Tax Level 1: Intuit Academy Exam Questions and Answers
Comprehensive Resource To Help You Ace 2026-2027 Exams
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!! Current Update!!
1. A firm's choice of taxable year is usually dictated by the annual operating
cycle of the firm's business? T/F - Correct Answer: True
2. Business Interest Deduction - Correct Answer: Limited to 30% of a
taxpayers adjustable taxable income
3. Why does Federal tax law disallow a business deduction for political
contributions? - Correct Answer: A deduction to political contributions
would subsidize political activities
4. Constructive Receipt Doctrine - Correct Answer: Term mandating that
an individual or business must pay taxes on income despite the fact it has
not been physically received.
Doctrine applies to cash basis taxpayers
Relates to the time period variable in tax planning
Application of the doctrine by the IRS is subjective and depends on facts
and circumstances of each case.
5. Accrual corporation accrued $48,800 wage and salary expense and a
corresponding liability at the end of 2018. How much of the accrued
, expense is deductible in 2018? - Correct Answer: The amount of the
accrued expense paid by March 15, 2019, is deductible in 2018.
March 15: tax deadline for partnerships and S corps
April 17: deadline for C corps
6. Cosmo Inc. paid $15,000 plus $825 sales tax plus a $200 delivery charge for
a new business asset. Cosmo's tax basis in the asset is $15,200, and it can
deduct the sales tax. T/F - Correct Answer: FALSE
Sales tax must be capitalized as part of the cost of the asset.
7. Basis - Correct Answer: The cost is the amount you pay including sales
tax, and other expenses included in the purchase of the asset.
8. Favorable v Unfavorable - Correct Answer: Fav: If it improves NI. Actual
result is better than budgeted
Un: Decreases income. Falls short of budgeted amount
Favorable when Tax purposes is > than Book.
Unfavorable when Book> Tax
9. UNICAP - Correct Answer: Set of tax rules governing the type of current
expenditures that must be capitalized to inventory
Exs: Pension, EE benefits
Rent paid on buildings/equip
Repair and Maintenance of production Assets
,10.MACRS - Correct Answer: Modified Accelerated Cost Recovery System.
Used only for TAX purposes
11.Calendar Year v Fiscal Year Taxpayers - Correct Answer: 12 consecutive
months beginning jan 1 ending dec 31
Fiscal: 12 consecutive months ending on last day of any month besides
December
12.Depreciation Conventions - Correct Answer: Half year convention:
assumed to be placed in service or disposed in the 1st year of recovery, 6
months depreciation is allowed
Midquarter Convention: if more than 40% of depreciable personalty is
placed in service during the last 3 months of the year.
13.Section 179 - Correct Answer: Allows businesses to deduct the FULL
purchase price of qualifying equip/software.
-Amount allowed to be deducted is based on TAXABLE INCOME.
Write off Limits: 1 million
Purchase limit: 2.5 million
, 14.Organizational Costs - Correct Answer: Include legal and Accounting
fees.
15.Can Deduct the LESSER of its actual organizational cost or 5,000.
If it exceeds 50,000:
MUST capitalize any nondeductible organizational cost over a 180 month
period starting with month BUSINESS BEGINS.
16.Goodwill - Correct Answer: Not amortized under GAAP.
17.DTL v DTA - Correct Answer: DTL: Tax> Book
DTA: Book> Tax
18.Installment Sale Method - Correct Answer: Method for gains realized on
the sale of property when some part of the amount realized consists of the
buyers note. Gain Recognition is linked to the sellers receipt of the cash
over life of the note.
19.Realized v Recognized Gains - Correct Answer: Realized increase in
taxpayers economic position as result of exchange. In a sale tax is paid on
the realized gain.
The recognized gain is The TAXABLE gain.
Comprehensive Resource To Help You Ace 2026-2027 Exams
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!! Current Update!!
1. A firm's choice of taxable year is usually dictated by the annual operating
cycle of the firm's business? T/F - Correct Answer: True
2. Business Interest Deduction - Correct Answer: Limited to 30% of a
taxpayers adjustable taxable income
3. Why does Federal tax law disallow a business deduction for political
contributions? - Correct Answer: A deduction to political contributions
would subsidize political activities
4. Constructive Receipt Doctrine - Correct Answer: Term mandating that
an individual or business must pay taxes on income despite the fact it has
not been physically received.
Doctrine applies to cash basis taxpayers
Relates to the time period variable in tax planning
Application of the doctrine by the IRS is subjective and depends on facts
and circumstances of each case.
5. Accrual corporation accrued $48,800 wage and salary expense and a
corresponding liability at the end of 2018. How much of the accrued
, expense is deductible in 2018? - Correct Answer: The amount of the
accrued expense paid by March 15, 2019, is deductible in 2018.
March 15: tax deadline for partnerships and S corps
April 17: deadline for C corps
6. Cosmo Inc. paid $15,000 plus $825 sales tax plus a $200 delivery charge for
a new business asset. Cosmo's tax basis in the asset is $15,200, and it can
deduct the sales tax. T/F - Correct Answer: FALSE
Sales tax must be capitalized as part of the cost of the asset.
7. Basis - Correct Answer: The cost is the amount you pay including sales
tax, and other expenses included in the purchase of the asset.
8. Favorable v Unfavorable - Correct Answer: Fav: If it improves NI. Actual
result is better than budgeted
Un: Decreases income. Falls short of budgeted amount
Favorable when Tax purposes is > than Book.
Unfavorable when Book> Tax
9. UNICAP - Correct Answer: Set of tax rules governing the type of current
expenditures that must be capitalized to inventory
Exs: Pension, EE benefits
Rent paid on buildings/equip
Repair and Maintenance of production Assets
,10.MACRS - Correct Answer: Modified Accelerated Cost Recovery System.
Used only for TAX purposes
11.Calendar Year v Fiscal Year Taxpayers - Correct Answer: 12 consecutive
months beginning jan 1 ending dec 31
Fiscal: 12 consecutive months ending on last day of any month besides
December
12.Depreciation Conventions - Correct Answer: Half year convention:
assumed to be placed in service or disposed in the 1st year of recovery, 6
months depreciation is allowed
Midquarter Convention: if more than 40% of depreciable personalty is
placed in service during the last 3 months of the year.
13.Section 179 - Correct Answer: Allows businesses to deduct the FULL
purchase price of qualifying equip/software.
-Amount allowed to be deducted is based on TAXABLE INCOME.
Write off Limits: 1 million
Purchase limit: 2.5 million
, 14.Organizational Costs - Correct Answer: Include legal and Accounting
fees.
15.Can Deduct the LESSER of its actual organizational cost or 5,000.
If it exceeds 50,000:
MUST capitalize any nondeductible organizational cost over a 180 month
period starting with month BUSINESS BEGINS.
16.Goodwill - Correct Answer: Not amortized under GAAP.
17.DTL v DTA - Correct Answer: DTL: Tax> Book
DTA: Book> Tax
18.Installment Sale Method - Correct Answer: Method for gains realized on
the sale of property when some part of the amount realized consists of the
buyers note. Gain Recognition is linked to the sellers receipt of the cash
over life of the note.
19.Realized v Recognized Gains - Correct Answer: Realized increase in
taxpayers economic position as result of exchange. In a sale tax is paid on
the realized gain.
The recognized gain is The TAXABLE gain.
