Individual Tax Practice TestAccounting Training Unlimited [email protected] 1

Individual Tax Practice TestIndividual Tax Practice TestTable of ContentsIndividual Tax Practice Test. 3Individual Tax Practice Test Answer Sheet . 8Accounting Training Unlimited [email protected] 2

Individual Tax Practice TestIndividual Tax Practice Test1. The most popular form of doing business in the United States is:A) Corporate formB) Partnership formC) Single proprietorshipD) S corporation2. The IRS levies penalties for which of the following:A) Bouncing checksB) FraudC) Late filingD) All of the above3. The ultimate source of power to tax resides with the:A) PresidentB) House Ways and Means CommitteeC) Senate Finance CommitteeD) Constitution4. Which of the following statements regarding Treasury Regulations is false?A) In dealing with the IRS, Treasury Regulations have the authority of law.B) Courts are bound to follow Treasury Regulations when they are in conflict with the law.C) The legal citation for a Treasury Regulation refers to the associated Internal Revenue Codesection.D) Regulations are published in the Federal Register.5. Which of the following sources of tax law are cross-referenced to related Internal RevenueCode sections through the use of a similar numbering system?A) Revenue RulingsB) Tax Court casesC) Treasury RegulationsD) Determination Letters6. Upon completion of an audit, which procedural form does the IRS agent give to thetaxpayer?A) Form 870, Waiver of RestrictionsB) 30-day letterC) 90-day letterD) Revenue Agent's ReportAccounting Training Unlimited [email protected] 3

Individual Tax Practice Test7. What is the amount of standard deduction for Abigale Abrams in 2015, a divorced parent,who fully supports her five-year-old daughter?A) 6,300B) 9,250C) 12,600D) 8,000E) None of the above8. Determine the amount of taxable income of Michael Manx in 2015, who is single and has 300 of wages and 2,000 of interest income for the year. He is claimed as a dependent by hisparents.A) 2,000B) 2,300C) 1,250D) 300E) 09. Marvin Miller, who is claimed as a dependent by his parents, received income of 3,100from a trust fund and 500 from wages. Marvin had 1,150 in itemized deductions. What isMarvin's taxable income?A) 2,550B) 3,600C) 2,450D) 1,500E) None of the above10. All of the following are considered "constructive receipt" of income, except:A) Lori was informed her check for services rendered was available but she did not pick it up.B) Pierre earned income that was received by his agent but was not received by Pierre.C) Jacque bought a 9-month certificate of deposit in November 2015. It earned 200 interest in2015. She can withdraw the principal and interest in 2015 if she pays a penalty of one month'sinterest ( 100).D) A payment on a sale of real property place in escrow pending settlement at which time titlewould convey.11. In which of the following situations will the divorced custodial parent be entitled to thedependency exemption for the child?A) The noncustodial parent provides 1,500 of support for the child and the custodial parentprovides 1,200.B) The custodial and noncustodial parent both provide 1,500 of support for the child.C) The custodial parent provides 1,500 of support for the child and the noncustodial parentprovides 1,200.D) All of the above.Accounting Training Unlimited [email protected] 4

Individual Tax Practice Test12. In July 2008, Dan Farley leased a building to Robert Shelter for a period of 15 years at amonthly rental of 1,000 with no option to renew. At that time the building had a remainingestimated useful life of 20 years. Prior to taking possession of the building, Shelter madeimprovements at a cost of 18,000. These improvements had an estimated useful life of 20years at the commencement of the lease period. The lease expired on June 30, 2015, at whichpoint the improvements had a fair market value of 2,000. The amount that Farley, thelandlord, should include in his gross income for 2015 is:A) 6,000B) 8,000C) 12,000D) 24,00013. Marnie purchased a bond on August 15, 2015 for 2,100. 200 of the purchase pricerepresented accrued interest. She received 210 in interest income on the bond on December1, 2015. What is the proper treatment of the 210 interest income for federal income taxpurposes?A) 200 return of capital, the 10 can be currently included as interest income or deferred untilthe bond is cashed.B) Marnie can elect to include the 210 as interest income in 2015 or defer the reporting untilshe cashes the bond.C) 210 taxable as interest income.D) Report the total payment as taxable interest, then report 200 as an adjustment to income.14. During 2015, Anne Apple received tangible personal property as a safety achievementaward from her employer. The award was not a qualified plan award. The property cost theemployer 500 and had a fair market value of 600. How much must Anne include in her 2015gross income?A) 0B) 200C) 500D) 60015. During 2015, Edward East had wages of 10,000 and received unemploymentcompensation of 6,200 from the state. Edward is single and 45 years old. What is theamount of unemployment compensation to be included in his gross income?A) 0B) 2,100C) 3,800D) 6,200Accounting Training Unlimited [email protected] 5

Individual Tax Practice Test16. Hobby expenditures are deductible to the extent of:A) Total individual gross incomeB) Hobby gross incomeC) Trade or business gross incomeD) Nonbusiness gross income17. If an expenditure is part business-related and part personal:A) The entire expenditure is deductible for tax purposes.B) No part of the expenditure is deductible for tax purposes.C) The personal portion of the expenditure may be deductible for tax purposes.D) Only the business-related portion of the expenditure is deductible for tax purposes.18. Fines and penalties paid to the government for the violation of a law are:A) Generally deductible for tax purposes as business expensesB) Not deductible for tax purposesC) Deductible if ordinary and necessaryD) Deductible if reasonable in amount19. ABC, Inc. of Jasper, Georgia suffered a casualty loss of 150,000 in March 2015. This losswas caused by heavy rains that completely flooded their factory. As a result of these rains,the President declared North Georgia (including Jasper) a disaster area on March 23, 2015. Inwhat year can ABC, Inc. elect to deduct the casualty loss?A) 2015 or 2016B) 2014 or 2015C) 2015D) 201420. Which of the following is not a passive activity?A) Owning a business and not materially participatingB) Having rental condosC) Owning a limited partnership interest in a real estate limited partnershipD) Owning a working interest in oil and gas properties21. John Henderson purchased a condo on Hilton Head Island on January 4, 2015. Hepersonally used the condo from May 7, 2015 until May 28, 2015. Because John rented thecondo out for 112 days in 2015, he qualifies to deduct all the available rental expenses.A) TrueB) FalseAccounting Training Unlimited [email protected] 6

Individual Tax Practice Test22. The Code Section 199 manufacturing deduction cannot exceed 50% of W-2 wages paid bythe taxpayer during a tax year.A) TrueB) False23. Itemized deductions only reduce taxable income if the taxpayer's itemized deductionsexceed the standard deduction amount.A) TrueB) False24. A taxpayer may elect to capitalize certain annual taxes, mortgage interest, and deductiblecarrying charges on unimproved and unproductive real property.A) TrueB) False25. Education expenses which qualify an individual for a new trade or business are allowed asan itemized deduction.A) TrueB) False26. Individual taxpayers cannot deduct as itemized deductions losses arising from fire, storm,shipwreck, or other casualty, or from theft of nonbusiness property.A) TrueB) False27. Tuition paid to a private school for a third-grader qualifies for the dependent care credit.A) TrueB) False28. Taxpayers may elect to carry forward unused general business credit for 10 years ratherthan back one year and forward 20 years.A) TrueB) False29. Accelerated depreciation and depletion are examples of tax preference items.A) TrueB) False30. The deduction for foreign taxes is only allowed in the year in which the foreign taxes arepaid or incurred.A) TrueB) FalseAccounting Training Unlimited [email protected] 7

Individual Tax Practice TestIndividual Tax Practice Test Answer 29.30.DDBBDBAAABBBBAAAccounting Training Unlimited [email protected] 8