H&R Block Income Tax Course
Exam Tested Questions With
Revised Correct Detailed Answers
>Latest Update>>
1. Active Income and Losses - ANSWER Those for which a taxpayer performs
services.
2. Partnership - ANSWER A form of business in which two or more persons
join their money and skills in conducting the business as co-owners.
3. Passive Income and Losses - ANSWER Those from business activities in
which the taxpayer does not materially participate, and all rental activities.
4. Portfolio Income and Losses - ANSWER Those from such sources as
dividends, interest, capital gains and losses, and royalties.
5. Rental Income - ANSWER Income received by the taxpayer for allowing
another person's use of the taxpayer's property.
6. Royalty - ANSWER (1) A payment received for the right to exploit a
taxpayer's ownership of natural resources or a taxpayer's literary, musical, or
artistic creation. (2) An interest in the oil and gas in place that entitles the holder
to a specified fraction, in kind or in value, of the total production from the
property, free of any expenses of development and operation.
,7. S Corporation - ANSWER A qualified small business corporation that has
elected special tax treatment under subchapter S of the Internal Revenue Code. S
corporations pass income, losses, and deductions through to shareholders to
report on their individual returns.
8. Trust - ANSWER A tax entity that distributes all or part of its income to
beneficiaries as instructed by the trust agreement.
9. Requirements for a Real Estate Professional - ANSWER 1. More than half of
the personal services performed by the taxpayer in all trades or businesses during
the tax year were performed in real property trades or businesses in which the
taxpayer materially participated.
2. The taxpayer performed more than 750 hours of services during the year in real
property trades or businesses in which the taxpayer materially participated.
10. Trade or Business Activities - ANSWER Any activity that: Involves the
conduct of a trade or business; is conducted in anticipation of starting a trade or
business; Involves research or experimental expenditures that are deductible
under IRS Code 174.
11. Nonpassive Income - ANSWER Income derived from activities that are not
passive.
12. Types of Nonpassive Income - ANSWER Portfolio income; personal service
income; other income.
,13. Portfolio Income - ANSWER Includes interest, dividends, annuities, and
royalties not derived in the ordinary course of business.
14. Personal Service Income - ANSWER Salaries, wages, commissions, self-
employment income from trade or business in which the taxpayer materially
participates, deferred compensation, taxable social security and other retirement
benefits, and payments from partnerships to partners for personal services.
15. Rent - ANSWER Income received for the use of property.
16. Is rent earned or unearned income? - ANSWER Unearned.
17. Schedule E - ANSWER Supplemental Income and Loss
18. Deductible Maintenance and Repairs - ANSWER Those that do not
appreciably add to the value or useful life of the property.
19. Is the value of the owner's labor deductible when it comes to rental property?
- ANSWER No.
20. Rental Property Depreciable Basis - ANSWER Basis MINUS land value
TIMES the rental use percentage.
Vacation home - ANSWER A dwelling unit and may be a house, apartment,
condominium, mobile home, boat, or any other property that provides normal
living accomodations.
, Used as a Residence - ANSWER A dwelling unit is used for personal purposes
during the year for whichever is greater: more than 14 days; more than 10% of
the days the house is rented at fair rental value.
Royalty - ANSWER Payments received for the right to extract natural
resources from the taxpayer's property or to use a taxpayer's literary, musical, or
artistic creation.
Economic Interest - ANSWER One acquired by investment, the return on
which is dependent upon the extraction of the natural deposit or cutting of the
timber.
Two Methods of Computing Depletion - ANSWER Cost and Percentage
What tax form must estates and trusts file? - ANSWER Form 1041
What tax form must partnerships file? - ANSWER Form 1065
Do partnerships pay income taxes? - ANSWER No.
General Partner - ANSWER One who is personally responsible for partnership
debts.
Exam Tested Questions With
Revised Correct Detailed Answers
>Latest Update>>
1. Active Income and Losses - ANSWER Those for which a taxpayer performs
services.
2. Partnership - ANSWER A form of business in which two or more persons
join their money and skills in conducting the business as co-owners.
3. Passive Income and Losses - ANSWER Those from business activities in
which the taxpayer does not materially participate, and all rental activities.
4. Portfolio Income and Losses - ANSWER Those from such sources as
dividends, interest, capital gains and losses, and royalties.
5. Rental Income - ANSWER Income received by the taxpayer for allowing
another person's use of the taxpayer's property.
6. Royalty - ANSWER (1) A payment received for the right to exploit a
taxpayer's ownership of natural resources or a taxpayer's literary, musical, or
artistic creation. (2) An interest in the oil and gas in place that entitles the holder
to a specified fraction, in kind or in value, of the total production from the
property, free of any expenses of development and operation.
,7. S Corporation - ANSWER A qualified small business corporation that has
elected special tax treatment under subchapter S of the Internal Revenue Code. S
corporations pass income, losses, and deductions through to shareholders to
report on their individual returns.
8. Trust - ANSWER A tax entity that distributes all or part of its income to
beneficiaries as instructed by the trust agreement.
9. Requirements for a Real Estate Professional - ANSWER 1. More than half of
the personal services performed by the taxpayer in all trades or businesses during
the tax year were performed in real property trades or businesses in which the
taxpayer materially participated.
2. The taxpayer performed more than 750 hours of services during the year in real
property trades or businesses in which the taxpayer materially participated.
10. Trade or Business Activities - ANSWER Any activity that: Involves the
conduct of a trade or business; is conducted in anticipation of starting a trade or
business; Involves research or experimental expenditures that are deductible
under IRS Code 174.
11. Nonpassive Income - ANSWER Income derived from activities that are not
passive.
12. Types of Nonpassive Income - ANSWER Portfolio income; personal service
income; other income.
,13. Portfolio Income - ANSWER Includes interest, dividends, annuities, and
royalties not derived in the ordinary course of business.
14. Personal Service Income - ANSWER Salaries, wages, commissions, self-
employment income from trade or business in which the taxpayer materially
participates, deferred compensation, taxable social security and other retirement
benefits, and payments from partnerships to partners for personal services.
15. Rent - ANSWER Income received for the use of property.
16. Is rent earned or unearned income? - ANSWER Unearned.
17. Schedule E - ANSWER Supplemental Income and Loss
18. Deductible Maintenance and Repairs - ANSWER Those that do not
appreciably add to the value or useful life of the property.
19. Is the value of the owner's labor deductible when it comes to rental property?
- ANSWER No.
20. Rental Property Depreciable Basis - ANSWER Basis MINUS land value
TIMES the rental use percentage.
Vacation home - ANSWER A dwelling unit and may be a house, apartment,
condominium, mobile home, boat, or any other property that provides normal
living accomodations.
, Used as a Residence - ANSWER A dwelling unit is used for personal purposes
during the year for whichever is greater: more than 14 days; more than 10% of
the days the house is rented at fair rental value.
Royalty - ANSWER Payments received for the right to extract natural
resources from the taxpayer's property or to use a taxpayer's literary, musical, or
artistic creation.
Economic Interest - ANSWER One acquired by investment, the return on
which is dependent upon the extraction of the natural deposit or cutting of the
timber.
Two Methods of Computing Depletion - ANSWER Cost and Percentage
What tax form must estates and trusts file? - ANSWER Form 1041
What tax form must partnerships file? - ANSWER Form 1065
Do partnerships pay income taxes? - ANSWER No.
General Partner - ANSWER One who is personally responsible for partnership
debts.
