INTUIT ACADEMY TAX Level 2 Exam Questions
(One from Each Section) With Answers and
Explanations Latest Version
The Intuit Academy Tax Level 2 is an intermediate free, self-
paced online course building on Level 1 fundamentals. It dives
deeper into practical tax return preparation, including income
sourcing, adjustments, itemized deductions, business income
(Schedule C), rentals (Schedule E), capital gains/losses
(Schedule D), and advanced credits/penalties. The course
includes modules with quizzes and culminates in an open-book
multiple-choice final exam (typically 50-60 questions, 1.5
hours). Passing requires ~70% (graded on a curve), earning a
Credly digital badge that strengthens TurboTax Live applications
but doesn't guarantee jobs or meet licensing needs.
1. *Which of the following is a nondeductible business expense
on Schedule C?*
A) Advertising costs
B) 50% of business meals
C) $1,000 gift card to a client
, D) Home office rent (exclusive use)
*Answer:* C) $1,000 gift card to a client (gifts limited to
$25/recipient; excess nondeductible).
Rationale: Exam tests "ordinary and necessary" vs. limits;
illegal/personal items always out.
2. *When calculating the depreciable basis of a rental property,
the taxpayer should:*
A) Include the full purchase price
B) Exclude the value of the land
C) Add closing costs only
D) Subtract prior depreciation
*Answer:* B) Exclude the value of the land (land isn't
depreciable).
Rationale: Basis = building + improvements; allocate via
appraisal/tax assessment.
3. *A Qualified Charitable Distribution (QCD) from an IRA can
satisfy:*
A) Only part of the RMD
B) The entire RMD
, C) No part of the RMD
D) Only excess contributions
*Answer:* B) The entire RMD (up to $105k in 2025).
Rationale: QCDs count toward RMD but aren't income; for age
70½+ donors.
4. *When converting a nondeductible IRA contribution to a
Roth IRA, the:*
A) Entire amount is taxable
B) Contribution basis is nontaxable; earnings are taxable
C) Earnings are nontaxable
D) Conversion is always penalty-free
*Answer:* B) Contribution basis is nontaxable; earnings are
taxable.
Rationale: Pro-rata rule applies if mixed funds; track basis on
Form 8606.
5. *Schedules K-2 and K-3 (Form 1065) replace which lines on
Schedule K-1?*
A) Lines 16 and 17
, B) Lines 19 and 20
C) Lines 1 and 2
D) Lines 10 and 11
*Answer:* A) Lines 16 and 17 (international info).
Rationale: New for 2021+; detail foreign transactions for
partners.
6. *A taxpayer uses their dwelling for personal purposes more
than the greater of 14 days or 10% of rental days. This affects:*
A) Depreciation allowance
B) Vacation home rules (Sch E)
C) QBI eligibility
D) Home office deduction
*Answer:* B) Vacation home rules (Sch E) (limits deductions
to rental income).
Rationale: If personal use > threshold, it's a "residence,"
capping losses.
7. *The bargain element of a non-qualified stock option is taxed
as:*
(One from Each Section) With Answers and
Explanations Latest Version
The Intuit Academy Tax Level 2 is an intermediate free, self-
paced online course building on Level 1 fundamentals. It dives
deeper into practical tax return preparation, including income
sourcing, adjustments, itemized deductions, business income
(Schedule C), rentals (Schedule E), capital gains/losses
(Schedule D), and advanced credits/penalties. The course
includes modules with quizzes and culminates in an open-book
multiple-choice final exam (typically 50-60 questions, 1.5
hours). Passing requires ~70% (graded on a curve), earning a
Credly digital badge that strengthens TurboTax Live applications
but doesn't guarantee jobs or meet licensing needs.
1. *Which of the following is a nondeductible business expense
on Schedule C?*
A) Advertising costs
B) 50% of business meals
C) $1,000 gift card to a client
, D) Home office rent (exclusive use)
*Answer:* C) $1,000 gift card to a client (gifts limited to
$25/recipient; excess nondeductible).
Rationale: Exam tests "ordinary and necessary" vs. limits;
illegal/personal items always out.
2. *When calculating the depreciable basis of a rental property,
the taxpayer should:*
A) Include the full purchase price
B) Exclude the value of the land
C) Add closing costs only
D) Subtract prior depreciation
*Answer:* B) Exclude the value of the land (land isn't
depreciable).
Rationale: Basis = building + improvements; allocate via
appraisal/tax assessment.
3. *A Qualified Charitable Distribution (QCD) from an IRA can
satisfy:*
A) Only part of the RMD
B) The entire RMD
, C) No part of the RMD
D) Only excess contributions
*Answer:* B) The entire RMD (up to $105k in 2025).
Rationale: QCDs count toward RMD but aren't income; for age
70½+ donors.
4. *When converting a nondeductible IRA contribution to a
Roth IRA, the:*
A) Entire amount is taxable
B) Contribution basis is nontaxable; earnings are taxable
C) Earnings are nontaxable
D) Conversion is always penalty-free
*Answer:* B) Contribution basis is nontaxable; earnings are
taxable.
Rationale: Pro-rata rule applies if mixed funds; track basis on
Form 8606.
5. *Schedules K-2 and K-3 (Form 1065) replace which lines on
Schedule K-1?*
A) Lines 16 and 17
, B) Lines 19 and 20
C) Lines 1 and 2
D) Lines 10 and 11
*Answer:* A) Lines 16 and 17 (international info).
Rationale: New for 2021+; detail foreign transactions for
partners.
6. *A taxpayer uses their dwelling for personal purposes more
than the greater of 14 days or 10% of rental days. This affects:*
A) Depreciation allowance
B) Vacation home rules (Sch E)
C) QBI eligibility
D) Home office deduction
*Answer:* B) Vacation home rules (Sch E) (limits deductions
to rental income).
Rationale: If personal use > threshold, it's a "residence,"
capping losses.
7. *The bargain element of a non-qualified stock option is taxed
as:*
