LATEST ENROLLED AGENT PART 1 LATEST UPDATED VERSION
2024 ACTUAL TEST QUESTIONS AND WELL ELABORATED
ANSWERS (100% CORRECT VERIFIED ANSWERS) |
GUARANTEED PASS. (BRAND NEW!!)
Dual status alien - ANSWER: An alien who is both a nonresident and resident alien
during the same tax year. The most common dual-status tax years are the years of
arrival and departure.
Resident Alien - ANSWER: If either the green card test or the substantial presence
test is met. Even if the taxpayer does not meet either of these tests, (s)he may be
able to choose to be treated as a U.S. resident for part of the year.
Green Card Test - ANSWER: A taxpayer is a resident for tax purposes if (s)he was a
lawful permanent resident (immigrant) of the United States at any time during the
year
Substantial presence Test - ANSWER: A taxpayer is considered a U.S. resident if
she/he was physically present in the US for at least (1) 31 days during 2018 and 183
days during 2018, 2017, and 2016, counting all days of physical presence in 2018 but
only 1/3 of days in 2017, and 1/6 of days in 2016
Provisional Income threshholds for exclusion of SS Benefits from Income - ANSWER:
MFJ -- 32,000 to 44,000
All Others-- 25,000 to 34,000
MFSLT -- 0
What is excluded from gross income in the case of insurance proceeds? - ANSWER:
Disability pay (excluded)
Accident insurance proceeds. sub for lost income (excluded)
Damages for emotional distress (included if no physical injury)
Punitive damages (included)
Gross income does not include benefits specified that might be received in the form
of disability pay, health or accident insurance proceeds (even if benefits are a
substitute for lost income), workers' compensation awards, or other damages for
personal physical injury or physical sickness. Also excluded are damages received for
emotional distress if an injury has its origin in a physical injury or physical sickness
(regardless of whether the damages are received by a lawsuit or an agreement).
Punitive damages received are included in gross income even if in connection with a
physical injury or sickness
Is unemployment compensation included in gross income? - ANSWER: Yes
,Is disability pay included in gross income? - ANSWER: No
Are punitive damages included in gross income? - ANSWER: Yes (unless you received
a physical injury in connection with the punitive damages)
Are benefits from a health and accident plan included in gross income if paid by
employer? - ANSWER: No (if you received a physical injury in connection with the
benefits)
is compensation for lost wages included in gross income? - ANSWER: No, as long as
the income was given because of physical injury or illness
is compensation due to punitive damages included in gross income? - ANSWER: No,
as long as the income was given because of physical injury or illness
In December 2018, Jim and Tina, a married couple with $50,000 in gross income,
cashed qualified Series EE U.S. Savings Bonds, which they had purchased in January
2015. The proceeds were used to help pay for their son's 2018 college tuition. They
received gross proceeds of $3,500, representing principal of $3,000 and interest of
$500. The qualified higher educational expenses they paid during 2018 totaled
$2,100. Their modified adjusted gross income for 2018 was $80,000. How much of
the $500 interest can Jim and Tina exclude from income for 2018? - ANSWER: $300.
Interest is excluded as long as the gross amount received (principal and interest) do
not exceed qualified educational expenses. If they do exceed that amount, the
amount excluded is limited to the percentage. 2100/3500 = .6 *500 = 300. The
exclusion is reduced when AGI exceeds a threshold of $79,550 (single) or $119,300
(MFJ). completely phased out at $94,550 and $149,300
What factors determine tax home? - ANSWER: 1. The taxpayer performs his or her
business in the area surrounding his/her main home and uses that for lodging while
in the area.
2. The taxpayer has living expenses at his or her main home that are duplicated
because business requires him/her to be away from the main home.
3. The taxpayer has not abandoned the area in which both his/her traditional place
of lodging and man home; family members live at his/her main home. She often uses
this main home for lodging.
Under what circumstance is a day NOT considered a day of personal use of a
dwelling unit for determining if it is used as a home? - ANSWER: If the taxpayer rents
the home at fair rental value to any person (including relatives), such use by that
person is not considered personal use of the home
When are meals deductible? - ANSWER: 50% of meals are deductible if eaten while
away from home on business or with a client or business associate.
Are entertainment expenses deductible? - ANSWER: No
, What is included in deductible travel expenses? - ANSWER: Meals, lodging, and
expenses incident to travel (reasonable laundry, etc.)
Nondeductible travel expenses - ANSWER: Parking at the office. Commuting.
Are event tickets deductible as business gift expense? - ANSWER: Yes if the amount
per individual donee per year is limited to $25. Also, adequate records must be
maintained.
If your bank goes bankrupt, how can the taxpayer deduct the amount? - ANSWER: As
a short term capital loss or ordinary loss (if not a 1% or more owner in the bank)
Job requires relocation and comes with probationary period - ANSWER: the job is
indefinite. Thus, the taxpayer may not deduct any expenses for traveling during the
probationary period.
Where is the tax home of a taxpayer who works permanently in a location away
from his/her principal residence? - ANSWER: While traveling, this taxpayer is not
considered to be away from home. they are considered a transient, and their tax
home is wherever they work.
The standard mileage rate may be used if you own five or more cars that are used
for business as long as you alternate using (use at different times) the cars for
business. (T/F) - ANSWER: True. If you own five or more cars that are used for
business at the same time, you cannot use the standard mileage rate for the
business use of any car. However, you are not using cars at the same time if you use
the cars at different times for business purposes.
On January 1, Year 1, John made a loan of $6,000 to his neighbor. The loan was
evidenced by a written promise to repay the principal within 3 years and was to bear
interest at a rate of 6% per annum. John's neighbor paid only interest for the first
year, and he made no payments in Year 2 or Year 3. Then his financial condition
deteriorated. In Year 2, John learned that he would probably be able to recover only
$3,000 of the loan. The loan was not made in the course of John's business. John can
deduct $3,000 of the loan on his Year 2 tax return. - ANSWER: A partially worthless
nonbusiness debt is not deductible (Reg. 1.166-5), and a wholly worthless
nonbusiness debt is treated as a loss from the sale or exchange of a capital asset
held for 1 year or less, i.e., a short-term capital loss [Sec. 166(d)]. Here, John has a
partially worthless nonbusiness debt. Therefore, it is not deductible.
Ms. X lives with her family in San Francisco, but works in Los Angeles. While in Los
Angeles, Ms. X stays in a hotel and eats in restaurants during the week. She returns
to San Francisco every weekend. Ms. X can deduct her expenses for travel, meals,
and lodging while in Los Angeles.
True. - ANSWER: False.
Travel expenses are deductible only when the taxpayer is away from home for a
temporary period. Since Ms. X permanently works in Los Angeles, this is the location
2024 ACTUAL TEST QUESTIONS AND WELL ELABORATED
ANSWERS (100% CORRECT VERIFIED ANSWERS) |
GUARANTEED PASS. (BRAND NEW!!)
Dual status alien - ANSWER: An alien who is both a nonresident and resident alien
during the same tax year. The most common dual-status tax years are the years of
arrival and departure.
Resident Alien - ANSWER: If either the green card test or the substantial presence
test is met. Even if the taxpayer does not meet either of these tests, (s)he may be
able to choose to be treated as a U.S. resident for part of the year.
Green Card Test - ANSWER: A taxpayer is a resident for tax purposes if (s)he was a
lawful permanent resident (immigrant) of the United States at any time during the
year
Substantial presence Test - ANSWER: A taxpayer is considered a U.S. resident if
she/he was physically present in the US for at least (1) 31 days during 2018 and 183
days during 2018, 2017, and 2016, counting all days of physical presence in 2018 but
only 1/3 of days in 2017, and 1/6 of days in 2016
Provisional Income threshholds for exclusion of SS Benefits from Income - ANSWER:
MFJ -- 32,000 to 44,000
All Others-- 25,000 to 34,000
MFSLT -- 0
What is excluded from gross income in the case of insurance proceeds? - ANSWER:
Disability pay (excluded)
Accident insurance proceeds. sub for lost income (excluded)
Damages for emotional distress (included if no physical injury)
Punitive damages (included)
Gross income does not include benefits specified that might be received in the form
of disability pay, health or accident insurance proceeds (even if benefits are a
substitute for lost income), workers' compensation awards, or other damages for
personal physical injury or physical sickness. Also excluded are damages received for
emotional distress if an injury has its origin in a physical injury or physical sickness
(regardless of whether the damages are received by a lawsuit or an agreement).
Punitive damages received are included in gross income even if in connection with a
physical injury or sickness
Is unemployment compensation included in gross income? - ANSWER: Yes
,Is disability pay included in gross income? - ANSWER: No
Are punitive damages included in gross income? - ANSWER: Yes (unless you received
a physical injury in connection with the punitive damages)
Are benefits from a health and accident plan included in gross income if paid by
employer? - ANSWER: No (if you received a physical injury in connection with the
benefits)
is compensation for lost wages included in gross income? - ANSWER: No, as long as
the income was given because of physical injury or illness
is compensation due to punitive damages included in gross income? - ANSWER: No,
as long as the income was given because of physical injury or illness
In December 2018, Jim and Tina, a married couple with $50,000 in gross income,
cashed qualified Series EE U.S. Savings Bonds, which they had purchased in January
2015. The proceeds were used to help pay for their son's 2018 college tuition. They
received gross proceeds of $3,500, representing principal of $3,000 and interest of
$500. The qualified higher educational expenses they paid during 2018 totaled
$2,100. Their modified adjusted gross income for 2018 was $80,000. How much of
the $500 interest can Jim and Tina exclude from income for 2018? - ANSWER: $300.
Interest is excluded as long as the gross amount received (principal and interest) do
not exceed qualified educational expenses. If they do exceed that amount, the
amount excluded is limited to the percentage. 2100/3500 = .6 *500 = 300. The
exclusion is reduced when AGI exceeds a threshold of $79,550 (single) or $119,300
(MFJ). completely phased out at $94,550 and $149,300
What factors determine tax home? - ANSWER: 1. The taxpayer performs his or her
business in the area surrounding his/her main home and uses that for lodging while
in the area.
2. The taxpayer has living expenses at his or her main home that are duplicated
because business requires him/her to be away from the main home.
3. The taxpayer has not abandoned the area in which both his/her traditional place
of lodging and man home; family members live at his/her main home. She often uses
this main home for lodging.
Under what circumstance is a day NOT considered a day of personal use of a
dwelling unit for determining if it is used as a home? - ANSWER: If the taxpayer rents
the home at fair rental value to any person (including relatives), such use by that
person is not considered personal use of the home
When are meals deductible? - ANSWER: 50% of meals are deductible if eaten while
away from home on business or with a client or business associate.
Are entertainment expenses deductible? - ANSWER: No
, What is included in deductible travel expenses? - ANSWER: Meals, lodging, and
expenses incident to travel (reasonable laundry, etc.)
Nondeductible travel expenses - ANSWER: Parking at the office. Commuting.
Are event tickets deductible as business gift expense? - ANSWER: Yes if the amount
per individual donee per year is limited to $25. Also, adequate records must be
maintained.
If your bank goes bankrupt, how can the taxpayer deduct the amount? - ANSWER: As
a short term capital loss or ordinary loss (if not a 1% or more owner in the bank)
Job requires relocation and comes with probationary period - ANSWER: the job is
indefinite. Thus, the taxpayer may not deduct any expenses for traveling during the
probationary period.
Where is the tax home of a taxpayer who works permanently in a location away
from his/her principal residence? - ANSWER: While traveling, this taxpayer is not
considered to be away from home. they are considered a transient, and their tax
home is wherever they work.
The standard mileage rate may be used if you own five or more cars that are used
for business as long as you alternate using (use at different times) the cars for
business. (T/F) - ANSWER: True. If you own five or more cars that are used for
business at the same time, you cannot use the standard mileage rate for the
business use of any car. However, you are not using cars at the same time if you use
the cars at different times for business purposes.
On January 1, Year 1, John made a loan of $6,000 to his neighbor. The loan was
evidenced by a written promise to repay the principal within 3 years and was to bear
interest at a rate of 6% per annum. John's neighbor paid only interest for the first
year, and he made no payments in Year 2 or Year 3. Then his financial condition
deteriorated. In Year 2, John learned that he would probably be able to recover only
$3,000 of the loan. The loan was not made in the course of John's business. John can
deduct $3,000 of the loan on his Year 2 tax return. - ANSWER: A partially worthless
nonbusiness debt is not deductible (Reg. 1.166-5), and a wholly worthless
nonbusiness debt is treated as a loss from the sale or exchange of a capital asset
held for 1 year or less, i.e., a short-term capital loss [Sec. 166(d)]. Here, John has a
partially worthless nonbusiness debt. Therefore, it is not deductible.
Ms. X lives with her family in San Francisco, but works in Los Angeles. While in Los
Angeles, Ms. X stays in a hotel and eats in restaurants during the week. She returns
to San Francisco every weekend. Ms. X can deduct her expenses for travel, meals,
and lodging while in Los Angeles.
True. - ANSWER: False.
Travel expenses are deductible only when the taxpayer is away from home for a
temporary period. Since Ms. X permanently works in Los Angeles, this is the location
