AFSP Exam Review Practice Test Questions
And Answers Verified 100% Correct
Two classes of NOL deductions - ANSWER -Class A and Class B
NOL deduction Class A- - ANSWER -NOL deductions stemming from Tax Years
ending before 01/01/2018
-Carryforward period is 20 years
-Not limited to 80% of Taxable Income
-No sourcing of loss required for nonresidents
NOL deduction Class B- - ANSWER -NOL deductions stemming from Tax Years
beginning after 12/31/2017 and Loss limitation under IRC 461(l)
-Unlimited carryforward period
-Carryback only for farming losses
-Limited to 80% of Taxable Income
-Sourcing of losses is required for nonresidents
To determine the amount of tax-free interest, the qualified education expenses
incurred must be
reduced, for purposes of the education savings bond program, by certain tax-free
education benefits
received. The resulting education expenses, reduced as required, are referred to as
"adjusted qualified
education expenses."
Thus, adjusted qualified education expenses are equal to the qualified education
expenses reduced by
all of the following tax-free benefits: - ANSWER --The tax-free part of
scholarships and fellowships;
-Expenses used to figure the tax-free portion of
Coverdell ESA distributions;
-Expenses used to figure the tax-free portion of
, qualified tuition program distributions;
-Any tax-free payments received as education
assistance, including -
o Veterans' educational assistance benefits,
o Qualified tuition reductions, and
o Employer -provided educational assistance;
and
-Any expenses used in figuring the American
opportunity and lifetime learning credits.
(Neither gifts nor inheritances received, however, reduce qualified education
expenses for purposes of the education savings bond program.)
If the total amount received by the taxpayer when eligible bonds are cashed in,
including both the
bond investment and accrued interest, does not exceed the adjusted qualified
education expenses, What part of interest is tax free, if any? - ANSWER -all
interest received may be tax free. (Note, the taxpayer must still be eligible based on
income.)
If the total amount received on liquidation of the bonds is greater than the adjusted
qualified education
expenses, is interest tax free? - ANSWER -only a portion of the interest may be tax
free.
Determining the tax-free amount of the interest distributed when the bonds are
cashed in and the
adjusted qualified education expenses are less than the distribution requires that the
interest
received be - ANSWER -multiplied by a fraction.
The numerator of the fraction is - ANSWER -the adjusted qualified education
expenses,
and the denominator of the fraction is - ANSWER -the total proceeds received on
liquidation of the
, bonds during the year the bonds were cashed in.
Suppose a taxpayer received a $9,000 distribution of bond proceeds during the
year, and the proceeds
consisted of $6,000 of invested principal and $3,000 of interest. Further suppose
that the adjusted
qualified education expenses were $7,650—less than the bond proceeds, in other
words. To determine
the part of the $3,000 of interest that may be tax free, we need to use the following
equation: - ANSWER -Interest X (Adjusted qualified education expenses/Total
proceeds received) = Maximum tax-free interest
$3,000 X ($7,650/$9,000) = $2,550
Since the taxpayer received $9,000 when cashing in the bonds, the $6,000 invested
is tax free as a
recovery of cost basis, but the portion of the interest other than the $2,550 tax-free
amount—$450 in
this case—is taxable interest. As noted earlier, however, a taxpayer's eligibility for
the education
savings bond program is determined by the taxpayer's income and filing status,
discussed
immediately below.
Depending on the taxpayer's MAGI/filing status, some or all of the maximum
taxfree
interest may - ANSWER -also be includible in income.
Under tax code Section 6672, the IRS can - ANSWER --assess you personally for
100% of your company's outstanding payroll taxes, if you're a responsible person
who willfully fails to deposit those taxes.
You're a responsible person (under code Section 6672) if - ANSWER --you have
some check signing authority
And Answers Verified 100% Correct
Two classes of NOL deductions - ANSWER -Class A and Class B
NOL deduction Class A- - ANSWER -NOL deductions stemming from Tax Years
ending before 01/01/2018
-Carryforward period is 20 years
-Not limited to 80% of Taxable Income
-No sourcing of loss required for nonresidents
NOL deduction Class B- - ANSWER -NOL deductions stemming from Tax Years
beginning after 12/31/2017 and Loss limitation under IRC 461(l)
-Unlimited carryforward period
-Carryback only for farming losses
-Limited to 80% of Taxable Income
-Sourcing of losses is required for nonresidents
To determine the amount of tax-free interest, the qualified education expenses
incurred must be
reduced, for purposes of the education savings bond program, by certain tax-free
education benefits
received. The resulting education expenses, reduced as required, are referred to as
"adjusted qualified
education expenses."
Thus, adjusted qualified education expenses are equal to the qualified education
expenses reduced by
all of the following tax-free benefits: - ANSWER --The tax-free part of
scholarships and fellowships;
-Expenses used to figure the tax-free portion of
Coverdell ESA distributions;
-Expenses used to figure the tax-free portion of
, qualified tuition program distributions;
-Any tax-free payments received as education
assistance, including -
o Veterans' educational assistance benefits,
o Qualified tuition reductions, and
o Employer -provided educational assistance;
and
-Any expenses used in figuring the American
opportunity and lifetime learning credits.
(Neither gifts nor inheritances received, however, reduce qualified education
expenses for purposes of the education savings bond program.)
If the total amount received by the taxpayer when eligible bonds are cashed in,
including both the
bond investment and accrued interest, does not exceed the adjusted qualified
education expenses, What part of interest is tax free, if any? - ANSWER -all
interest received may be tax free. (Note, the taxpayer must still be eligible based on
income.)
If the total amount received on liquidation of the bonds is greater than the adjusted
qualified education
expenses, is interest tax free? - ANSWER -only a portion of the interest may be tax
free.
Determining the tax-free amount of the interest distributed when the bonds are
cashed in and the
adjusted qualified education expenses are less than the distribution requires that the
interest
received be - ANSWER -multiplied by a fraction.
The numerator of the fraction is - ANSWER -the adjusted qualified education
expenses,
and the denominator of the fraction is - ANSWER -the total proceeds received on
liquidation of the
, bonds during the year the bonds were cashed in.
Suppose a taxpayer received a $9,000 distribution of bond proceeds during the
year, and the proceeds
consisted of $6,000 of invested principal and $3,000 of interest. Further suppose
that the adjusted
qualified education expenses were $7,650—less than the bond proceeds, in other
words. To determine
the part of the $3,000 of interest that may be tax free, we need to use the following
equation: - ANSWER -Interest X (Adjusted qualified education expenses/Total
proceeds received) = Maximum tax-free interest
$3,000 X ($7,650/$9,000) = $2,550
Since the taxpayer received $9,000 when cashing in the bonds, the $6,000 invested
is tax free as a
recovery of cost basis, but the portion of the interest other than the $2,550 tax-free
amount—$450 in
this case—is taxable interest. As noted earlier, however, a taxpayer's eligibility for
the education
savings bond program is determined by the taxpayer's income and filing status,
discussed
immediately below.
Depending on the taxpayer's MAGI/filing status, some or all of the maximum
taxfree
interest may - ANSWER -also be includible in income.
Under tax code Section 6672, the IRS can - ANSWER --assess you personally for
100% of your company's outstanding payroll taxes, if you're a responsible person
who willfully fails to deposit those taxes.
You're a responsible person (under code Section 6672) if - ANSWER --you have
some check signing authority
