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Practice Test 8 - CPA Tcp

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

  1. Grace and Owen are married filing jointly with AGI of $250,000. They paid $19,000 of state and local taxes (SALT capped at $10,000), $14,500 of qualified home mortgage interest, $8,000 of cash charitable contributions, and $10,000 of unreimbursed medical expenses (deductible only above  7.5%\,7.5\% of AGI). What is the total allowable itemized deduction for Grace and Owen (ignoring any other limitations)?
  2. In 2025, Daniel Lee (single) has a $2,500 short-term capital gain and a $9,400 long-term capital loss from sales of capital assets. He has no other capital transactions. What is the taxpayer's net capital gain (or loss) for 2025 after applying the netting rules and the annual capital loss limitation?
  3. JKL Corporation, a calendar-year entity, was formed and began business on November 1, 2024. The shareholders wish to elect S corporation status for the corporation's first tax year. All shareholders consented and signed Form 2553, which was filed on January 20, 2025. When is JKL's S election effective?
  4. Harper is head of household in 2025 and earned $105,000 of wages and $9,000 of net Schedule C income. Harper paid $6,700 of state income tax and $4,100 of real property taxes, and also paid $1,200 of city income tax. What is the maximum SALT deduction Harper may claim on Schedule A?
  5. In December 2025, Thomas Nguyen (single) has realized long-term capital gains of $18,000 earlier in the year. To reduce his tax liability, he considers selling either (1) Stock X held 16 months with an unrealized loss of $6,000, or (2) Stock Y held 4 months with an unrealized loss of $6,000; he plans not to repurchase either stock within 30 days. What strategy could minimize the taxpayer's tax liability under the capital gain and loss netting rules?
  6. Riley is retired, files as head of household in 2025, and receives $48,000 of pension income and $22,000 of taxable Social Security benefits, plus $6,000 of interest income. Riley paid $6,200 of state income tax and $5,100 of real property taxes on a personal residence, and also paid $2,400 of personal property tax on a vehicle that is based on value. What is the maximum SALT deduction Riley may claim on Schedule A?
  7. A business owner transfers their business to their adult child as a gift. The child's tax basis in the gifted business assets is:
  8. A tax representative receives a power of attorney to represent a client in a collection matter. The client asks the representative to instruct the Internal Revenue Service that the client has no bank accounts, but the representative has seen bank statements showing multiple accounts. What is the most appropriate response under Circular 230 guidelines?
  9. A single taxpayer has $185,000 of wages, $900 of taxable interest, $2,100 of qualified dividends, and $12,000 of long-term capital gains. The taxpayer claims itemized deductions including $22,000 of SALT and $9,000 of charitable contributions; no other AMT adjustments apply. Under IRC §56, which adjustment is required for AMT calculation?
  10. The attribution rules under Section 318 are significant in stock redemption analysis because:
  11. Under the ethical standards applicable to CPAs, which of the following best describes the CPA's duty of confidentiality in tax engagements?
  12. An LLC with two members that has not made a check-the-box election is treated for federal income tax purposes as:
  13. The statute of limitations for the IRS to assess tax is extended to 6 years when:
  14. In 2025, Brian O'Neal (single) sells Stock Q for $10,000 on October 10; his basis is $14,000 (held 2 years). On October 25, he buys substantially identical Stock Q again. He also has a $6,000 long-term capital gain from another sale. What is the taxpayer's net capital gain for 2025 after applying the wash sale rules?
  15. Quinn (age 64, single, retired) receives $40,000 of pension payments in 2025 from a former employer plan. Quinn did not make any after-tax employee contributions to the plan. How is the pension income reported on the tax return?
  16. In 2025, Jordan's spouse died on March 2, 2025, and Jordan did not remarry during 2025. Jordan paid more than half the cost of maintaining a home for a dependent child (Jordan's biological son, age 9) who lived with Jordan all year, and Jordan had wage income of $78,000 and interest income of $600. Under Internal Revenue Code (IRC) §2(a) and the IRS rules for a surviving spouse, which filing status is most appropriate for Jordan for 2025?
  17. An individual taxpayer realizes in October that they have significantly underpaid their estimated taxes. Which of the following actions would best minimize the underpayment penalty for the year?
  18. A public charity must demonstrate broad public support to maintain its status as a public charity (rather than a private foundation). The primary support tests require:
  19. For research and development expenditures paid after 2021, the TCJA requires:
  20. In 2025, Riley is single and has $65,000 of wages and $8,000 of net earnings from self-employment (after applying the net earnings calculation). Riley's self-employment tax is $1,224. Under current IRS rules, what is the impact of the deduction for one-half of self-employment tax on Riley's AGI?

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