CALIFORNIA TAX EDUCATION COUNCIL (CTEC) EXAM
(FOR TAX PREPARERS) EXAM QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES
2025/2026 Q&A | INSTANT DOWNLOAD PDF
A cash basis taxpayer gets a few hundred dollars for payment on some
random labor a few days before Christmas but doesn't spend it until
January. Does the money get reported in the year he received it or in the
year after? - Correct Answer>>>It gets reported in the year received under
the doctrine of constructive receipt.
Which taxing system does the United States use for income tax
calculation? - Correct Answer>>>progressive tax
Recovery of Capital Doctrine - Correct Answer>>>Recovery of Capital
Doctrine states that income cannot be taxed to the extent it is a recovery of
basis. This doctrine limits the amount a person can be taxed on a
transation by subtracting the adjusted basis from the income received to
arrive at net gain.
not ordinary income - Correct Answer>>>long term capital gain is
considered capital gain income, not ordinary income.
pension - Correct Answer>>>: Anyone who receives a distribution from a
pension plan before this 59.5 will be subject to a 10% penalty, unless they
meet a stated exception.
How much can taxpayers who materially participate in rental activity deduct
in losses without being subject to passive activity limits? - Correct
Answer>>>25,000
,Since TY2018, there is no requirement to include the investment income of
certain children on their parent's return. - Correct Answer>>>The TCJA
heavily altered the "Kiddie Tax" to no longer be taxable to the parents AND
be subject to the trust and estate tax rates.
How many Schedules does the Form 1040 have? - Correct Answer>>>3
Which of the following forms would be present for an individual who
receives both a pension and social security? - Correct Answer>>>1099-R
and SSA-1099
Where would the net income from all Schedule Cs on a return be directly
reported? - Correct Answer>>>schedule 1
child tax credit - Correct Answer>>>$2,000 per qualifying dependent
itemized deductions - Correct Answer>>>Taxpayers may deduct certain
allowed expenses in lieu of taking the standard deduction.
Which of these expenses are allowed to be itemized post-Tax Cuts and
Jobs Act - Correct Answer>>>State and Local taxes are still allowed to be
itemized, however, they are subject to a $10,000 limitation.
Which of the following types of adjustments can taxpayers no longer take
under the Tax Cuts and Jobs Act? - Correct Answer>>>Moving expenses
can no longer be taken as an adjustment, unless it is incurred by a member
of the military.
, Medical expenses must exceed what percentage of AGI in order to qualify
as an itemized deduction? - Correct Answer>>>7.5%
A client purchased a second home with a mortgage payment in 2015. How
much acquisition indebtedness can be used as the basis of the mortgage
interest deduction? pre-act - Correct Answer>>>up to 1 million
Casualty and theft losses are pretty much only allowed in which
circumstance? - Correct Answer>>>Only for casualties and thefts
experienced in a Federal disaster zone under the Stafford Act.
Which of the following taxpayers can claim earned income tax credit. -
Correct Answer>>>A woman legally married with 2 kids, who has been
estranged for her husband for six months. This taxpayer can claim the
EITC can be considered unmarried, and file as head of household instead
of MFS.
The IRS requires an additional form to be completed by the tax preparer for
all returns with refundable tax credits - Correct Answer>>>The IRS requires
all tax preparers fill out the Form 8867 for any returns where refundable
credits are claimed.
Which of the following is true about the hobby vs business analysis? -
Correct Answer>>>The 3 out of 5 rule for profitability can be avoided by
making reasonable changes to one's business model in response to
shortcomings. Even if a business doesn't turn a profit, so long as the owner
is making reasonable changes to adjust to the market, a profit motive will
be found.
(FOR TAX PREPARERS) EXAM QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES
2025/2026 Q&A | INSTANT DOWNLOAD PDF
A cash basis taxpayer gets a few hundred dollars for payment on some
random labor a few days before Christmas but doesn't spend it until
January. Does the money get reported in the year he received it or in the
year after? - Correct Answer>>>It gets reported in the year received under
the doctrine of constructive receipt.
Which taxing system does the United States use for income tax
calculation? - Correct Answer>>>progressive tax
Recovery of Capital Doctrine - Correct Answer>>>Recovery of Capital
Doctrine states that income cannot be taxed to the extent it is a recovery of
basis. This doctrine limits the amount a person can be taxed on a
transation by subtracting the adjusted basis from the income received to
arrive at net gain.
not ordinary income - Correct Answer>>>long term capital gain is
considered capital gain income, not ordinary income.
pension - Correct Answer>>>: Anyone who receives a distribution from a
pension plan before this 59.5 will be subject to a 10% penalty, unless they
meet a stated exception.
How much can taxpayers who materially participate in rental activity deduct
in losses without being subject to passive activity limits? - Correct
Answer>>>25,000
,Since TY2018, there is no requirement to include the investment income of
certain children on their parent's return. - Correct Answer>>>The TCJA
heavily altered the "Kiddie Tax" to no longer be taxable to the parents AND
be subject to the trust and estate tax rates.
How many Schedules does the Form 1040 have? - Correct Answer>>>3
Which of the following forms would be present for an individual who
receives both a pension and social security? - Correct Answer>>>1099-R
and SSA-1099
Where would the net income from all Schedule Cs on a return be directly
reported? - Correct Answer>>>schedule 1
child tax credit - Correct Answer>>>$2,000 per qualifying dependent
itemized deductions - Correct Answer>>>Taxpayers may deduct certain
allowed expenses in lieu of taking the standard deduction.
Which of these expenses are allowed to be itemized post-Tax Cuts and
Jobs Act - Correct Answer>>>State and Local taxes are still allowed to be
itemized, however, they are subject to a $10,000 limitation.
Which of the following types of adjustments can taxpayers no longer take
under the Tax Cuts and Jobs Act? - Correct Answer>>>Moving expenses
can no longer be taken as an adjustment, unless it is incurred by a member
of the military.
, Medical expenses must exceed what percentage of AGI in order to qualify
as an itemized deduction? - Correct Answer>>>7.5%
A client purchased a second home with a mortgage payment in 2015. How
much acquisition indebtedness can be used as the basis of the mortgage
interest deduction? pre-act - Correct Answer>>>up to 1 million
Casualty and theft losses are pretty much only allowed in which
circumstance? - Correct Answer>>>Only for casualties and thefts
experienced in a Federal disaster zone under the Stafford Act.
Which of the following taxpayers can claim earned income tax credit. -
Correct Answer>>>A woman legally married with 2 kids, who has been
estranged for her husband for six months. This taxpayer can claim the
EITC can be considered unmarried, and file as head of household instead
of MFS.
The IRS requires an additional form to be completed by the tax preparer for
all returns with refundable tax credits - Correct Answer>>>The IRS requires
all tax preparers fill out the Form 8867 for any returns where refundable
credits are claimed.
Which of the following is true about the hobby vs business analysis? -
Correct Answer>>>The 3 out of 5 rule for profitability can be avoided by
making reasonable changes to one's business model in response to
shortcomings. Even if a business doesn't turn a profit, so long as the owner
is making reasonable changes to adjust to the market, a profit motive will
be found.
