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Practice Test 3 - CPA Tcp

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

  1. In tax year 2023, Birch Co., a C corporation, has taxable income (before net operating loss deduction) of $1,000,000 and a net operating loss carryforward from 2022 of $1,200,000. Birch has no special deductions. What is the correct application of net operating loss for this year?
  2. In tax year 2025, Elise, married filing separately, received $55,000 of wages, $300 of interest from a savings account, and a $2,500 birthday gift from Elise's parents. Which of the following items should be included in Elise's gross income under IRS rules?
  3. In evaluating reasonable compensation for tax purposes, which approach involves paying the shareholder-employee an amount similar to what an unrelated third party would receive for the same services?
  4. In 2025, Grace Wilson (single) sells Stock A held 10 months for a $6,000 gain and sells Stock B held 18 months for a $6,000 loss. She has no other capital transactions. What is the taxpayer's net capital gain (or loss) for 2025 under the capital gain and loss netting rules?
  5. In tax year 2023, Ivy Co., a C corporation, has taxable income (before net operating loss deduction) of $80,000 and a 2022 net operating loss carryforward of $200,000. Ivy wants to know the maximum net operating loss deduction allowed in 2023. What is the correct application of net operating loss for this year?
  6. Pinecrest Medical Supply, Inc. is a newly formed corporation that wants S Corporation status effective for its first tax year beginning January 1. The organizers obtained signatures from all shareholders but are unsure which filing controls the S election. Which factor affects the S Corporation election process?
  7. A donor-advised fund (DAF) allows donors to:
  8. In 2025, Maya is single and works as a full-time K–12 teacher. She received $62,000 of wages (Form W-2) and paid $410 out of pocket for classroom supplies that were not reimbursed by her school. Under current IRS rules for the educator expense above-the-line adjustment, what is the maximum allowable deduction Maya may claim for educator expenses?
  9. A state requires combined reporting for unitary businesses. 'Combined reporting' requires:
  10. The private foundation minimum distribution requirement mandates that:
  11. For 2025, Nia, a single filer, inherited $25,000 cash and received $700 of dividends from a U.S. corporation. Based on IRS gross income rules, which income source is correctly excluded from taxation?
  12. A partnership files Form 941 and later discovers it accidentally reported the quarter's payroll tax deposits in the wrong line, causing the return to show a balance due even though deposits were actually made timely and in full. The partnership wants to correct the filed quarterly return to align reported deposits with the IRS records. Which document should be filed to correct the payroll tax discrepancy?
  13. An individual taxpayer who files a joint return can file a subsequent amended return as Married Filing Separately (switching from MFJ to MFS) only if:
  14. The 'throwback rule' in state apportionment applies when:
  15. The accumulated adjustments account (AAA) of an S corporation represents:
  16. Hana, a head of household filer, completed work in December 2025. Her employer mailed her paycheck on December 31, 2025, and it could not be accessed until it arrived on January 3, 2026. Under IRS constructive receipt principles, what is the proper treatment of the paycheck for tax year inclusion?
  17. In 2025, Talia is single and has $40,000 of wages and $30,000 of net profit from her sole proprietorship (Schedule C). She will owe self-employment tax on her self-employment income. Under current IRS rules, which statement best describes her eligibility for the above-the-line deduction for one-half of self-employment tax?
  18. An individual taxpayer receives a notice of deficiency after an IRS examination disallowed significant cash charitable contributions due to lack of written substantiation. The taxpayer wants to continue disputing the liability without paying first. Which step should the taxpayer take next in the appeals process?
  19. For its year ended December 31, 2024, a C corporation reported taxable income of $700,000beforeconsideringanetoperatingloss(NOL)carryforward.ThecorporationhasanNOLcarryforwardof\$700,000 before considering a net operating loss (NOL) carryforward. The corporation has an NOL carryforward of$900,000 available from the 2022 tax year. What is the corporation's taxable income for 2024 after applying the NOL deduction?
  20. In 2025, Chris and Dana file a joint return and have $120,000 of wages and $30,000 of taxable IRA distributions. They paid $6,900 of state income tax and $2,400 of real property taxes, and they also paid $900 of local occupational tax that is based on wages. What is the maximum SALT deduction they may claim on Schedule A?

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