Skip to main content
Sign in Create a free account
Varsity Tutors
Sign in Sign up

Practice Test 12 - CPA Tcp

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

  1. The statute of limitations for assessment is unlimited (i.e., there is no limitations period) when:
  2. A sole proprietorship landscaping business hires a worker who must be on-site from 7:00 a.m. to 3:30 p.m., uses the business's truck and equipment, is trained on the owner's required procedures, and is paid $1,000 weekly. The owner is trying to decide payroll tax responsibilities for the worker (Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act (FUTA), and State Unemployment Tax Act (SUTA)) and whether to issue a Form W-2 or Form 1099-NEC. What is the correct classification for this worker under Internal Revenue Service (IRS) common-law rules?
  3. During 2024, Forge Corp., a calendar-year C corporation, made the following expenditures: - Business meals with clients where business was discussed: $8,000−Ticketstoalocaltheaterproductionforkeyclients:\$8,000 - Tickets to a local theater production for key clients:$3,000 - Food and beverages for the annual employee holiday party: $$$5,000 What is the total amount of these expenses that Forge Corp. can deduct to determine its taxable income?
  4. A taxpayer in the 24% bracket purchased shares of Stock Z for $25,000 and sells them for $39,000 after holding them for 9 months. The taxpayer also received $2,500 of qualified dividends from other stocks and $4,000 of interest income from bonds during the year, and has a traditional IRA invested in mutual funds. What is the tax consequence of realizing a short-term capital gain in this scenario?
  5. A taxpayer expects to owe $800 in tax for the year after withholding and credits. Are estimated tax payments required?
  6. In tax year 2025, Uma, a single filer, received $41,000 of wages, $90 of interest from a bank account, and a $4,000 cash gift from Uma's cousin. Which of the following items should be included in Uma's gross income?
  7. A business evaluating an accounting method change should time the change to maximize benefit. For a change that produces a favorable (negative) Section 481(a) adjustment, the best time to file Form 3115 is:
  8. A retail clothing store (C corporation) with gross receipts averaging $900,000 per year and 22 employees operates in a leased storefront. In 2025 it spends $8,000 to install a wheelchair ramp, $3,500 to widen an interior doorway, and $2,000 to add accessible signage and adjust fitting rooms to improve access for customers with disabilities. The owner wants to understand which federal credit could apply to these expenditures. Which tax credit is the business eligible for based on its activities?
  9. When recommending an accounting method change to a client, a tax advisor should consider:
  10. A taxpayer age 65 or older has a higher filing threshold than younger taxpayers because:
  11. A decedent owned a life insurance policy on their life with a $2,500,000 death benefit and had incidents of ownership at death. The executor is reviewing gross estate inclusion and possible planning alternatives for similar clients. Under IRC § 2042 and related regulations, which strategy would best minimize estate tax liability for a future client with similar objectives (assuming planning is done more than 3 years before death)?
  12. A business with international operations should consider which entity structure to minimize the impact of GILTI rules?
  13. A calendar-year C corporation starts operations in April and will owe $12,000 in taxes for its first short tax year (April - December). Estimated payments are required. The corporation's first required payment is due:
  14. For an S corporation shareholder-employee, the distinction between compensation and distributions matters because:
  15. For 2025, Farah, a single filer, inherited $12,000 in cash from an uncle and received $900 of dividends from a mutual fund. Which income source is correctly excluded from gross income under IRS guidelines?
  16. A married couple filed a joint return claiming head of household filing status and the earned income tax credit for two children. The IRS initiates a compliance check focused on filing status, residency, and support, noting inconsistent information compared to prior years. Which factor would most likely affect the IRS's decision regarding the claimed filing status and credit?
  17. A corporation reports book income for financial reporting purposes but lower taxable income for tax purposes. The most common reason for this difference is:
  18. Cedar, Inc., a C corporation, is offered $5,000,000 for its business either as a stock purchase or as an asset purchase followed by liquidation. Cedar's shareholders have stock basis of $1,200,000 (held more than one year), and Cedar's assets have aggregate adjusted basis of $2,800,000. Which tax treatment applies to the sale, assuming an asset sale is chosen and Cedar liquidates completely in the same tax year?
  19. A partner's outside basis must be tracked separately from the partnership's inside basis. The purpose of tracking both bases is primarily to:
  20. A taxpayer's original return was due April 15 and was filed on that date. They later file an amended return on April 14, exactly 3 years later. The refund claim is:

Practice tests