HR BLOCK (TKA EXAM PREP) QUESTIONS AND
ANSWERS
/. IRC - Answer-✅Internal Revenue Code
/.Standard Deduction - Answer-✅Set by statute. Included in calculating the Below-the-
Line deductions (for Taxable Income). Alternative is Itemized Deduction
/.Itemized Deduction - Answer-✅Sum of allowable deductions in calculating the Below-
the-Line deductions (for Taxable Income). Alternative is Standard Deduction
/.Tax Rate (Individuals) - Ordinary Income - Answer-✅10% - 37%
/.Tax Rate (Individuals) - Net Gains / Qualified Dividends - Answer-✅0% - 20%
(sometimes) 20% - 28% (usually)
/.Alternative Minimum Tax Rate - Answer-✅26% - 28%
/.Capital Gains - Answer-✅Profit (or Loss) from the sale of property or investments
(preferential tax rate compared to Ordinary Income)
/.Adjusted Gross Income (AGI) - Answer-✅Gross Income - Deductions
/.Taxable Income - Answer-✅AGI - (Larger of Standard or Itemized Deduction)
/.Tentative Tax - Answer-✅Taxable Income (x) Tax Rate
/.Taxes Due (+) or Refund (-) - Answer-✅Tentative Tax - Credits
/.Refundable Tax Credit - Answer-✅Taxpayer can receive money through a refund
/.Nonrefundable Tax Credit - Answer-✅Tax is lowered to a possible $0. But no refund.
/.Title 26 (US. Code) - Answer-✅The statutory bas of all federal tax law.
/.Gross Income - Answer-✅"All income from whatever source derived"
/.Haig-Simons Definition of Income - Answer-✅Market Value of Rights Exercised in
Consumption + Change in Property Rights over the Term.
, Interpretation: Total value of consumer expenditures + net change in savings (e.g., bank
accounts, stocks and bonds, real estate)
Alternative is Economic Benefit Definition.
/.Economic Benefit Definition of Income - Answer-✅Value of any economic benefit
received by the taxpayer regardless of the form of that benefit.
Alternative is Haig-Simons Definition.
/.Imputed Income - Answer-✅*Not Income
Any services one performs for oneself or family / the value of property used that one
owns
/.Loans - Answer-✅Loans themselves are not taxed.
However, Loan Discharge or Loan Forgiveness may constitute Income.
- Debt must be enforceable.
- Creditor has agreed to receive less than initially contracted
/.Compensation Income - Answer-✅Consideration for Performance of Services
(regardless of the form - e.g., cash, property, fringe benefits).
Ordinary Income taxable up to the highest rate.
/.Business Income - Answer-✅A SOLE PROPRIETOR should report his gross income -
deductions.
/.Annuities - Answer-✅Annuities (in business) involve a company promising to pay an
amount of money monthly to a person in exchange for the person paying premiums to
the issuer.
Annuity payments include partial repayment of initial investment (excludable).
1) Payment (*) [Investment / Total Expected Return] = Excludable Amount
2) Payment - Excludable Amount = Taxable Income
/.Prizes and Awards - Answer-✅Include unless:
- Qualified Scholarship
- Employee Achievement Award
- Recognition of Religious, Charitable, Scientific, Literary, Artistic, Educational, or Civic
Achievement
Criteria for Exclusion:
ANSWERS
/. IRC - Answer-✅Internal Revenue Code
/.Standard Deduction - Answer-✅Set by statute. Included in calculating the Below-the-
Line deductions (for Taxable Income). Alternative is Itemized Deduction
/.Itemized Deduction - Answer-✅Sum of allowable deductions in calculating the Below-
the-Line deductions (for Taxable Income). Alternative is Standard Deduction
/.Tax Rate (Individuals) - Ordinary Income - Answer-✅10% - 37%
/.Tax Rate (Individuals) - Net Gains / Qualified Dividends - Answer-✅0% - 20%
(sometimes) 20% - 28% (usually)
/.Alternative Minimum Tax Rate - Answer-✅26% - 28%
/.Capital Gains - Answer-✅Profit (or Loss) from the sale of property or investments
(preferential tax rate compared to Ordinary Income)
/.Adjusted Gross Income (AGI) - Answer-✅Gross Income - Deductions
/.Taxable Income - Answer-✅AGI - (Larger of Standard or Itemized Deduction)
/.Tentative Tax - Answer-✅Taxable Income (x) Tax Rate
/.Taxes Due (+) or Refund (-) - Answer-✅Tentative Tax - Credits
/.Refundable Tax Credit - Answer-✅Taxpayer can receive money through a refund
/.Nonrefundable Tax Credit - Answer-✅Tax is lowered to a possible $0. But no refund.
/.Title 26 (US. Code) - Answer-✅The statutory bas of all federal tax law.
/.Gross Income - Answer-✅"All income from whatever source derived"
/.Haig-Simons Definition of Income - Answer-✅Market Value of Rights Exercised in
Consumption + Change in Property Rights over the Term.
, Interpretation: Total value of consumer expenditures + net change in savings (e.g., bank
accounts, stocks and bonds, real estate)
Alternative is Economic Benefit Definition.
/.Economic Benefit Definition of Income - Answer-✅Value of any economic benefit
received by the taxpayer regardless of the form of that benefit.
Alternative is Haig-Simons Definition.
/.Imputed Income - Answer-✅*Not Income
Any services one performs for oneself or family / the value of property used that one
owns
/.Loans - Answer-✅Loans themselves are not taxed.
However, Loan Discharge or Loan Forgiveness may constitute Income.
- Debt must be enforceable.
- Creditor has agreed to receive less than initially contracted
/.Compensation Income - Answer-✅Consideration for Performance of Services
(regardless of the form - e.g., cash, property, fringe benefits).
Ordinary Income taxable up to the highest rate.
/.Business Income - Answer-✅A SOLE PROPRIETOR should report his gross income -
deductions.
/.Annuities - Answer-✅Annuities (in business) involve a company promising to pay an
amount of money monthly to a person in exchange for the person paying premiums to
the issuer.
Annuity payments include partial repayment of initial investment (excludable).
1) Payment (*) [Investment / Total Expected Return] = Excludable Amount
2) Payment - Excludable Amount = Taxable Income
/.Prizes and Awards - Answer-✅Include unless:
- Qualified Scholarship
- Employee Achievement Award
- Recognition of Religious, Charitable, Scientific, Literary, Artistic, Educational, or Civic
Achievement
Criteria for Exclusion:
