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Practice Test 1 - CPA Tcp

20 questions. Answer them in any order, then submit to see your score and every explanation.

  1. A single taxpayer has $150,000 of wages, $1,100 of taxable interest, $1,900 of qualified dividends, and $13,000 of long-term capital gains. The taxpayer itemizes $20,000 of SALT and has no other AMT adjustments. Under AMT rules, which adjustment is required for AMT calculation?
  2. The American Opportunity Tax Credit phases out for single filers when MAGI is between:
  3. A cash-basis taxpayer switching to accrual has year-end accounts payable of $50,000. The impact on the Section 481(a) adjustment is:
  4. A shareholder's S corporation stock basis is reduced (but not below zero) by:
  5. A partnership interest is sold midyear. How are income and loss items for the year allocated between the selling and buying partners?
  6. In 2025, Cameron, a head of household filer, earned $32,000 of wages, received $600 of interest on municipal bonds issued by Cameron's state, and won $1,500 in a state lottery. Which of the following items should be included in Cameron's gross income under IRS rules?
  7. Under Circular 230, a practitioner who is representing a client before the IRS discovers that the client has made a misrepresentation to the IRS. The practitioner should:
  8. In tax year 2024, an S corporation allocates a $600,000 ordinary loss to its sole shareholder, Chen (single). Chen has $700,000 of wage income and no other items. Assume basis and at-risk limitations do not apply. How should the entity account for excess business losses on Chen's return?
  9. A CPA discovers they made an error on a client's prior year return that benefits the client (i.e., the client's tax was understated). Under SSTS No. 3, the CPA should:
  10. An individual who is taxed as both a resident of State A (domicile) and State B (statutory residency based on days and permanent place of abode) may be subject to:
  11. A nonresident alien who earns wages from a U.S. employer for services performed entirely in their home country is generally:
  12. A taxpayer installs solar panels on their primary residence at a cost of $30,000. The residential clean energy credit provides:
  13. A small consulting firm (LLC taxed as an S corporation) has 24 full-time equivalent employees and average annual wages of $43,000. In 2025 it buys SHOP Marketplace coverage and pays 50% of employee-only premiums, but the firm has claimed the small employer health insurance credit for two prior taxable years. The owners ask whether the credit can be claimed again in 2025. What are the limitations affecting the business's credit claim?
  14. A reverse triangular merger (Type A) is a reorganization where:
  15. Under the 'substantial economic effect' test, which of the following would cause a partnership allocation to be reallocated according to the partners' interests in the partnership?
  16. Spruce, Inc., a C corporation, sells all assets to an unrelated buyer for $900,000 and then liquidates, distributing the after-tax cash to its shareholders. Spruce's aggregate adjusted basis in assets is $650,000; shareholder stock basis is $100,000 and the stock has been held for more than one year. What is the tax impact of this transaction?
  17. In 2025, a partnership operating a manufacturing business purchased and placed in service qualifying equipment on March 1, 2025, for $2,900,000. Total 2025 purchases of Section 179 property were $3,140,000. For 2025, the Section 179 annual limit is $1,250,000 and the phase-out threshold begins at $3,130,000. What is the maximum Section 179 deduction for 2025 (ignoring the taxable income limitation)?
  18. MN LLC is classified as a partnership for federal tax purposes and has three members with profit interests: M 50%, N 30%, O 20%. The operating agreement allocates Year 1 ordinary income 50/30/20 but allocates all charitable contributions solely to O, with no corresponding economic arrangement and no substantial economic effect. Under Internal Revenue Code section 704(b), how should the charitable contribution be allocated for tax purposes?
  19. The primary tax planning reason to change from accrual to cash method (when eligible) is:
  20. When a corporation purchases assets from another corporation, depreciation recapture under Section 1245 or 1250 applies to:

Practice tests