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Practice Test 11 - CPA Tcp

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

  1. In tax year 2023, Horizon Inc., a C corporation, has taxable income (before net operating loss deduction) of $500,000. It also has a 2021 net operating loss carryforward of $800,000. Horizon asks how much net operating loss it can use in 2023 and what remains. What is the correct application of net operating loss for this year?
  2. HH LLC is classified as a partnership. In Year 2, member H receives a $40,000 cash distribution and the LLC reduces H's share of partnership liabilities by $15,000 in the same year; immediately before these changes, H's outside basis is $45,000. Under Internal Revenue Code sections 731 and 752, what is the correct characterization of the net effect for determining whether H recognizes gain?
  3. In 2025, Amir Johnson (married filing jointly) has $5,000 net short-term capital gain and $2,000 net long-term capital loss. He also has a $4,000 capital loss carryforward from 2024 that is long-term. What is the taxpayer's net capital gain (or loss) for 2025 after applying carryforward and netting rules?
  4. A business owner who wants to provide significant retirement plan contributions should consider which entity structure?
  5. An individual taxpayer has a projected taxable estate of $13,900,000 and no prior taxable gifts. Assume the lifetime exemption is $13,610,000, the estate tax rate is 40% above the exemption, and the annual gift exclusion is $19,000 per donee. The taxpayer wants to reduce the taxable estate below the exemption as efficiently as possible. Which strategy best minimizes estate tax liability?
  6. Wyatt and Aria are married filing jointly with AGI of $100,000. They paid $7,800 of unreimbursed medical expenses (deductible only above  7.5%\,7.5\% of AGI), $10,500 of state and local taxes (subject to the $10,000 cap), $6,400 of qualified home mortgage interest, and $2,600 of cash charitable contributions. What is the total allowable itemized deduction for Wyatt and Aria (ignoring any other limitations)?
  7. A single individual under age 65 in 2024 must file a federal income tax return if their gross income equals or exceeds:
  8. A Section 338(h)(10) election in a stock acquisition allows:
  9. What is the CPA's most appropriate professional action at this point in the examination process?
  10. According to Circular 230, which records must the CPA promptly return to the client, notwithstanding the fee dispute?
  11. Jamie is head of household in 2025 and earned $88,000 of wages and $3,000 of interest income. Jamie paid $5,500 of state income tax and $4,900 of real property taxes, and also paid $1,100 of local general sales tax; Jamie elects to deduct state income taxes rather than general sales taxes. What is the maximum SALT deduction Jamie may claim on Schedule A?
  12. Evan is single in 2025 and earned $65,000 of wages and $4,000 of taxable unemployment compensation. Evan paid $2,900 of state income tax and $1,600 of local income tax, and $4,800 of real property taxes on a home; Evan also made $600 of charitable contributions. What is Evan's maximum SALT deduction on Schedule A?
  13. The child tax credit for 2024 is $2,000 per qualifying child. A taxpayer with $150,000 of modified adjusted gross income (MAGI) filing as married filing jointly will receive:
  14. In tax year 2023, Partner C (single) receives from a partnership a $500,000 ordinary loss from a trade or business in which Partner C materially participates. Partner C also has $300,000 of wage income. Assume basis and at-risk limitations do not apply. What impact does the loss limitation have on the partner's tax return?
  15. Lena's spouse died in 2024. Lena remained unmarried throughout 2025 and paid more than half the cost of maintaining a home for herself and her dependent child, who lived with her all year. Lena earned $120,000 in wages and is evaluating filing status options. Which filing status provides the best tax advantage for 2025?
  16. Natalie is single with AGI of $200,000 and lives in a high-tax jurisdiction. She paid $17,000 of state income taxes and $6,000 of real property taxes (SALT capped at $10,000), $12,000 of qualified home mortgage interest, $3,000 of cash charitable contributions, and $25,000 of unreimbursed medical expenses (deductible only above  7.5%\,7.5\% of AGI). What is the impact of the SALT deduction cap on Natalie's return (i.e., by how much are her SALT payments reduced for itemized deduction purposes)?
  17. A taxpayer (single) has $175,000 of wages, $1,900 of taxable interest, $2,600 of qualified dividends, and $11,000 of long-term capital gains. The taxpayer exercised ISOs with a $12,000 spread at exercise and held the shares at year-end; no other AMT adjustments apply. Under AMT rules, how is the ISO spread treated?
  18. Public Law 86-272 (P.L. 86-272) provides protection from state income tax when a business:
  19. A nonresident alien with U.S.-source income is generally required to file:
  20. An individual taxpayer wants to make annual gifts in 2026 to five beneficiaries and is considering writing one check payable to a family trust rather than making separate gifts. The taxpayer wants the gifts to qualify for the $19,000 annual gift exclusion per donee and avoid using the $13,610,000 lifetime exemption (40% rate above it). What is the most tax-efficient way to utilize the annual gift exclusion?

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