Tax Specialist Certification Test

Benicio purchased stock shares many years ago. His records were destroyed, and he does not know exactly when the purchase was made or what he paid. He sold the shares for $10,000 in 2022. If he is unable to verify what the original basis was, what is his taxable gain?

 $0

 $2,500

 $5,000

 $10,000

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Grayson purchased his primary residence for $260,000. As part of the closing procedure, he paid $2,900 in loan origination fees, $750 to a lawyer to review the purchase contract and other closing papers, $250 for a property survey, and $1,200 for title insurance. He also gave the real estate agent a $100 gift certificate in appreciation for her hard work. What is Grayson's basis in the residence?

 $260,000

 $261,200

  $262,200

 $263,000

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Investment Income

Question 3 of 75.

Jeremiah converted $2,000 into Bitcoin in November 2021. In October 2022, when the value of his holding had increased to $3,500, Jeremiah decided to purchase a watch using Bitcoin. He spent the entire holding on the watch. How will Jeremiah report this on his tax return?

 No reporting is necessary until he sells the watch. At that time, he will report a gain or loss, depending on the sale price of the watch.

 As a short-term capital gain of $2,000 on Form 8949. His basis in the watch is $3,500.

 As $3,500 in ordinary income.

 No reporting is necessary when purchases are made using virtual currency.

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Question 4 of 75.

Gizelle, a shareholder in ABC Corporation, received a distribution of cash from the earnings and profits of the company. This income is reported as:

 Capital gain income.

 Corporate bond interest.

 Dividend income.

 A return of capital.

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All of the following are considered a capital asset EXCEPT:

 Investment-use property, such as land.

 Jewelry.

 Personal residence.

  Real property used in a trade or business.

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Lesha purchased some units of ECoin in 2022. For tax purposes, the virtual currency is treated as:

 Cash.

 Credit.

 Property.

 Stock.

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Carmella owns 250 shares of stock, with a basis of $2,500. The stock split 2 for 1. Carmella now owns ______ shares at ______ per share.

  500 shares at $5 per share.

 500 shares at $10 per share.

 250 shares at $5 per share.

 250 shares at $10 per share.

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Melonie owns shares of KBC Corporation. In early 2023, she received the following Form 1099-DIV, reporting the dividends paid for 2022. She has elected to have these dividends reinvested. Which of the following statements correctly describes the tax treatment of her reinvested dividends and the effect on her basis? (Answer choices are below the image.) The dividends are:

 Not taxable on her 2022 return, but the new shares purchased increase her basis in the stock.

 Not taxable until the stock is sold, and it does not affect her basis.

 Taxable on her 2022 return and increase her basis in the original shares.

  Taxable on her 2022 return, and her basis in the new shares purchased is the cash value of the dividends.

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Qualified dividends may be taxed at which of the following rates?

 0%.

 22%.

 35%.

 37%.

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Jaxon (51) purchased a $10,000, 13-week Treasury bill as a short-term investment. He paid $9,960 for the security, which was issued on June 17, 2022. When the bill matured on September 16, 2022, Jaxon received $10,000. How is the $40 in interest that he earned on this investment reported on his return?

 As accrued interest on Schedule B,  Interest and Ordinary Dividends.

  As taxable interest on line 2b of his Form 1040.

 As tax-exempt interest on line 2a of his Form 1040.

 As tax-exempt interest that is taxable for the alternative minimum tax (AMT), reported only on Form 6251.

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Kiddie Tax

Question 11 of 75.

For the "kiddie tax" rule to apply, the child must:

  Be required to file a tax return for 2022.

 Not be a full-time student and not have attained age 23 in the tax year.

 Have both parents living.

 Not have claimed the American Opportunity Credit the previous year.

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Schedules K-1

Question 12 of 75.

Which of the following situations does NOT describe a material participant?

 Mika participated in Activity A for 20 hours, Activity B for 80 hours, and Activity C for 75 hours. Another person contributed more hours in the same activity.

 Bree participated in Activity X for 612 hours.

 Justin was a full-time owner/employee at Activity Q from 2012 to 2022.

 Brent participated in Activity Y for 210 hours, more than any other individual.

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Question 13 of 75.

Portfolio income includes:

 Commissions for a stockbroker.

 Guaranteed payments for service rendered by a partner to the partnership.

 Royalties not derived in the ordinary course of a trade or business.

 Quarterly bonus payments.

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Question 14 of 75.

Mackenzie works full-time as a director of a corporation. She is also a shareholder in an S corporation, a family restaurant. Mackenzie does not do any work for the restaurant, but does receive a Schedule K-1 for her share of the income. Where would that income be reported on her tax return?

 Schedule B, Interest and Ordinary Dividends.

 Schedule C, Profit or Loss from Business.

 Schedule D, Capital Gains and Losses.

  Schedule E, Supplemental Income and Loss.

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Clergy

Question 15 of 75.

Like all self-employed taxpayers, self-employed clergy can deduct health care coverage amounts paid for medical and dental insurance and long-term care for:

 Themselves only, and not for their spouse or dependents.

 Themselves, their spouse, their dependents, and any child who, at the end of the year, is under age 27.

 Themselves, their spouse, their dependents, and any child who, at the end of the year, is under age 28.

 Themselves and spouse only, and not for their dependents.

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Question 16 of 75.

The Reverend Roberson receives an annual salary of $51,000 as a full-time minister. This includes $5,000 designated as rental allowance to pay utilities. Reverend Roberson is not exempt from self-employment tax. How much must he include when figuring net income for self-employment tax?

 $5,000

 $46,000

 $51,000

 $56,000

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Question 17 of 75.

Jessica is an ordained minister. Jessica's salary from her employing church last year was $52,000. The church did not designate any of her salary as housing allowance. Jessica spent $12,400 to rent her home last year. How much of Jessica's salary must be included when figuring net income for self-employment tax?

 $39,600

 $52,000

 $58,200

 $64,400

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Military

Question 18 of 75.

Riva Huster is a servicemember, and a legal resident of New York. She met her husband, Mitch, in Florida during a visit in 2017, where he grew up. In 2022, Riva and Mitch moved from New York to Michigan in accordance with new PCS orders Riva received. Which of the following statements is TRUE regarding Mitch’s state of legal residency?

  He may elect to be considered a legal resident of New York.

 He may elect to be considered a legal resident of either Michigan or Florida.

 He is required to maintain his legal residency of New York.

 He is required to maintain his legal residency in Florida.

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Question 19 of 75.

Which of the following is an accurate statement regarding the filing of a joint tax return for military families?

 The spouse of a member of the military may sign a joint return if the servicemember is serving in Germany and the spouse is still stateside.

 One spouse can prepare and sign the return and then send it to the other spouse to sign and file.

 The spouse of a member of the military may never sign for the servicemember on a joint return.

  The spouse of a member of the military never needs a power of attorney (POA) in order to file an MFJ tax return.

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Question 20 of 75.

If a servicemember dies while on active duty, all of the following allowances are available to surviving family members EXCEPT:

  Interment and a burial marker at any cemetery for the servicemember's direct descendants.

 Death gratuity payments for eligible survivors.

 Travel of dependents to the servicemember's burial site.

 Burial services for the deceased servicemember.

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Question 21 of 75.

Ladislav Vadim was deployed in a combat zone for all of 2022. He is married and has two children. Ladislav's nontaxable combat pay in 2022 is $25,000. His wife worked part-time while Ladislav was deployed and earned $9,000. What is the maximum amount of earned income the Vadims can report for Earned Income Tax Credit (EITC) purposes in 2022?

 $9,000

 $16,000

 $25,000

 $34,000

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Question 22 of 75.

Quincy was in a combat zone from March 10 through August 15. During the year, the military paid $4,800 toward his student loans ($400 per month). How much of that benefit is taxable income?

 $400

 $2,400

 $3,600

 $4,800

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Tax Planning

Question 23 of 75.

Health savings account (HSA) contributions made by an employer:

 Exist on a use-it-or-lose-it basis.

 Reduce the total amount an employee can contribute to their HSA.

 May include amounts over and above the employee's wages.

 Are not subject to the same limits as the individual for whom they are made.

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Question 24 of 75.

Contributions from wages to an employer retirement plan are generally either:

  Tax-reduced or tax-deferred.

 Tax-deferred or tax-accelerated.

 Tax-exempt or tax-deferred.

 Tax-accelerated or tax-exempt.

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Question 25 of 75.

Which of the following statements is TRUE regarding excess health savings account (HSA) contributions? Excess HSA contributions:

 Can be rolled into the following year's contributions by completing Form 2121.

  May be removed, without penalty, by the due date of the tax return, including extensions.

 Are subject to a 20% penalty.

 Can only be resolved by the taxpayer's employer. There is no effect on income tax.

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Form 1040 Adjustments

Question 26 of 75.

June (56) and Yusef (53) are married filing jointly. June's health insurance through work covers both of them, with a $3,500 annual deductible. June has a health savings account (HSA). They had no other insurance. What is the maximum contributions to their HSA account for 2022?

 $4,600

 $7,300

  $8,300

 $9,200

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Question 27 of 75.

Which of the following statements is a benefit of having a health savings account (HSA)?

 An HSA is "portable," and will remain in place even if you change employers or leave the workforce.

 Contributions to an HSA made by an employer are included in income.

 After-tax contributions to an HSA are deducted from gross income if the taxpayer itemizes deductions.

  Contributions to an HSA must be used by the end of the year, plus a short grace period, or they are lost.

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Question 28 of 75.

Which of the following describes a qualified expense for the educator expense deduction?

 Snacks for in-class birthday parties.

 Buying art supplies for a homeschool class.

 Acquiring hand soap, hand sanitizer, and disposable gloves for the classroom.

 Teacher's union dues.

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Question 29 of 75.

Diana (43) contributed $225 per month to a self-only health savings account (HSA) through her paycheck in 2022. Her employer contributed $1,000 for the year. She had no other health insurance. Diana's excess contribution amount is __________ and the excise tax is __________.

  $50; $3

 $100; $6

 $500; $30

 $750; $45

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Question 30 of 75.

Select the taxpayer who is an eligible educator for the educator expense deduction.

 Melba is a teacher's aide at Indian Creek Middle School. She worked 761 hours in 2022 and spent $144 on supplies she used in the classroom. She was not reimbursed for her expenses.

 Linseey is the principal at Cross Creek Elementary School. She worked 748 hours in 2022 and spent $447 on books and supplies for two classrooms with new teachers. She was not reimbursed for her expenses.

 Val homeschooled her five children for 1,227 hours in 2022. She spent $663 on a curriculum for her children. She was not reimbursed for her expenses.

 Brandy is a kindergarten teacher at Brougham Elementary School. She worked 1,240 hours in 2022. Brandy spent $461 on supplies for her classroom. She was not reimbursed for her expenses.

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Question 31 of 75.

Janine turned age 64 on May 19, 2022. During the year, she received distributions from her health savings account (HSA) totaling $1,096. She paid $494 for a year's supply of nutritional supplements (not recommended by a doctor or for treatment with a diagnosis) in February. In April, she paid $134 to her podiatrist, and in August and October, she paid $468 to her chiropractor. The penalty on Janine's nonqualified distributions is __________.

 $27

 $94

 $99

 $219

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Question 32 of 75.

Roderick and Ashely Garin, a married couple who will file jointly, are both full-time teachers. In 2022, Roderick had receipts totaling $374 in qualifying expenses for his classroom. Ashley had qualifying receipts totaling $214. What is the maximum amount of the educator expense deduction they are able to claim on their joint return?

  $500

 $514

 $588

 $600

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Question 33 of 75.

The form sent or provided online by the health savings account (HSA) trustee to report a taxpayer's contributions to an HSA is:

 Form 1099-MISC.

 Form 8889.

 Form W-2.

  Form 5498-SA.

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Injured/Innocent Spouse

Question 34 of 75.

A request for relief by separation of liability can only be made:

 Before the joint return is filed.

 At the time the joint return is filed.

  After the joint return is filed.

 With an extension of time to file the joint return.

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Question 35 of 75.

Jacinda decides to file separately from her husband, Xavier. On his separately filed return, Xavier claims itemized deductions in the amount of $15,223. What are Jacinda's options regarding itemizing on her federal return?

 Jacinda can use the full standard deduction of $12,950 or itemized deductions if she has enough to exceed that number.

 Because Xavier is itemizing, Jacinda may not use the standard deduction. She is required to itemize deductions on her return.

 Jacinda is able to claim either the full standard deduction or one-half of Xavier's itemized deductions, whichever is greater.

  Because they are married, even though not filing jointly, Jacinda is required to take one-half of the amount of Xavier's itemized deductions as her standard deduction.

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Question 36 of 75.

Which of the following taxpayers might benefit from filing Form 8379,  Injured Spouse Allocation?

 Stan and Rina file a joint return that results in a refund that includes refundable credits. Both had earned income. Stan was married before and bought a car for his ex-wife. He is behind on those payments.

 Yared misrepresented the amount of tax withheld when he filed a joint return with his wife, Zoe.

 Carmen and Jian file a joint return, which results in a refund that includes refundable credits. Carmen earned $42,000. Jian was a stay-at-home dad and had no earned income. Jian owes back child support.

 Bran has earned income and files a joint return with his wife, Naomi. Naomi did not work in 2022. Their joint return results in a refund that is not dependent on any refundable credits. Bran owes $4,450 in delinquent student loan payments.

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Question 37 of 75.

When taxpayers file jointly and only one spouse is liable for a past due debt that is offset or will be offset, the other spouse can be considered a(n):

 Innocent spouse.

 Exempt spouse.

 Complicit spouse.

 Injured spouse.

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Dependent Related Credits

Question 38 of 75.

What two situations may cause a taxpayer's Child Tax Credit to be limited or excluded?

  1) Tax liability, and 2) modified adjusted gross income above the phaseout thresholds.

 1) Earned income above the phaseout thresholds, and 2) taxpayer age.

 1) Modified adjusted gross income above the phaseout thresholds, and 2) three or more children.

 1) Tax liability, and 2) earned income above the phaseout thresholds.

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Question 39 of 75.

Cheron files single and claims her daughter, Xandra (24). Her adjusted gross income (AGI) is $184,000. What is the maximum amount Cheron may potentially be able to claim for the credit for other dependents?

 $0

 $500

 $2,000

  $3,000

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Question 40 of 75.

Miranda has two qualifying children for the Child and Dependent Care Credit, Kailee (5) and Alex (9). Miranda paid $13,000 for Kailee's care, but Alex stayed at a friend's house, so there were no expenses for him. Assuming all other tests are met, how much expense can Miranda use to calculate her credit?

 $3,000

 $6,000

 $8,000

 $16,000

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Question 41 of 75.

Amina was enrolled as a full-time student for the entire year and had no earned income. She is single and has two qualifying children for the Child and Dependent Care Credit. For credit calculation, what amount of earned income per month is she deemed to have?

 $200

 $400

  $500

 $1,000

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Question 42 of 75.

Which of the following describes the tie-breaker rules for taxpayers claiming benefits, including the Earned Income Tax Credit, when a dependent child's parents do not file a joint return?

 The parent with whom the child spent the fewer number of nights and the parent that had the higher AGI concurrently during the year takes precedence.

 The parent with whom the child spent the greater number of nights during the year takes precedence.

 The parent with whom the child spent the greater number of nights and the parent that had the lower AGI concurrently during the year takes precedence.

 If the child spent the same amount of time with each parent, the parent with the lowest adjusted gross income takes precedence.

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Education Credits

Question 43 of 75.

Uma attends graduate school. For 2022, she received a Form 1098-T showing tuition paid of $5,250. What is the maximum amount of lifetime learning credit she can claim for 2022?

  $2,000

 $2,500

 $4,000

 $5,250

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Question 44 of 75.

Which of the following expenses is allowed for the American Opportunity Tax Credit?

 Student health fees.

 Room and board.

 Non-credit courses.

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