Enrolled Agent Part 2 Sample Test 4
Question and answers verified to pass
1. Overstreet Corporation is owned by three individuals who have more than
80% of the combined voting
power for four other corporations. These three individuals also have identical
common ownership within the
five corporations of at least 50%. The five corporations represent an example
of:
A. Personal services corporations.
B. Closely-held corporations.
C. A parent-subsidiary controlled group.
D. A brother-sister controlled group. - correct answers D
2. Hadiya is a managing partner of RealTime Partnership. She has a 50%
partnership interest and shares
profits and losses based on that percentage. At the beginning of the year, the
basis of Hadiya's partnership
interest is $35,000. RealTime Partnership has an $82,000 net operating loss
for the year. How would
RealTime Partnership report this loss on her Schedule K-1, and how would
this loss be reported on Hadiya's
individual return?
A. $35,000 of partnership losses and a $6,000 loss carryforward.
B. $41,000 of partnership losses a $5,000 loss carryforward.
C. $41,000 of partnership losses.
D. $6,000 of partnership losses. - correct answers A
,3. Eugene owns a large plot of farmland. In 2015, he foregoes growing his
own crops and rents the farmland
to someone else. After the new tenants arrive, Eugene takes a vacation and is
gone for most of the year.
Eugene does not materially participate in the farming activity on his farm in
2015. How should Eugene report
this income?
A. Eugene must report the income on Schedule F.
B. Eugene must report the income on Schedule E.
C. Eugene must report the income on Form 4835.
D. Eugene must report the income on Schedule C. - correct answers C
4. Form 3115 is used by a business to:
A. Apply for a change in accounting method.
B. Choose entity classification.
C. Report partnership income.
D. Report cash payments over $10,000. - correct answers A
5. Saul operates a tuna fishing boat and reports his income on Schedule F.
Saul hires his 16-year-old son,
Ingram, part-time to help him run the business. Saul pays his son a
reasonable wage of $6,200 for the year.
Which of the following statements is correct about Ingram's wages?
A. Ingram's wages are subject to the kiddie tax.
B. Saul cannot deduct the wages he paid to Ingram because of related party
transaction rules.
C. Saul may deduct Ingram's wages as a business expense, and the wages
are not subject to Social Security
,and Medicare taxes.
D. Ingram's wages are subject to backup withholding. - correct answers C
6. Rick wants to transfer assets to a corporation in exchange for a controlling
interest in the corporation's
stock. Which of the following transfers would create a taxable event for Rick
under section 351?
A. Rick exchanges depreciated property in exchange for 100% of the
corporation's stock.
B. The corporation assumes liabilities in excess of the basis of the assets
transferred.
C. Cash is exchanged for 100% of the corporate stock.
D. Rick will not be required to recognize gain from a transfer, as long as he
has ownership of over 80% of the
corporation's stock after the transfer is complete. - correct answers B
7. Alex sold his office building to Cassandra, a real estate investor, who plans
to use it as a business rental
property. Alex was liable for $2,000 in delinquent real estate taxes on the
property, which Cassandra agreed
to pay. Which of the following statements is correct?
A. Cassandra can deduct these taxes as a business expense.
8. Cassandra cannot deduct these taxes as a current expense, but should
instead add the amount to her basis
in the property.
C. Alex can deduct these taxes as an expense because he was the owner of
the property.
D. The expense must be divided equally between Alex and Cassandra in
order to be deductible. - correct answers B
, 8. Which of the following cannot be a shareholder in an S corporation?
A. A bank.
8. A U.S. resident who is not an American citizen.
C. A nonresident alien.
D. A 501(c)(3) exempt entity that is also a corporation. - correct answers C
9. Lisa is the sole beneficiary of a trust that her father, Isaac, set up before his
death. Given the following
information related to activity following her father's death in 2015, how much
income related to the trust, if
any, must Lisa report on her tax return?
Taxable income $27,000
Tax-exempt interest 3,000
Distributable net income 30,000
Required distributions 15,000
Discretionary distributions 7,500
A. $15,000
B. $22,500
C. $27,000
D. $30,000 - correct answers B
10. Quicker Relay Corporation is going through a final liquidation and
distributes property with a fair market
value of $500,000 and an adjusted basis of $190,000. The property is
encumbered by an existing mortgage of
$620,000. How much gain {or loss) would Quicker Relay recognize in this
distribution?
Question and answers verified to pass
1. Overstreet Corporation is owned by three individuals who have more than
80% of the combined voting
power for four other corporations. These three individuals also have identical
common ownership within the
five corporations of at least 50%. The five corporations represent an example
of:
A. Personal services corporations.
B. Closely-held corporations.
C. A parent-subsidiary controlled group.
D. A brother-sister controlled group. - correct answers D
2. Hadiya is a managing partner of RealTime Partnership. She has a 50%
partnership interest and shares
profits and losses based on that percentage. At the beginning of the year, the
basis of Hadiya's partnership
interest is $35,000. RealTime Partnership has an $82,000 net operating loss
for the year. How would
RealTime Partnership report this loss on her Schedule K-1, and how would
this loss be reported on Hadiya's
individual return?
A. $35,000 of partnership losses and a $6,000 loss carryforward.
B. $41,000 of partnership losses a $5,000 loss carryforward.
C. $41,000 of partnership losses.
D. $6,000 of partnership losses. - correct answers A
,3. Eugene owns a large plot of farmland. In 2015, he foregoes growing his
own crops and rents the farmland
to someone else. After the new tenants arrive, Eugene takes a vacation and is
gone for most of the year.
Eugene does not materially participate in the farming activity on his farm in
2015. How should Eugene report
this income?
A. Eugene must report the income on Schedule F.
B. Eugene must report the income on Schedule E.
C. Eugene must report the income on Form 4835.
D. Eugene must report the income on Schedule C. - correct answers C
4. Form 3115 is used by a business to:
A. Apply for a change in accounting method.
B. Choose entity classification.
C. Report partnership income.
D. Report cash payments over $10,000. - correct answers A
5. Saul operates a tuna fishing boat and reports his income on Schedule F.
Saul hires his 16-year-old son,
Ingram, part-time to help him run the business. Saul pays his son a
reasonable wage of $6,200 for the year.
Which of the following statements is correct about Ingram's wages?
A. Ingram's wages are subject to the kiddie tax.
B. Saul cannot deduct the wages he paid to Ingram because of related party
transaction rules.
C. Saul may deduct Ingram's wages as a business expense, and the wages
are not subject to Social Security
,and Medicare taxes.
D. Ingram's wages are subject to backup withholding. - correct answers C
6. Rick wants to transfer assets to a corporation in exchange for a controlling
interest in the corporation's
stock. Which of the following transfers would create a taxable event for Rick
under section 351?
A. Rick exchanges depreciated property in exchange for 100% of the
corporation's stock.
B. The corporation assumes liabilities in excess of the basis of the assets
transferred.
C. Cash is exchanged for 100% of the corporate stock.
D. Rick will not be required to recognize gain from a transfer, as long as he
has ownership of over 80% of the
corporation's stock after the transfer is complete. - correct answers B
7. Alex sold his office building to Cassandra, a real estate investor, who plans
to use it as a business rental
property. Alex was liable for $2,000 in delinquent real estate taxes on the
property, which Cassandra agreed
to pay. Which of the following statements is correct?
A. Cassandra can deduct these taxes as a business expense.
8. Cassandra cannot deduct these taxes as a current expense, but should
instead add the amount to her basis
in the property.
C. Alex can deduct these taxes as an expense because he was the owner of
the property.
D. The expense must be divided equally between Alex and Cassandra in
order to be deductible. - correct answers B
, 8. Which of the following cannot be a shareholder in an S corporation?
A. A bank.
8. A U.S. resident who is not an American citizen.
C. A nonresident alien.
D. A 501(c)(3) exempt entity that is also a corporation. - correct answers C
9. Lisa is the sole beneficiary of a trust that her father, Isaac, set up before his
death. Given the following
information related to activity following her father's death in 2015, how much
income related to the trust, if
any, must Lisa report on her tax return?
Taxable income $27,000
Tax-exempt interest 3,000
Distributable net income 30,000
Required distributions 15,000
Discretionary distributions 7,500
A. $15,000
B. $22,500
C. $27,000
D. $30,000 - correct answers B
10. Quicker Relay Corporation is going through a final liquidation and
distributes property with a fair market
value of $500,000 and an adjusted basis of $190,000. The property is
encumbered by an existing mortgage of
$620,000. How much gain {or loss) would Quicker Relay recognize in this
distribution?
