FEDERAL TAXATION 2026 EXAM
QUESTIONS AND CORRECT ANSWERS A+
STUDY GUIDE COMPREHENSIVE
PRACTICE TEST
Internal Revenue Code - CORRECT ANSWER-The statutory source of tax
law, which is passed by both houses of Congress and signed into law by the
president of the U.S.
IRA Rollover - CORRECT ANSWER-When an individual withdraws funds
from one type of IRA and converts it into another type of IRA
Itemized Deductions - CORRECT ANSWER-Are from AGI deductions or
below-the-line deduction
Kiddie Tax - CORRECT ANSWER-Unearned income (e.g., interest,
dividends, capital gains, rent, etc.) of certain children (e.g., children less
than 19 years old or less than 24 if a full-time student) that is taxed at the
tax rate applicable to estates and trusts instead of the child's tax rate if it
exceeds certain thresholds
Marginal Tax Rate - CORRECT ANSWER-The tax rate that applies to the
next additional increment of a taxpayer's taxable income
, Life Insurance - CORRECT ANSWER-Insurance based on the death of a
taxpayer and is, in general, excluded from gross income
Meals Expense - CORRECT ANSWER-That is not lavish and is directly
related to business or associated with business is, as a general rule, allowed
as a 50% tax deduction (meaning one-half of the expense can be deducted
on the taxpayer's return)
Meals and Lodging - CORRECT ANSWER-If provided to the taxpayer as a
fringe benefit, can be excluded from gross income if the meals and/or
lodging are furnished by the employer, on the employer's AGI (Adjusted
Gross Income) - CORRECT ANSWER-An individual's gross income less
certain deductions and is used as the baseline for many phase-out limits
Alimony - CORRECT ANSWER-The transfer of cash made between two
spouses under a written separation agreement or divorce decree and, in
order for it to be considered as such for tax purposes, must end upon the
death of the former spouse
Bonus Depreciation - CORRECT ANSWER-A form of additional first-year
depreciation on qualifying assets
Basis - CORRECT ANSWER-A tax concept that, in general, represents the
tax-free return of capital and is usually calculated as cost with certain
adjustments
QUESTIONS AND CORRECT ANSWERS A+
STUDY GUIDE COMPREHENSIVE
PRACTICE TEST
Internal Revenue Code - CORRECT ANSWER-The statutory source of tax
law, which is passed by both houses of Congress and signed into law by the
president of the U.S.
IRA Rollover - CORRECT ANSWER-When an individual withdraws funds
from one type of IRA and converts it into another type of IRA
Itemized Deductions - CORRECT ANSWER-Are from AGI deductions or
below-the-line deduction
Kiddie Tax - CORRECT ANSWER-Unearned income (e.g., interest,
dividends, capital gains, rent, etc.) of certain children (e.g., children less
than 19 years old or less than 24 if a full-time student) that is taxed at the
tax rate applicable to estates and trusts instead of the child's tax rate if it
exceeds certain thresholds
Marginal Tax Rate - CORRECT ANSWER-The tax rate that applies to the
next additional increment of a taxpayer's taxable income
, Life Insurance - CORRECT ANSWER-Insurance based on the death of a
taxpayer and is, in general, excluded from gross income
Meals Expense - CORRECT ANSWER-That is not lavish and is directly
related to business or associated with business is, as a general rule, allowed
as a 50% tax deduction (meaning one-half of the expense can be deducted
on the taxpayer's return)
Meals and Lodging - CORRECT ANSWER-If provided to the taxpayer as a
fringe benefit, can be excluded from gross income if the meals and/or
lodging are furnished by the employer, on the employer's AGI (Adjusted
Gross Income) - CORRECT ANSWER-An individual's gross income less
certain deductions and is used as the baseline for many phase-out limits
Alimony - CORRECT ANSWER-The transfer of cash made between two
spouses under a written separation agreement or divorce decree and, in
order for it to be considered as such for tax purposes, must end upon the
death of the former spouse
Bonus Depreciation - CORRECT ANSWER-A form of additional first-year
depreciation on qualifying assets
Basis - CORRECT ANSWER-A tax concept that, in general, represents the
tax-free return of capital and is usually calculated as cost with certain
adjustments
