FEDERAL TAXATION FINAL EXAMINATION - LATEST
PRACTICE QUESTIONS AND 100% VERIFIED CORRECT
ANSWERS | COMPLETE EXAM PREP TESTBANK |
GUARANTEED PASS | INSTANT DOWNLOAD PDF
Exam Coverage & Structure
This comprehensive final examination assesses foundational theory, applied taxation knowledge,
computational skills, ethical standards, professional responsibilities, and real-world tax planning under
current U.S. federal tax law. Topics include:
Gross income and exclusions
Adjustments and deductions
Filing status and dependency rules
Property transactions and capital gains
Business income and deductions
Depreciation and cost recovery
Corporate and partnership taxation
S corporations
Tax credits
Alternative minimum tax
Payroll and employment taxes
Retirement plans
Estate and gift taxation
Procedural rules, penalties, and ethics
Practice standards under the Internal Revenue Service and Treasury regulations
1. Gross income under Internal Revenue Code §61 includes:
A. Gifts received
B. Municipal bond interest
C. Life insurance proceeds paid by reason of death
D. Compensation for services
Gross income broadly includes compensation for services unless specifically
excluded. Gifts, municipal bond interest, and life insurance death benefits
are generally excluded.
2. Which item is excluded from gross income?
A. Punitive damages
, B. Qualified scholarships used for tuition
C. Gambling winnings
D. Jury duty pay
Qualified scholarships used for tuition and required fees are excluded.
Punitive damages, gambling winnings, and jury duty pay are taxable.
3. A cash-basis taxpayer receives a check on December 30 but deposits it
January 5. Income is recognized:
A. January 5
B. December 30
C. When cleared by bank
D. When spent
Under constructive receipt doctrine, income is taxable when made available
without restriction.
4. Which filing status generally provides the highest standard deduction?
A. Single
B. Married Filing Separately
C. Married Filing Jointly
D. Head of Household
Married Filing Jointly generally receives the largest standard deduction.
5. A qualifying child must meet all except:
A. Relationship test
B. Residency test
C. Age test
D. Gross income test
The gross income test applies to qualifying relatives, not qualifying children.
6. Capital gain holding period for long-term treatment is:
A. 6 months
, B. 9 months
C. 11 months
D. More than 12 months
Long-term capital gain requires holding period exceeding one year.
7. Net capital losses for individuals are deductible up to:
A. $1,000
B. $2,000
C. $3,000
D. Unlimited
Individuals may deduct up to $3,000 of net capital losses annually.
8. Basis of property received as a gift generally equals:
A. FMV on date of gift
B. Donor’s adjusted basis
C. Zero
D. Selling price
Donee takes carryover basis from donor (with special loss limitation rules).
9. Depreciation under MACRS applies to:
A. Land
B. Tangible business property
C. Inventory
D. Personal-use property
MACRS applies to tangible property used in business or income production;
land is not depreciable.
10.Section 179 expensing is limited by:
A. Capital gains
B. Taxable income from active trades or businesses
C. Passive income
, D. Standard deduction
Section 179 deduction cannot exceed taxable income from active business.
11.Like-kind exchange defers gain when:
A. Property is sold for cash
B. Exchange involves inventory
C. Real property is exchanged for real property held for investment or
business
D. Personal-use residence is exchanged
Post-2017, §1031 applies only to real property used for business/investment.
12.Which is deductible for AGI?
A. Charitable contributions
B. Mortgage interest
C. Student loan interest (subject to limits)
D. Medical expenses
Student loan interest is an above-the-line deduction.
13.Medical expense deduction threshold is:
A. 5% of AGI
B. 7% of AGI
C. 7.5% of AGI
D. 10% of AGI
Medical expenses deductible to extent exceeding 7.5% of AGI.
14.A hobby loss:
A. Fully deductible
B. Deductible only to extent of hobby income
C. Deductible as capital loss
D. Never reportable
Hobby expenses cannot exceed hobby income.
PRACTICE QUESTIONS AND 100% VERIFIED CORRECT
ANSWERS | COMPLETE EXAM PREP TESTBANK |
GUARANTEED PASS | INSTANT DOWNLOAD PDF
Exam Coverage & Structure
This comprehensive final examination assesses foundational theory, applied taxation knowledge,
computational skills, ethical standards, professional responsibilities, and real-world tax planning under
current U.S. federal tax law. Topics include:
Gross income and exclusions
Adjustments and deductions
Filing status and dependency rules
Property transactions and capital gains
Business income and deductions
Depreciation and cost recovery
Corporate and partnership taxation
S corporations
Tax credits
Alternative minimum tax
Payroll and employment taxes
Retirement plans
Estate and gift taxation
Procedural rules, penalties, and ethics
Practice standards under the Internal Revenue Service and Treasury regulations
1. Gross income under Internal Revenue Code §61 includes:
A. Gifts received
B. Municipal bond interest
C. Life insurance proceeds paid by reason of death
D. Compensation for services
Gross income broadly includes compensation for services unless specifically
excluded. Gifts, municipal bond interest, and life insurance death benefits
are generally excluded.
2. Which item is excluded from gross income?
A. Punitive damages
, B. Qualified scholarships used for tuition
C. Gambling winnings
D. Jury duty pay
Qualified scholarships used for tuition and required fees are excluded.
Punitive damages, gambling winnings, and jury duty pay are taxable.
3. A cash-basis taxpayer receives a check on December 30 but deposits it
January 5. Income is recognized:
A. January 5
B. December 30
C. When cleared by bank
D. When spent
Under constructive receipt doctrine, income is taxable when made available
without restriction.
4. Which filing status generally provides the highest standard deduction?
A. Single
B. Married Filing Separately
C. Married Filing Jointly
D. Head of Household
Married Filing Jointly generally receives the largest standard deduction.
5. A qualifying child must meet all except:
A. Relationship test
B. Residency test
C. Age test
D. Gross income test
The gross income test applies to qualifying relatives, not qualifying children.
6. Capital gain holding period for long-term treatment is:
A. 6 months
, B. 9 months
C. 11 months
D. More than 12 months
Long-term capital gain requires holding period exceeding one year.
7. Net capital losses for individuals are deductible up to:
A. $1,000
B. $2,000
C. $3,000
D. Unlimited
Individuals may deduct up to $3,000 of net capital losses annually.
8. Basis of property received as a gift generally equals:
A. FMV on date of gift
B. Donor’s adjusted basis
C. Zero
D. Selling price
Donee takes carryover basis from donor (with special loss limitation rules).
9. Depreciation under MACRS applies to:
A. Land
B. Tangible business property
C. Inventory
D. Personal-use property
MACRS applies to tangible property used in business or income production;
land is not depreciable.
10.Section 179 expensing is limited by:
A. Capital gains
B. Taxable income from active trades or businesses
C. Passive income
, D. Standard deduction
Section 179 deduction cannot exceed taxable income from active business.
11.Like-kind exchange defers gain when:
A. Property is sold for cash
B. Exchange involves inventory
C. Real property is exchanged for real property held for investment or
business
D. Personal-use residence is exchanged
Post-2017, §1031 applies only to real property used for business/investment.
12.Which is deductible for AGI?
A. Charitable contributions
B. Mortgage interest
C. Student loan interest (subject to limits)
D. Medical expenses
Student loan interest is an above-the-line deduction.
13.Medical expense deduction threshold is:
A. 5% of AGI
B. 7% of AGI
C. 7.5% of AGI
D. 10% of AGI
Medical expenses deductible to extent exceeding 7.5% of AGI.
14.A hobby loss:
A. Fully deductible
B. Deductible only to extent of hobby income
C. Deductible as capital loss
D. Never reportable
Hobby expenses cannot exceed hobby income.
