CTEC 2025/26 EXAM | 139 QUESTIONS | WITH
COMPLETE SOLUTIONS.
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? 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?
Answer - progressive tax
Recovery of Capital Doctrine 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 Answer - long term capital gain is considered capital gain
income, not ordinary income.
pension 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? Answer - 25,000
Since TY2018, there is no requirement to include the investment income of
certain children on their parent's return. 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? Answer - 3
Which of the following forms would be present for an individual who receives
both a pension and social security? Answer - 1099-R and SSA-1099
Where would the net income from all Schedule Cs on a return be directly
reported? Answer - schedule 1
child tax credit Answer - $2,000 per qualifying dependent
itemized deductions 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
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? 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? 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 Answer - up to 1 million
, Casualty and theft losses are pretty much only allowed in which circumstance?
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. 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 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? 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.
What of the following expenses can be subtotaled with no additional
worksheets or forms with the Sch C? Answer - Contract labor
What is the rate of tax applied on the SE income below the benefit and
contribution base for the year? Answer - The full 7.65% rate for both the
employee and employer portions, totaling 15.3%, is used for the SE income
below the benefit and contribution base.
what is deductible Answer - The entertainment is nondeductible and the meals
are reduced by 50%, leaving the full value of the company picnic to be added
with the reduced meal value.
COMPLETE SOLUTIONS.
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? 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?
Answer - progressive tax
Recovery of Capital Doctrine 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 Answer - long term capital gain is considered capital gain
income, not ordinary income.
pension 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? Answer - 25,000
Since TY2018, there is no requirement to include the investment income of
certain children on their parent's return. 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? Answer - 3
Which of the following forms would be present for an individual who receives
both a pension and social security? Answer - 1099-R and SSA-1099
Where would the net income from all Schedule Cs on a return be directly
reported? Answer - schedule 1
child tax credit Answer - $2,000 per qualifying dependent
itemized deductions 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
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? 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? 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 Answer - up to 1 million
, Casualty and theft losses are pretty much only allowed in which circumstance?
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. 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 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? 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.
What of the following expenses can be subtotaled with no additional
worksheets or forms with the Sch C? Answer - Contract labor
What is the rate of tax applied on the SE income below the benefit and
contribution base for the year? Answer - The full 7.65% rate for both the
employee and employer portions, totaling 15.3%, is used for the SE income
below the benefit and contribution base.
what is deductible Answer - The entertainment is nondeductible and the meals
are reduced by 50%, leaving the full value of the company picnic to be added
with the reduced meal value.
