EXAM PREP PART 2: ENROLLED AGENT,
2025/2026 WITH CORRECT/ACCURATE
ANSWERS
FOCUSES ON BUSINESS TAXATION
Exam content: Businesses
The main topics covered in Part 2 include:
Business entities and considerations
Business income and expenses
Business assets:
Specialized returns
Tax credits and deductions
Is a tax professional who is federally authorized by the U.S. Treasury
Department to represent taxpayers before the Internal Revenue Service
(IRS).
Which form of business entity is not a legal entity separate and apart from
its owner?
A. Corporation
B. Partnership
C. Sole proprietorship
D. S corporation - correct answer.C
Under which circumstance is an entity required to apply for a new
employer identification number?
,A. Proprietorship that incorporates
B. Business name change
C. Electing or revoking S corp status
D. 50% change of interest in partnership within 12 months. - correct
answer.A
LLC's may be an attractive small business alternative as opposed to an S
corp because LLC's offer the following advantage(s) not available in S
corps:
A. Inclusion of entity-level liabilities in tax basis
B. Pass-through taxation
C. Flexibility in types of owners and ownership interest
D. Both inclusion of entity-level liabilities in tax basis and flexibility in
types of owners and ownership interests. - correct answer.D
A domestic LLC with at least two members that does not file Form 8832,
Entity Classification Election, is classified as
A. An entity disregarded as an entity separate from its owners by
applying the rules in Regulations Section 301.7701-3
B. A partnership
C. A corporation
D. A non-entity that requires members to report the income and related
expenses on Form 1040 - correct answer.B
Which of the following statements regarding accounting methods is false?
A. If inventories are necessary, the accrual method is used for sales and
purchases
B. A combination (hybrid) method is not an acceptable method of
accounting
, C. A change from the accrual to the cash method of accounting requires
consent from the IRS
D. Under the cash method of accounting, gross income includes all
items of income actually or constructively received during the year -
correct answer.B
You can compute your taxable income under which of the following
accounting methods?
A. Hybrid method
B. Accrual method
C. Special method for certain items
D. All of the answers are correct - correct answer.D
Which of the following accounting changes do not require the filing of
Form 3115 to request a change in accounting method?
A. Correction of a math error
B. Change from accrual method to cash method
C. Change in the method inventory is valued
D. Change from cash method to accrual method - correct answer.A
Which of the following accounting methods is not an acceptable method
of reporting income and expenses?
A. If an inventory is necessary to account for your income, you must
use an accrual method for purchases and sales. You can use the cash
method for all other items of income and expenses.
B. If you use the cash method for figuring your income, you can use the
accrual method for figuring your expenses.
2025/2026 WITH CORRECT/ACCURATE
ANSWERS
FOCUSES ON BUSINESS TAXATION
Exam content: Businesses
The main topics covered in Part 2 include:
Business entities and considerations
Business income and expenses
Business assets:
Specialized returns
Tax credits and deductions
Is a tax professional who is federally authorized by the U.S. Treasury
Department to represent taxpayers before the Internal Revenue Service
(IRS).
Which form of business entity is not a legal entity separate and apart from
its owner?
A. Corporation
B. Partnership
C. Sole proprietorship
D. S corporation - correct answer.C
Under which circumstance is an entity required to apply for a new
employer identification number?
,A. Proprietorship that incorporates
B. Business name change
C. Electing or revoking S corp status
D. 50% change of interest in partnership within 12 months. - correct
answer.A
LLC's may be an attractive small business alternative as opposed to an S
corp because LLC's offer the following advantage(s) not available in S
corps:
A. Inclusion of entity-level liabilities in tax basis
B. Pass-through taxation
C. Flexibility in types of owners and ownership interest
D. Both inclusion of entity-level liabilities in tax basis and flexibility in
types of owners and ownership interests. - correct answer.D
A domestic LLC with at least two members that does not file Form 8832,
Entity Classification Election, is classified as
A. An entity disregarded as an entity separate from its owners by
applying the rules in Regulations Section 301.7701-3
B. A partnership
C. A corporation
D. A non-entity that requires members to report the income and related
expenses on Form 1040 - correct answer.B
Which of the following statements regarding accounting methods is false?
A. If inventories are necessary, the accrual method is used for sales and
purchases
B. A combination (hybrid) method is not an acceptable method of
accounting
, C. A change from the accrual to the cash method of accounting requires
consent from the IRS
D. Under the cash method of accounting, gross income includes all
items of income actually or constructively received during the year -
correct answer.B
You can compute your taxable income under which of the following
accounting methods?
A. Hybrid method
B. Accrual method
C. Special method for certain items
D. All of the answers are correct - correct answer.D
Which of the following accounting changes do not require the filing of
Form 3115 to request a change in accounting method?
A. Correction of a math error
B. Change from accrual method to cash method
C. Change in the method inventory is valued
D. Change from cash method to accrual method - correct answer.A
Which of the following accounting methods is not an acceptable method
of reporting income and expenses?
A. If an inventory is necessary to account for your income, you must
use an accrual method for purchases and sales. You can use the cash
method for all other items of income and expenses.
B. If you use the cash method for figuring your income, you can use the
accrual method for figuring your expenses.
