Enrolled Agent Exam - Part 2 Question and answers already passed 2025
1. What is the min- (C) Three out of five years
imum number of
years that a company The IRS has a limitation on the number of years a business can operate at
must show a profit to a loss and still use the
qualify a business as deductions on other income. This eliminates individuals operating busi-
operating for profit? nesses at a loss for the
sole reason of the lower tax liability. The requirement is that the business
(A) One out of three must show a profit on
years at least three of the previous five years to be considered operating for profit.
(B) Two out of five
years
(C) Three out of five
years
(D) Four out of six
years
2. A company in its first (B) $420,000
year has a net op-
erating loss of $1.9 A net operating loss can be carried forward up to a maximum of 80%
million. In the second of the taxable income in the following year. 80% of $2.1 million = $1.68
year, it has a taxable million. Therefore, the total taxable income is $2.1 million - $1.68 million =
income of $2.1 mil- $420,000. This also leaves an additional $220,000 to carry forward to the
lion. Determine the next year.
taxable income for
the second year in-
corporating the carry-
forward of the NOL.
(A) $200,000
(B) $420,000
(C) $1.9 million
(D) $2.1 million
,Enrolled Agent Exam - Part 2 Question and answers already passed 2025
3. Which of the follow- (B) C corporation and S Corporation
ing business entities
requires the election A board of directors which is elected for the oversight of the company is
of a board of direc- only required for a corporation whether it be S or C.
tors?
(A) C corporation
only
(B) C corporation and
S Corporation
(C) C corporation, S
Corporation, and LLC
(D) All business enti-
ties require a board of
directors
4. All of the following (B) The company may only have two classes of stock designated as A and B
are requirements for
a company to be eligi- There are certain limitations on a company's eligibility to be an S corpora-
ble for an S corpora- tion. These limits include:
tion except: Must be a domestic company
Must not be on the IRS list of ineligible types including insurance or
(A) The company financial institutions
must have 100 share- Must have only one class of stock
holders or less Must be limited to 100 or fewer shareholders
(B) The company may
only have two class-
es of stock designat-
ed as A and B
(C) The company
must be domestic
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(D) The company
must not be an in-
eligible company as
designated by the IRS
5. A partnership with (C) 5 years
three members de-
cides to become Once an election is made on Form 8832, Entity Classification Election, a new
a corporation after election cannot be made until after a five-year waiting period.
three years of oper-
ation and elects to
do so on Form 8832,
Entity Classification
Election. What is the
minimum amount of
time that must pass
to be eligible for a
second change in en-
tity classification?
(A) 1 year
(B) 2 years
(C) 5 years
(D) 10 years
6. All of the following (B) Change in classification to a corporation
actions do not re-
quire the need for a Sole Proprietors are required to obtain a new EIN if any of the following
new employer identi- statements are true:
fication number (EIN) Subject to a bankruptcy proceeding.
for a sole proprietor- The company chooses to incorporate.
ship except: The company takes in partners and operates as a partnership.
, Enrolled Agent Exam - Part 2
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The company purchases or inherits an existing business that you operate
(A) Addition of busi- as a sole
ness locations in a dif- proprietorship.
ferent state
(B) Change in classi- Sole proprietors are not required to obtain a new EIN if any of the following
fication to a corpora- statements are
tion true:
(C) Change in location The company changes the name of your business.
of primary headquar- The company changes your location and/or add other locations.
ters The company operates multiple businesses.
(D) Change of busi-
ness name
7. All of the following (C) Company-owned by corporations
are entity types are
unable to be formed Partnerships are not allowed for certain types of businesses including:
as a partnership ex- Insurance companies
cept: Government entities
Corporations
(A) A government en- Non-profits
tity Joint-stock companies
(B) Real estate invest- Real estate investment trust
ment trust However, partnerships may be owned by corporations and operated as
(C) Company-owned such.
by corporations
(D) An insurance com-
pany
8. A C corporation has (C) September 15th
a June 30th fiscal
year-end. What is the A C corporation is required to file by the fourth month following the end of
required filing date the year if it follows the calendar year which would be April 15th. However,
for those which have a fiscal year ending June 30th, the requirement
1. What is the min- (C) Three out of five years
imum number of
years that a company The IRS has a limitation on the number of years a business can operate at
must show a profit to a loss and still use the
qualify a business as deductions on other income. This eliminates individuals operating busi-
operating for profit? nesses at a loss for the
sole reason of the lower tax liability. The requirement is that the business
(A) One out of three must show a profit on
years at least three of the previous five years to be considered operating for profit.
(B) Two out of five
years
(C) Three out of five
years
(D) Four out of six
years
2. A company in its first (B) $420,000
year has a net op-
erating loss of $1.9 A net operating loss can be carried forward up to a maximum of 80%
million. In the second of the taxable income in the following year. 80% of $2.1 million = $1.68
year, it has a taxable million. Therefore, the total taxable income is $2.1 million - $1.68 million =
income of $2.1 mil- $420,000. This also leaves an additional $220,000 to carry forward to the
lion. Determine the next year.
taxable income for
the second year in-
corporating the carry-
forward of the NOL.
(A) $200,000
(B) $420,000
(C) $1.9 million
(D) $2.1 million
,Enrolled Agent Exam - Part 2 Question and answers already passed 2025
3. Which of the follow- (B) C corporation and S Corporation
ing business entities
requires the election A board of directors which is elected for the oversight of the company is
of a board of direc- only required for a corporation whether it be S or C.
tors?
(A) C corporation
only
(B) C corporation and
S Corporation
(C) C corporation, S
Corporation, and LLC
(D) All business enti-
ties require a board of
directors
4. All of the following (B) The company may only have two classes of stock designated as A and B
are requirements for
a company to be eligi- There are certain limitations on a company's eligibility to be an S corpora-
ble for an S corpora- tion. These limits include:
tion except: Must be a domestic company
Must not be on the IRS list of ineligible types including insurance or
(A) The company financial institutions
must have 100 share- Must have only one class of stock
holders or less Must be limited to 100 or fewer shareholders
(B) The company may
only have two class-
es of stock designat-
ed as A and B
(C) The company
must be domestic
, Enrolled Agent Exam - Part 2
Study online at https://quizlet.com/_d2w667
(D) The company
must not be an in-
eligible company as
designated by the IRS
5. A partnership with (C) 5 years
three members de-
cides to become Once an election is made on Form 8832, Entity Classification Election, a new
a corporation after election cannot be made until after a five-year waiting period.
three years of oper-
ation and elects to
do so on Form 8832,
Entity Classification
Election. What is the
minimum amount of
time that must pass
to be eligible for a
second change in en-
tity classification?
(A) 1 year
(B) 2 years
(C) 5 years
(D) 10 years
6. All of the following (B) Change in classification to a corporation
actions do not re-
quire the need for a Sole Proprietors are required to obtain a new EIN if any of the following
new employer identi- statements are true:
fication number (EIN) Subject to a bankruptcy proceeding.
for a sole proprietor- The company chooses to incorporate.
ship except: The company takes in partners and operates as a partnership.
, Enrolled Agent Exam - Part 2
Study online at https://quizlet.com/_d2w667
The company purchases or inherits an existing business that you operate
(A) Addition of busi- as a sole
ness locations in a dif- proprietorship.
ferent state
(B) Change in classi- Sole proprietors are not required to obtain a new EIN if any of the following
fication to a corpora- statements are
tion true:
(C) Change in location The company changes the name of your business.
of primary headquar- The company changes your location and/or add other locations.
ters The company operates multiple businesses.
(D) Change of busi-
ness name
7. All of the following (C) Company-owned by corporations
are entity types are
unable to be formed Partnerships are not allowed for certain types of businesses including:
as a partnership ex- Insurance companies
cept: Government entities
Corporations
(A) A government en- Non-profits
tity Joint-stock companies
(B) Real estate invest- Real estate investment trust
ment trust However, partnerships may be owned by corporations and operated as
(C) Company-owned such.
by corporations
(D) An insurance com-
pany
8. A C corporation has (C) September 15th
a June 30th fiscal
year-end. What is the A C corporation is required to file by the fourth month following the end of
required filing date the year if it follows the calendar year which would be April 15th. However,
for those which have a fiscal year ending June 30th, the requirement
