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Practice Test 4 - CPA Tcp

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

  1. The sale of a partnership interest where the partnership has hot assets results in which form filing requirement?
  2. The foreign earned income exclusion under Section 911 for 2024 excludes up to approximately:
  3. When a partnership distributes property that has a different basis (inside) than the partner's outside basis, and the partnership has a Section 754 election in effect, which adjustment applies?
  4. A single taxpayer has $140,000 of wages, $1,200 of taxable interest, $1,800 of qualified dividends, and $60,000 of long-term capital gains. The taxpayer itemizes deductions including $16,000 of SALT and $7,000 of charitable contributions; no other AMT adjustments apply. Which adjustment is required for AMT calculation under IRC §56?
  5. Catalyst Corp., a C corporation, had an operating loss of ($10,000)fortheyear.Duringtheyear,Catalystalsoreceived\$10,000) for the year. During the year, Catalyst also received$50,000 in dividends from a 15%-owned domestic corporation. Catalyst has no other income or expenses. What is Catalyst Corp.'s taxable income for the year?
  6. A trust instrument requires all accounting income to be distributed annually to a surviving spouse, with principal discretionary for health, education, maintenance, and support; remainder to children. The trustee is evaluating whether distributions will shift taxable income to the spouse or remain taxed at the trust level. Under IRC §§ 651–652 (simple trusts) and §§ 661–662 (complex trusts), which factor would most likely impact the trust's tax treatment?
  7. In 2025, a sole proprietorship operating a manufacturing business purchased and placed in service qualifying equipment on December 20, 2025, for $1,300,000. The taxpayer purchased no other Section 179 property during 2025. For 2025, the Section 179 annual deduction 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)?
  8. A mid-sized technology company (C corporation) with 140 employees is evaluating whether its 2025 engineering work qualifies for the research credit. The work involves building a new machine-learning feature for its SaaS platform, including experimentation with multiple model architectures to resolve uncertainty about accuracy and latency; it also includes routine data labeling and cosmetic user interface changes. The company maintained design documents and test results but did not track employee time by project until the last quarter. What documentation is needed to substantiate the tax credit claim?
  9. A corporation uses a third-party payroll provider but remains responsible for payroll tax compliance. The controller finds that for two pay dates in the current quarter, the provider processed payroll and calculated FICA correctly but did not remit the federal payroll tax deposits; state SUTA deposits were made. The corporation wants to take corrective action consistent with IRS requirements. How should the business correct the payroll tax error?
  10. When evaluating reasonable compensation in a family-owned business, the IRS pays particular attention to:
  11. In a tax preparation engagement, a tax preparer discovers that a client's prior-year return (prepared by another firm) likely overstated charitable contributions by $9,500 based on receipts the client now provides. The client says, "Do not bring that up; it is already filed." What is the most appropriate response under Circular 230 guidelines?
  12. For corporations, the threshold requiring estimated tax payments is:
  13. A business owner is deciding between operating as a sole proprietorship or an S corporation. The primary tax advantage of the S corporation structure for an active owner-employee is:
  14. For purposes of the 6-year extended SOL, which of the following is treated as an omission from gross income?
  15. A retail pharmacy with average annual gross receipts of $850,000 spends $9,500 in 2025 to install an accessible checkout counter and $1,000 for staff training on assisting customers with hearing impairments. The owner asks what records should be retained to support a disabled access credit claim. What documentation is needed to substantiate the tax credit claim?
  16. An individual taxpayer, age 47, has $12,000 available to save for retirement. She can either contribute to her employer's traditional 401(k) or invest in a taxable account, and she expects to trade investments periodically in the taxable account, generating realized gains. Considering the tax deferral of qualified plan earnings and the annual taxation of realized gains in taxable accounts, which retirement savings strategy would minimize the client's tax liability?
  17. BB LLC is a domestic multi-member LLC classified as a partnership. The members want the LLC to be taxed as a C corporation effective the beginning of Year 2. Which action is generally required to change the LLC's federal tax classification to a corporation under the entity classification ("check-the-box") regulations?
  18. In 2025, Paige Sullivan (single) has a $9,500 net long-term capital gain and a $12,000 net short-term capital loss from sales of capital assets. She has no other capital transactions. What is the taxpayer's net capital gain (or loss) for 2025 after applying netting and the annual capital loss limitation?
  19. In 2025, Olivia Martin (single) sells 300 shares of the same mutual fund purchased in three lots: 100 shares bought in 2021 for $3,000, 100 shares bought in 2023 for $4,500, and 100 shares bought in 2025 for $5,400. She sells 300 shares in one transaction for $12,000 and does not identify which shares were sold. How should the taxpayer report this transaction on their tax return with respect to basis determination?
  20. A taxpayer wants to rebalance by reducing a concentrated stock position without increasing current-year taxes. The taxpayer holds $500,000 of the stock in a taxable account (basis $200,000; held 5 years), $250,000 of bond funds in taxable generating $12,000 of interest distributions, and $400,000 in a traditional IRA invested in mutual funds. The taxpayer's goal is to reduce equity exposure by $100,000. Which investment strategy minimizes tax liability for this individual?

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