CPA Exam 2025 Questions And Correct
Answers
What are the sources of taxable income? - ANSWER>>-Wages&Salaries
-Portfolio Income
-Passive Income
-Capital Income
What are some nontaxable fringe benefits? - ANSWER>>-
Insurance
premium
-De minimis fringe benefits
-Qualified tuition reduction
-qualified employee discounts
Are insurance premiums paid by employers taxable? -
ANSWER>><$50,000 ... No
>$50,000 ... Yes, use tax table to figure out how much (not entire amount
over 50k)
Give some examples of exempt interest - ANSWER>>-State and local
government bonds
-bonds of US possession (territory)
-Series EE if used for higher education
-Interest on VA insurance
What is the tax treatment of unearned income of a child who falls under the
"kiddie" tax" rules? - ANSWER>>First 100ish is tax free, second is taxed at
child's rate, anything over about 2500ish is taxed at parents rate
State the tax treatment of property settlements in a divorce -
ANSWER>>Tax free transfer/division of property
What are the requirements for alimony to be deductible by the paying
former spouse and includable by the recipient? - ANSWER>>-must be
,pursuant to written decree -cash
or its equivalent -can't extend
beyond life of payee
-can't be made to the same members of the household
-no joint tax return is filed
Describe the self-employment tax - ANSWER>>-2.9% medicare tax on
earnigns up to 118,500 and 12.4 ss tax on everything
-one half is available to take as a for AGI deduction
On what property do the Uniform Capitalization Rules apply? -
ANSWER>>-Manufacturer's inventory, regular inventory, rental inventory
-N/A if gross recipients in past 3 years do not exceed 10m annually.
When are funds in a nondeductible IRA taxable? - ANSWER>>Principle is
taxable when incurred and interest when withdrawn
What is the formula to determine the excludable portion of an annuity? -
ANSWER>>in years = (investment in contract/Age factor in months)
What are the exceptions form the early withdrawal penalty for pensions? -
ANSWER>>Home buyer (first time) 10k max
Insurance (for SE or 12wk UNEmp)
Medical expense >10% AGI
Disability
Education (tuition, books, fees)
And
Death
excluded from
How is rental income from a vacation house treated? - ANSWER>><15
income
>15 days rented <15 days lived in ... rental property
.15 days rented and used(or 10% of days rented) allocated rental expense
to the extent of rental income
,Define and give examples of passive activity - ANSWER>>Activity that the
investor does not have significant management say in how his/her money is
managed (rental<<always, interests in lp, s-corps)
What is the tax treatment of nondeductible passive activity loss? -
ANSWER>>deductible to the extent of gains with indefinite carry forward
and become fully deductible in year of disposition
lower middle <50%
What are the rules to determine taxable SS benefits? - ANSWER>>low 0%
middle 50% upper
middle 50%-85% upper
85%
(calc. as 50% ss plus tax-exempt interest)
Are scholarships and fellowships includable in gross income? -
ANSWER>>As long as degree-seeking student did not have to exchange
for services (strictly merit based). If non=degree seeking, then always fully
taxable
What are the tests for the foreign-earned income exclusion? -
ANSWER>>bona fide residence for entire taxable year and physically
present for >330 days
List some nontaxable misc items (exclusions) - ANSWER>>-Life insurance
proceeds
-gifts and inheritance
-accident insurance premiums (when paid by taxpayer)
-foreign-earned income exclusion
-Worker's compensation
-Medicare benefits
Describe the employee and employer taxation of nonqualified employee
stock options - ANSWER>>employee pays ordinary tax on stock in granted
, if there is a readily ascertainable value. If not, then use the FMV less any
amount paid for the option on the exercise date. Employer can deduct that
amount. Gain on sale is capital and not deductible by employer
Describe the employee and employer taxation of incentive stock options
(ISOs) and Employee Stock Purchase Plans(ESPPs) - ANSWER>>ISO
employee pays capital gains on gain in value from exercise date and sale
date (as long as exercise after 1 year from grant and sale occurs 2 years
from grant)
What are the criteria for filling "qualifying widow(er) (surviving spouse)? -
ANSWER>>Spouse must have passed in tax year OR in the last two years
if son/daughter lives with tax payer
Name the tests for claiming an exemption for a "qualifying child" -
ANSWER>>Close relative
Age (19/24)
Resident and filing requirements
Eliminate gross income test
Support test modified
Name the tests for claiming an exemption for a "qualifying relative" -
ANSWER>>Support (>50%) test
Under the personal exemption of gross income test
Precludes dependent filing a joint tax return
Only citizens
Relative
Taxpayer lives with individual for whole year test
For AGI Deductions - ANSWER>>Ira
Moving expenses
One half SE tax
Alimony
Tuition
Health Savings Account
Answers
What are the sources of taxable income? - ANSWER>>-Wages&Salaries
-Portfolio Income
-Passive Income
-Capital Income
What are some nontaxable fringe benefits? - ANSWER>>-
Insurance
premium
-De minimis fringe benefits
-Qualified tuition reduction
-qualified employee discounts
Are insurance premiums paid by employers taxable? -
ANSWER>><$50,000 ... No
>$50,000 ... Yes, use tax table to figure out how much (not entire amount
over 50k)
Give some examples of exempt interest - ANSWER>>-State and local
government bonds
-bonds of US possession (territory)
-Series EE if used for higher education
-Interest on VA insurance
What is the tax treatment of unearned income of a child who falls under the
"kiddie" tax" rules? - ANSWER>>First 100ish is tax free, second is taxed at
child's rate, anything over about 2500ish is taxed at parents rate
State the tax treatment of property settlements in a divorce -
ANSWER>>Tax free transfer/division of property
What are the requirements for alimony to be deductible by the paying
former spouse and includable by the recipient? - ANSWER>>-must be
,pursuant to written decree -cash
or its equivalent -can't extend
beyond life of payee
-can't be made to the same members of the household
-no joint tax return is filed
Describe the self-employment tax - ANSWER>>-2.9% medicare tax on
earnigns up to 118,500 and 12.4 ss tax on everything
-one half is available to take as a for AGI deduction
On what property do the Uniform Capitalization Rules apply? -
ANSWER>>-Manufacturer's inventory, regular inventory, rental inventory
-N/A if gross recipients in past 3 years do not exceed 10m annually.
When are funds in a nondeductible IRA taxable? - ANSWER>>Principle is
taxable when incurred and interest when withdrawn
What is the formula to determine the excludable portion of an annuity? -
ANSWER>>in years = (investment in contract/Age factor in months)
What are the exceptions form the early withdrawal penalty for pensions? -
ANSWER>>Home buyer (first time) 10k max
Insurance (for SE or 12wk UNEmp)
Medical expense >10% AGI
Disability
Education (tuition, books, fees)
And
Death
excluded from
How is rental income from a vacation house treated? - ANSWER>><15
income
>15 days rented <15 days lived in ... rental property
.15 days rented and used(or 10% of days rented) allocated rental expense
to the extent of rental income
,Define and give examples of passive activity - ANSWER>>Activity that the
investor does not have significant management say in how his/her money is
managed (rental<<always, interests in lp, s-corps)
What is the tax treatment of nondeductible passive activity loss? -
ANSWER>>deductible to the extent of gains with indefinite carry forward
and become fully deductible in year of disposition
lower middle <50%
What are the rules to determine taxable SS benefits? - ANSWER>>low 0%
middle 50% upper
middle 50%-85% upper
85%
(calc. as 50% ss plus tax-exempt interest)
Are scholarships and fellowships includable in gross income? -
ANSWER>>As long as degree-seeking student did not have to exchange
for services (strictly merit based). If non=degree seeking, then always fully
taxable
What are the tests for the foreign-earned income exclusion? -
ANSWER>>bona fide residence for entire taxable year and physically
present for >330 days
List some nontaxable misc items (exclusions) - ANSWER>>-Life insurance
proceeds
-gifts and inheritance
-accident insurance premiums (when paid by taxpayer)
-foreign-earned income exclusion
-Worker's compensation
-Medicare benefits
Describe the employee and employer taxation of nonqualified employee
stock options - ANSWER>>employee pays ordinary tax on stock in granted
, if there is a readily ascertainable value. If not, then use the FMV less any
amount paid for the option on the exercise date. Employer can deduct that
amount. Gain on sale is capital and not deductible by employer
Describe the employee and employer taxation of incentive stock options
(ISOs) and Employee Stock Purchase Plans(ESPPs) - ANSWER>>ISO
employee pays capital gains on gain in value from exercise date and sale
date (as long as exercise after 1 year from grant and sale occurs 2 years
from grant)
What are the criteria for filling "qualifying widow(er) (surviving spouse)? -
ANSWER>>Spouse must have passed in tax year OR in the last two years
if son/daughter lives with tax payer
Name the tests for claiming an exemption for a "qualifying child" -
ANSWER>>Close relative
Age (19/24)
Resident and filing requirements
Eliminate gross income test
Support test modified
Name the tests for claiming an exemption for a "qualifying relative" -
ANSWER>>Support (>50%) test
Under the personal exemption of gross income test
Precludes dependent filing a joint tax return
Only citizens
Relative
Taxpayer lives with individual for whole year test
For AGI Deductions - ANSWER>>Ira
Moving expenses
One half SE tax
Alimony
Tuition
Health Savings Account
