LATEST ENROLLED AGENT PART 1 LATEST UPDATED VERSION
2024 ACTUAL TEST QUESTIONS AND WELL ELABORATED
ANSWERS (100% CORRECT VERIFIED ANSWERS) |
GUARANTEED PASS. (BRAND NEW!!)
Funeral expenses paid out of the estate.
would be allowed as deductions from the gross estate in computing the taxable
estate
True or False - ANSWER: True
Which of the following types of interest payments, not allowed because of one of
the limitations, may be carried over to the next year? - ANSWER: Interest on money
borrowed to buy stocks.
Clyde, a single person, sold his principal residence for $700,000. He purchased his
home 10 years ago for $150,000 and lived there until he sold it. He paid for capital
improvements of $75,000, real estate commissions of $36,000, and other settlement
costs of $4,000. How much taxable gain must Clyde report? - ANSWER: 185,000
A taxpayer may exclude up to $250,000 ($500,000 for a joint return) of a gain on the
sale of a principal residence if (s)he primarily resided in this home for 2 years of a 5-
year period before the sale of the home. The gain is determined by subtracting from
the amount realized, $660,000, ($700,000 - $36,000 -$4,000) the adjusted basis,
$225,000 ($150,000 + $75,000). This yields a gain of $435,000. Clyde only has to
claim $185,000 ($435,000 - $250,000) as a gain (Sec. 121).
With regard to claiming a dependent, all of the following statements are true EXCEPT
A. To meet the citizenship test, a person must be a U.S. citizen or resident, or a
resident of Canada or Mexico.
B. A person does not meet the member-of-the-household test if at any time during
the tax year the relationship between the taxpayer and that person violates local
law.
C. A person who died during the year, but was a member of your household until
death, will meet the member-of-the-household test.
D. In calculating a person's total support, do not include tax-exempt income used to
support that person. - ANSWER: D - A taxpayer must furnish more than one-half of
the total support provided during the calendar year before claiming an exemption
for a dependent. The support may come from taxable income, tax-exempt receipts,
or loans (Publication 501).
, Ms. X, a cash-method taxpayer, received notice from her mutual fund that it has
realized a long-term capital gain on her behalf in the amount of $2,500. It also
advised her that it has paid a tax of $500 on this gain. The mutual fund indicated that
it will not distribute the net amount but will credit the amount to her account. All of
the following statements are true EXCEPT
A. X is allowed a $500 credit for the tax since it is considered paid by X.
B. X does not report a long-term capital gain because nothing was paid to her.
C. X is allowed to increase her basis in the stock by $2,000.
D. X must report a long-term capital gain of $2,500. - ANSWER: Answer (B) is correct.
A mutual fund is a regulated investment company, the taxation of which is
determined by Sec. 852. Shareholders are taxed on dividends paid by the mutual
fund. If part or all of the dividend is designated as a capital gain dividend, it must be
treated as such by the shareholders. Undistributed capital gains also must be
included in income by shareholders, but they are allowed a credit for their
proportionate share of any tax on the capital gain paid by the mutual fund
(Publication 17).
Which of the following will NOT usually be 100% deductible as a medical expense?
A. Lowering the kitchen cabinets.
B. Modifying the hardware on doors.
C. Building entrance and exit ramps.
D. Adding an elevator to your home to allow access to a second-floor bedroom. -
ANSWER: Answer (D) is correct.
Home-related capital expenditures incurred by a physically handicapped individual
are deductible. An example of such an expenditure is an elevator needed for
someone with a heart condition. However, the amount of any increase in value of
the existing property cannot be deducted. Since the addition of an elevator to a
home would normally increase the value of the home, the entire cost would not be
deductible as a medical expense. (Publication 502.)
Randi, a flight attendant, received wages of $30,000 in the current year. The airline
provided transportation on a stand-by basis, at no charge, from her home in Detroit
to the airline's hub in Chicago. The fair market value of the commuting flights was
$5,000. Also in the current year, Randi received reimbursements under an
accountable plan of $10,000 for overnight travel, but only spent $6,000. The excess
was returned. Randi became disabled in November of the current year and received
workers' compensation of $4,000. What amount must Randi include in gross income
on her current-year tax return?
What paid for by the employer are excluded from gross income since they are no-
additional-cost fringe benefits. - ANSWER: Commuting Flights
What to include in gross income:
wages
transportation by stand by basis
2024 ACTUAL TEST QUESTIONS AND WELL ELABORATED
ANSWERS (100% CORRECT VERIFIED ANSWERS) |
GUARANTEED PASS. (BRAND NEW!!)
Funeral expenses paid out of the estate.
would be allowed as deductions from the gross estate in computing the taxable
estate
True or False - ANSWER: True
Which of the following types of interest payments, not allowed because of one of
the limitations, may be carried over to the next year? - ANSWER: Interest on money
borrowed to buy stocks.
Clyde, a single person, sold his principal residence for $700,000. He purchased his
home 10 years ago for $150,000 and lived there until he sold it. He paid for capital
improvements of $75,000, real estate commissions of $36,000, and other settlement
costs of $4,000. How much taxable gain must Clyde report? - ANSWER: 185,000
A taxpayer may exclude up to $250,000 ($500,000 for a joint return) of a gain on the
sale of a principal residence if (s)he primarily resided in this home for 2 years of a 5-
year period before the sale of the home. The gain is determined by subtracting from
the amount realized, $660,000, ($700,000 - $36,000 -$4,000) the adjusted basis,
$225,000 ($150,000 + $75,000). This yields a gain of $435,000. Clyde only has to
claim $185,000 ($435,000 - $250,000) as a gain (Sec. 121).
With regard to claiming a dependent, all of the following statements are true EXCEPT
A. To meet the citizenship test, a person must be a U.S. citizen or resident, or a
resident of Canada or Mexico.
B. A person does not meet the member-of-the-household test if at any time during
the tax year the relationship between the taxpayer and that person violates local
law.
C. A person who died during the year, but was a member of your household until
death, will meet the member-of-the-household test.
D. In calculating a person's total support, do not include tax-exempt income used to
support that person. - ANSWER: D - A taxpayer must furnish more than one-half of
the total support provided during the calendar year before claiming an exemption
for a dependent. The support may come from taxable income, tax-exempt receipts,
or loans (Publication 501).
, Ms. X, a cash-method taxpayer, received notice from her mutual fund that it has
realized a long-term capital gain on her behalf in the amount of $2,500. It also
advised her that it has paid a tax of $500 on this gain. The mutual fund indicated that
it will not distribute the net amount but will credit the amount to her account. All of
the following statements are true EXCEPT
A. X is allowed a $500 credit for the tax since it is considered paid by X.
B. X does not report a long-term capital gain because nothing was paid to her.
C. X is allowed to increase her basis in the stock by $2,000.
D. X must report a long-term capital gain of $2,500. - ANSWER: Answer (B) is correct.
A mutual fund is a regulated investment company, the taxation of which is
determined by Sec. 852. Shareholders are taxed on dividends paid by the mutual
fund. If part or all of the dividend is designated as a capital gain dividend, it must be
treated as such by the shareholders. Undistributed capital gains also must be
included in income by shareholders, but they are allowed a credit for their
proportionate share of any tax on the capital gain paid by the mutual fund
(Publication 17).
Which of the following will NOT usually be 100% deductible as a medical expense?
A. Lowering the kitchen cabinets.
B. Modifying the hardware on doors.
C. Building entrance and exit ramps.
D. Adding an elevator to your home to allow access to a second-floor bedroom. -
ANSWER: Answer (D) is correct.
Home-related capital expenditures incurred by a physically handicapped individual
are deductible. An example of such an expenditure is an elevator needed for
someone with a heart condition. However, the amount of any increase in value of
the existing property cannot be deducted. Since the addition of an elevator to a
home would normally increase the value of the home, the entire cost would not be
deductible as a medical expense. (Publication 502.)
Randi, a flight attendant, received wages of $30,000 in the current year. The airline
provided transportation on a stand-by basis, at no charge, from her home in Detroit
to the airline's hub in Chicago. The fair market value of the commuting flights was
$5,000. Also in the current year, Randi received reimbursements under an
accountable plan of $10,000 for overnight travel, but only spent $6,000. The excess
was returned. Randi became disabled in November of the current year and received
workers' compensation of $4,000. What amount must Randi include in gross income
on her current-year tax return?
What paid for by the employer are excluded from gross income since they are no-
additional-cost fringe benefits. - ANSWER: Commuting Flights
What to include in gross income:
wages
transportation by stand by basis
