The cost of sending a child to an overnight camp

246. Kevin and Jenny, who are both working full-time, have three children all under the age of ten. The two youngestchildren, who are three and five years old, attended Eastside Pre-School for a total cost of $3,000. Ervin, who isnine, attended Big Kid Daycare after school at a cost of $2,000. Jenny has earned income of $15,000 and Kevinearns $14,000. What amount of childcare expenses should be used to determine the Child and Dependent CareCredit?

A. $3,000B. $5,000C. $14,000D. $15,000

247. Gina works 3 days a week. While she works, her 6-year-old child attends a dependent care center, whichcomplies with all state and local regulations. Gina can pay the center $150 for any 3 days a week or $250 for 5days a week. Her child attends the center 5 days a week. For the purposes of the Child and Dependent CareCredit, what are Gina’s work-related expenses for the center per week?

A. $0B. $75C. $150D. $250

248. A married taxpayer, filing jointly must reduce his or her Child Tax Credit if his or her modified adjusted grossincome (MAGI) is above what amount?

A. $80,000B. $90,000C. $100,000D. $110,000

249. Rob’s 10-year-old nephew lives in Mexico and qualifies as his dependent. However, his nephew is not a U.S.citizen, U.S. national, or U.S. resident alien. Which of the following is true regarding the Child Tax Credit?

A. Rob’s nephew is a qualifying child for the Child Tax CreditB. Rob’s nephew is not a qualifying child for the Child Tax CreditC. Rob’s nephew only qualifies for the Additional Child Tax CreditD. Rob’s nephew qualifies for a partial Child Tax Credit

250. George Alexander pays $9,300 in tuition and fees in December 2015, and his child began college in January2016. He filed his 2015 tax return on February 14, 2016, and claimed a Lifetime Learning Credit of $1,860. Heclaimed no other tax credits. After he filed his return, his child withdrew from two courses and George received arefund of $2,900. He must refigure his 2015 Lifetime Learning Credit using $6,400 of qualified education expensesinstead of $9,300. After George refigures the credit he determines his tax liability increased by what amount?

A. $0B. $580C. $1,280D. $1,860

251. For the purposes of the Lifetime Learning Credit, which of the following is not a qualifying student?A. A student who claims the American Opportunity Credit in the same yearB. A part-time studentC. A student in a graduate programD. A student in a vocational program

252. Sandy is a sophomore at the University of California. She paid $2,000 in tuition, $300 for books, and $150 forstudent fees. She also paid room and board of $2,500. For the calculation of the American Opportunity Credit,what is the total qualifying educational expense for Sandy?

A. $2,000B. $2,150C. $2,450D. $4,500

253. Small businesses that have fewer than how many full-time equivalent employees and provide healthcarecoverage may be eligible for the Small Business Health Care Tax Credit?

A. 25B. 35C. 45D. 55

254. Mary is a single taxpayer and has modified adjusted gross income of $80,000, what is the maximum AdoptionCredit she can claim on her 2016 income tax return?

A. $12,650 per eligible childB. $13,190 per eligible childC. $13,460 per eligible childD. $14,500 per eligible child

255. Miranda and Tony adopted a child, not determined to have special needs, in the current year. During the yeartheir qualified adoption expenses were $17,000 and they had a modified adjusted gross income (MAGI) of$283,500. What is the amount of Miranda and Tony’s Adoption Credit?

A. $0B. $6,700C. $13,460D. $26,800

256. Jason had two employers during the year. Both employers withheld Social Security tax from his wages in theamounts of $4,035 and $4,200. What amount can Jason claim as a credit against his income tax when he fileshis return?

A. $0B. $888C. $1,186D. $8,235

257. The taxpayer cannot claim the excess as a credit against his or her income tax if how many employer(s) withheldtoo much Social Security or RRTA tax?

A. OneB. TwoC. ThreeD. Four

258. If a taxpayer has foreign taxes available for credit but cannot use them because of the limit, he or she may beable to carry them back how many tax year(s)?

A. 1 tax yearB. 2 tax yearsC. 3 tax yearsD. 4 tax years

259. If the taxpayer is subject to the limit when claiming the Mortgage Interest Credit because the certificate creditrate is more than 20%, no amount over what dollar limit may be carried forward for use in a later year?

A. $1,000B. $2,000C. $3,000D. $4,000

Lesson 15 260. Tim enrolls in health insurance with Ace Insurance Company in January 2016. Tim fails to pay his premiums for

November and December 2016 and January 2017. Ace sends Tim a Form 1095-B on January 31, 2017, reportingcoverage for every month in 2016. On February 1, 2017, Ace cancels Tim’s coverage effective November 1, 2016.Additionally, Ace filed Tim’s Form 1095-B with the IRS. Regarding Tim’s corrected Form 1095-B, Ace mustcomplete which of the following actions?

A. Ace Insurance Company must send Tim a corrected Form 1095-B reporting that Tim was covered onlyfor January through October 2016

B. Ace Insurance Company must file a corrected Form 1095-B with the IRS reporting coverage only forJanuary through October

C. No action is required by Ace Insurance CompanyD. Both A and B

261. At the end of 2016 Sandy was 22 years old and a full-time student. She earned $2,000 working at the MuffinBreak after school. Her parents provided her with $10,000 of support for the year. What is Sandy’s AMT exemptionamount for 2016?

A. $2,000B. $7,400C. $9,400D. $10,000

262. The parent of a child under age 18 may elect to include the child’s income on their tax return if the child’s interestand dividend income (including capital gain distributions) for 2016 was less than what amount?

A. $7,150B. $8,500C. $9,500D. $10,500

Lesson 16 263. If a taxpayer fails to file a return and it is no more than 60 days past the due date (including extensions), what is

usually the penalty for failure to file?A. 5% for each month, but not more than 25%B. 10% for each month, but not more than 30%C. 15 % for each month, but not more than 35%D. 20% for each month, but not more than 40%

264. What is the penalty for a tax return filed with an accuracy error based on either substantial understatement ornegligence?

A. A flat 10 % of the net understatement of the taxB. A flat 15 % of the net understatement of the taxC. A flat 20 % of the net understatement of the taxD. A flat 25 % of the net understatement of the tax

265. Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangementsinto sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions andthe availability of credit/debit cards issued from offshore financial institutions. Generally, these schemes arecharacterized by the use of all of the following flow-through entities except:

A. International Business CompaniesB. Foreign TrustsC. Qualified IntermediariesD. Foreign Partnerships

266. Section 6662(d)(1) generally defines "substantial understatement" of income tax to be an understatement for thetaxable year that exceeds the greater of what percentage of the correct tax required to be shown on the return or$5,000?

A. 10%B. 20%C. 25%D. 30%

267. If a taxpayer alters or strikes out the preprinted language above the space provided for the taxpayer’s signatureon Form 1040, he or she may have to pay a frivolous return penalty in which amount?

A. $1,000B. $2,500C. $5,000D. $7,500

Lesson 17 268. Which of the following is true regarding Treasury Circular 230?

A. The circular contains the rules regarding eligibility to become an enrolled agent and renewal of enrollmentB. The circular contains rules of conduct applicable to enrolled agents, enrolled retirement plan agents,

registered tax return preparers, and enrolled actuaries, but not attorneys or certified public accountantsC. The circular contains rules regarding disciplinary actions for tax return preparers who are not enrolled

agents, registered tax return preparers, CPAs, or attorneysD. The circular contains rules of conduct applicable to attorneys or certified public accountants, but not

enrolled agents, enrolled retirement plan agents, registered tax return preparers, and enrolled actuaries

269. Generally, each tax practitioner who applies for renewal to practice before the Internal Revenue Service mustretain the information required with regard to qualifying continuing professional education hours. How long mustrecords of completed continuing professional education (CPE) be retained?

A. The individual is not required to retain the information if the continuing professional education sponsorhas agreed to retain it

B. For a period of 1 year following the date of renewal of enrollmentC. For a period of 4 years following the date of renewal of enrollmentD. For a period of 5 years if it is an initial enrollment

270. Identify the individual below who is not eligible to practice before the IRS. None of the individuals are undersuspension or disbarment.

A. Certified financial plannerB. AttorneyC. Enrolled agentD. Enrolled actuary, with respect to specified statutory issues

271. Jim Brown, a tax practitioner, received a complaint from the IRS for disreputable conduct. Which of the followingitems was not required to be listed in the complaint?

A. The unit and employee of the Internal Revenue Service that recommended the action against JimB. Clear and concise description of the facts that constitute the proceedingC. Clear and concise description of the law that constitute the proceedingD. Specific sanction sought

272. Which of the following statements is correct with respect to a client’s request for records of the client that arenecessary for the client to comply with his or her Federal tax obligations?

A. The practitioner may never return records of the client to the client even if the client requests prompt returnof the records

B. The existence of a dispute over fees always relieves the practitioner of his or her responsibility to returnrecords of the client to the client

C. The practitioner must, at the request of the client, promptly return the records of the client to the clientunless applicable state law provides otherwise

D. The practitioner must, at the request of the client, return the records of the client to the client within threemonths of receiving the request

273. How is a proceeding for violation of the regulations in Circular 230 instituted against a tax practitioner?A. An aggrieved taxpayer files a petition with the United States Tax Court stating a claim against the attorney,

certified public accountant, registered tax return preparer, enrolled agent, enrolled retirement plan agent,or enrolled actuary

B. The IRS representative signs a complaint naming the tax practitioner and files the complaint with theAdministrative Law Judge (ALJ)

C. The Secretary of the Treasury files a complaint against the attorney, certified public accountant, registeredtax return preparer, enrolled agent, enrolled retirement plan agent, or enrolled actuary in the United StatesDistrict Court for the District of Columbia

D. The Commissioner of the IRS files a complaint against the attorney, certified public accountant, registeredtax return preparer, enrolled agent, enrolled retirement plan agent, or enrolled actuary with the UnitedStates Tax Court

274. If an IRS examiner believes that a tax practitioner filed a return that contains a frivolous position, to whom doeshe report his concern?

A. To the practitionerB. To the practitioner’s supervisorC. To the Director of the Office of Professional ResponsibilityD. To the Secretary of the Treasury

275. The Office of Professional Responsibility can censure, suspend or disbar a practitioner from practice before theInternal Revenue Service for incompetence and/or disreputable conduct. Which of the following is considereddisreputable conduct?

A. Conviction of any criminal offense under the revenue laws of the United StatesB. Conviction of any criminal offense involving dishonesty or breach of trustC. Giving false or misleading information or participating in any way in the giving of false or misleading

information to the Department of the Treasury or any officer or employee thereofD. All of the above

276. Jenny James is a CPA who is representing Steve and Ashley O’Brien before the Wage and Investment Divisionof the Internal Revenue Service. The IRS is questioning Steve and Ashley on contributions that were listed onpage 2 of their 2015 Form 1040. While reviewing the documentation provided by Steve and Ashley, Jennydiscovers contributions that were made to a non-qualified organization. What is the appropriate action for Jennyto take?

A. Jenny must advise Steve and Ashley on how to keep the inaccuracy from being discovered by the IRSB. Jenny must notify the Internal Revenue Service that she is no longer representing Steve and Ashley by

withdrawing her Form 2848C. Jenny must advise Steve and Ashley promptly of the inaccuracy and the consequences provided by the

Internal Revenue Code and Regulations for such an inaccuracyD. Jenny must immediately advise the Internal Revenue Service examiner of the non-qualified contributions

277. With regards to negotiating a taxpayer’s refund check, a tax preparer that is also a financial institution, but hasnot made a loan to the taxpayer on the basis of the taxpayer’s anticipated refund, may complete all of the followingtransactions except:

A. Cash a refund check and remit all of the cash to the taxpayerB. Endorse a taxpayer’s refund check and electronically direct payment into an account owned and

controlled by the practitioner for an income tax return the practitioner preparedC. Accept a refund check for deposit in full to a taxpayer’s account provided the bank does not initially

endorse or negotiate the checkD. Endorse a refund check for deposit in full to a taxpayer’s account pursuant to a written authorization of

the taxpayer

Lesson 18 278. Which of the following statements is false regarding a taxpayer’s eligibility to qualify for the Premium Tax Credit?

A. If a taxpayer enrolls in an employer-sponsored plan, including retiree coverage, he or she is eligible forthe Premium Tax Credit

B. If a taxpayer is not eligible for coverage through a government program, like Medicaid, Medicare, CHIPor TRICARE he or she is eligible for the Premium Tax Credit

C. A taxpayer is eligible for the Premium Tax Credit if he or she cannot be claimed as a dependent by anotherperson

D. A taxpayer is eligible for the Premium Tax Credit if he or she purchases coverage through the Marketplace

279. The statutory $2,550 limit for Health Flexible Spending Arrangements (FSAs) under 26 USC Section 125(i) onlyapplies to which of the following?

A. Salary reduction contributions under a health FSAB. Certain employer non-elective contributions (sometimes called flex credits)C. Health savings accountsD. All of the above

280. Individual Taxpayer Identification Numbers (ITINs) not used on a Federal income tax return in the last how manyyears will no longer be valid to use on a tax return as of January 1, 2017?

A. Three yearsB. Four yearsC. Five yearsD. Ten years