H&R BLOCK INCOME TAX COURSE 2026
PRACTICE QUESTIONS AND CORRECT
ANSWERS WITH DETAILED
EXPLANATIONS TAX PREPARATION
STUDY GUIDE
Two Factors of Tax Consequences of Property Ownership - CORRECT
ANSWER-(1) The type of property
(2) The purpose for which the property is used
Two Types of Property - CORRECT ANSWER-(1) Real
(2) Personal
Real Property - CORRECT ANSWER-Includes land, buildings, and their
structural components.
Two Types of Personal Property - CORRECT ANSWER-(1) Tangible
(2) Intangible
Tangible Personal Property - CORRECT ANSWER-Has a physical
existence and its value is intrinsic.
,Intangible Personal Property - CORRECT ANSWER-Has no intrinsic
value.
Four Uses of Property - CORRECT ANSWER-(1) Personal-use property
(2) Investment-use property
(3) Business-use property
(4) Stock-in-trade
Stock-in-Trade - CORRECT ANSWER-Property held for sale to customers.
Capital Assets - CORRECT ANSWER-Everything you own or use for either
personal purposes or investment purposes is a capital asset.
Basis - CORRECT ANSWER-A measure of the taxpayer's investment in
property for tax purposes.
Cost - CORRECT ANSWER-Includes the cash paid, the fair market value
of services rendered, and the fair market value of property traded in
exchange for the property.
Adjusted Basis - CORRECT ANSWER-The original basis PLUS the cost of
improvements; the cost of restoration after a casualty; assessments for local
improvements MINUS any discount, rebate, or reimbursement of any
portion of the purchase price; insurance reimbursements for property
damages; the amount of casualty or other losses deducted on the return for
,any year; depletion or depreciation allowed or allowable; any gain that is
not reported in the year realized.
Holding Period - CORRECT ANSWER-The length of time an asset has
been owned.
Amount Realized - CORRECT ANSWER-The amount of cash received by
the seller from the buyer PLUS the fair market value of any obligations,
property, or services received; the face value of any of the seller's liabilities
the purchaser assumes as part of the transaction.
Expenses of Sale - CORRECT ANSWER-Includes the costs of transferring
the property.
Form 8949 - CORRECT ANSWER-Sales and Other Dispositions of Capital
Assets
Schedule D Tax Worksheet - CORRECT ANSWER-Taxpayers must use if
they have: Gains from the sale of collectibles; Unrecaptured 1250 gain;
Gain from the sale of certain 1202 stock.
Tax Rate of Long-Term Capital Gains - CORRECT ANSWER-15%
Maximum Rate - CORRECT ANSWER-28%. Applies to long-term gain
from the sale of collectibles; certain gain from the sale of 1202 stock, also
called qualified small business stock.
, Collectible - CORRECT ANSWER-Any work of art, rug, antique, metal,
gem, stamp, coin, alcoholic beverage, or other tangible property.
Form 1099-B - CORRECT ANSWER-Stocks or bonds sold through a
broker.
Form 1099-S - CORRECT ANSWER-Closure of certain real estate
transactions.
Capital Gain Distributions - CORRECT ANSWER-Amounts paid by
mutual funds, regulated investment companies, and real estate investment
trusts.
Mutual Fund - CORRECT ANSWER-(1) An open-ended investment
company that invests money of its shareholders in a usually diversified
group of securities of other corporations. (2) A company that is in the
business of buying and selling stocks and sharing its income with those
invested in it.
Nontaxable Distributions - CORRECT ANSWER-Stock dividend
distributions that are not taxable.
Ordinary Dividends - CORRECT ANSWER-Paid out of the earnings and
profits of the corporation.
PRACTICE QUESTIONS AND CORRECT
ANSWERS WITH DETAILED
EXPLANATIONS TAX PREPARATION
STUDY GUIDE
Two Factors of Tax Consequences of Property Ownership - CORRECT
ANSWER-(1) The type of property
(2) The purpose for which the property is used
Two Types of Property - CORRECT ANSWER-(1) Real
(2) Personal
Real Property - CORRECT ANSWER-Includes land, buildings, and their
structural components.
Two Types of Personal Property - CORRECT ANSWER-(1) Tangible
(2) Intangible
Tangible Personal Property - CORRECT ANSWER-Has a physical
existence and its value is intrinsic.
,Intangible Personal Property - CORRECT ANSWER-Has no intrinsic
value.
Four Uses of Property - CORRECT ANSWER-(1) Personal-use property
(2) Investment-use property
(3) Business-use property
(4) Stock-in-trade
Stock-in-Trade - CORRECT ANSWER-Property held for sale to customers.
Capital Assets - CORRECT ANSWER-Everything you own or use for either
personal purposes or investment purposes is a capital asset.
Basis - CORRECT ANSWER-A measure of the taxpayer's investment in
property for tax purposes.
Cost - CORRECT ANSWER-Includes the cash paid, the fair market value
of services rendered, and the fair market value of property traded in
exchange for the property.
Adjusted Basis - CORRECT ANSWER-The original basis PLUS the cost of
improvements; the cost of restoration after a casualty; assessments for local
improvements MINUS any discount, rebate, or reimbursement of any
portion of the purchase price; insurance reimbursements for property
damages; the amount of casualty or other losses deducted on the return for
,any year; depletion or depreciation allowed or allowable; any gain that is
not reported in the year realized.
Holding Period - CORRECT ANSWER-The length of time an asset has
been owned.
Amount Realized - CORRECT ANSWER-The amount of cash received by
the seller from the buyer PLUS the fair market value of any obligations,
property, or services received; the face value of any of the seller's liabilities
the purchaser assumes as part of the transaction.
Expenses of Sale - CORRECT ANSWER-Includes the costs of transferring
the property.
Form 8949 - CORRECT ANSWER-Sales and Other Dispositions of Capital
Assets
Schedule D Tax Worksheet - CORRECT ANSWER-Taxpayers must use if
they have: Gains from the sale of collectibles; Unrecaptured 1250 gain;
Gain from the sale of certain 1202 stock.
Tax Rate of Long-Term Capital Gains - CORRECT ANSWER-15%
Maximum Rate - CORRECT ANSWER-28%. Applies to long-term gain
from the sale of collectibles; certain gain from the sale of 1202 stock, also
called qualified small business stock.
, Collectible - CORRECT ANSWER-Any work of art, rug, antique, metal,
gem, stamp, coin, alcoholic beverage, or other tangible property.
Form 1099-B - CORRECT ANSWER-Stocks or bonds sold through a
broker.
Form 1099-S - CORRECT ANSWER-Closure of certain real estate
transactions.
Capital Gain Distributions - CORRECT ANSWER-Amounts paid by
mutual funds, regulated investment companies, and real estate investment
trusts.
Mutual Fund - CORRECT ANSWER-(1) An open-ended investment
company that invests money of its shareholders in a usually diversified
group of securities of other corporations. (2) A company that is in the
business of buying and selling stocks and sharing its income with those
invested in it.
Nontaxable Distributions - CORRECT ANSWER-Stock dividend
distributions that are not taxable.
Ordinary Dividends - CORRECT ANSWER-Paid out of the earnings and
profits of the corporation.
