ENROLLED AGENT COMPREHENSIVE EXAM UPDATED
QUESTIONS AND ANSWERS GUARANTEE A+
✔✔What factors determine tax home? - ✔✔1. The taxpayer performs his or her
business in the area surrounding his/her main home and uses that for lodging while in
the area.
2. The taxpayer has living expenses at his or her main home that are duplicated
because business requires him/her to be away from the main home.
3. The taxpayer has not abandoned the area in which both his/her traditional place of
lodging and man home; family members live at his/her main home. She often uses this
main home for lodging.
✔✔Under what circumstance is a day NOT considered a day of personal use of a
dwelling unit for determining if it is used as a home? - ✔✔If the taxpayer rents the home
at fair rental value to any person (including relatives), such use by that person is not
considered personal use of the home
✔✔When are meals deductible? - ✔✔50% of meals are deductible if eaten while away
from home on business or with a client or business associate.
✔✔Are entertainment expenses deductible? - ✔✔No
✔✔What is included in deductible travel expenses? - ✔✔Meals, lodging, and expenses
incident to travel (reasonable laundry, etc.)
✔✔Nondeductible travel expenses - ✔✔Parking at the office. Commuting.
✔✔Are event tickets deductible as business gift expense? - ✔✔Yes if the amount per
individual donee per year is limited to $25. Also, adequate records must be maintained.
✔✔If your bank goes bankrupt, how can the taxpayer deduct the amount? - ✔✔As a
short term capital loss or ordinary loss (if not a 1% or more owner in the bank)
✔✔Job requires relocation and comes with probationary period - ✔✔the job is indefinite.
Thus, the taxpayer may not deduct any expenses for traveling during the probationary
period.
✔✔Where is the tax home of a taxpayer who works permanently in a location away from
his/her principal residence? - ✔✔While traveling, this taxpayer is not considered to be
away from home. they are considered a transient, and their tax home is wherever they
work.
✔✔The standard mileage rate may be used if you own five or more cars that are used
for business as long as you alternate using (use at different times) the cars for business.
, (T/F) - ✔✔True. If you own five or more cars that are used for business at the same
time, you cannot use the standard mileage rate for the business use of any car.
However, you are not using cars at the same time if you use the cars at different times
for business purposes.
✔✔On January 1, Year 1, John made a loan of $6,000 to his neighbor. The loan was
evidenced by a written promise to repay the principal within 3 years and was to bear
interest at a rate of 6% per annum. John's neighbor paid only interest for the first year,
and he made no payments in Year 2 or Year 3. Then his financial condition
deteriorated. In Year 2, John learned that he would probably be able to recover only
$3,000 of the loan. The loan was not made in the course of John's business. John can
deduct $3,000 of the loan on his Year 2 tax return. - ✔✔A partially worthless
nonbusiness debt is not deductible (Reg. 1.166-5), and a wholly worthless nonbusiness
debt is treated as a loss from the sale or exchange of a capital asset held for 1 year or
less, i.e., a short-term capital loss [Sec. 166(d)]. Here, John has a partially worthless
nonbusiness debt. Therefore, it is not deductible.
✔✔Ms. X lives with her family in San Francisco, but works in Los Angeles. While in Los
Angeles, Ms. X stays in a hotel and eats in restaurants during the week. She returns to
San Francisco every weekend. Ms. X can deduct her expenses for travel, meals, and
lodging while in Los Angeles.
True. - ✔✔False.
Travel expenses are deductible only when the taxpayer is away from home for a
temporary period. Since Ms. X permanently works in Los Angeles, this is the location of
her tax home for purposes of determining travel expenses. Travel expenses to San
Francisco are not deductible since Ms. X's absence from her tax home does not relate
to her trade or business.
✔✔Ed incurred a loss on deposits when his bank became insolvent (bankrupt) and can
take a personal casualty loss deduction for the loss amount. - ✔✔False.
If the individual treats the nonbusiness account loss as a personal casualty loss, no
deduction is allowed after 2017. Alternatively, the individual can elect to treat the loss as
a nonbusiness ordinary loss arising from a transaction entered into for profit. If no
election is made, the default classification for the nonbusiness bad debt is a short-term
capital loss subject to a $3,000 annual limit.
✔✔Minimum use rental tests - ✔✔Rental use -- Pass if rented for more than 14 days.
Personal use -- Pass if personal use is less <=14 days or if personal use is less than
10% of total days rented.
If only the rental use test is passed, deductions are limited to profit. If both tests are
passed, a loss is allowed.
✔✔Mrs. W rented a portion of her personal residence to Ms. E, a college student. In
allocating the expenses between the rented portion and the personal portion of the
QUESTIONS AND ANSWERS GUARANTEE A+
✔✔What factors determine tax home? - ✔✔1. The taxpayer performs his or her
business in the area surrounding his/her main home and uses that for lodging while in
the area.
2. The taxpayer has living expenses at his or her main home that are duplicated
because business requires him/her to be away from the main home.
3. The taxpayer has not abandoned the area in which both his/her traditional place of
lodging and man home; family members live at his/her main home. She often uses this
main home for lodging.
✔✔Under what circumstance is a day NOT considered a day of personal use of a
dwelling unit for determining if it is used as a home? - ✔✔If the taxpayer rents the home
at fair rental value to any person (including relatives), such use by that person is not
considered personal use of the home
✔✔When are meals deductible? - ✔✔50% of meals are deductible if eaten while away
from home on business or with a client or business associate.
✔✔Are entertainment expenses deductible? - ✔✔No
✔✔What is included in deductible travel expenses? - ✔✔Meals, lodging, and expenses
incident to travel (reasonable laundry, etc.)
✔✔Nondeductible travel expenses - ✔✔Parking at the office. Commuting.
✔✔Are event tickets deductible as business gift expense? - ✔✔Yes if the amount per
individual donee per year is limited to $25. Also, adequate records must be maintained.
✔✔If your bank goes bankrupt, how can the taxpayer deduct the amount? - ✔✔As a
short term capital loss or ordinary loss (if not a 1% or more owner in the bank)
✔✔Job requires relocation and comes with probationary period - ✔✔the job is indefinite.
Thus, the taxpayer may not deduct any expenses for traveling during the probationary
period.
✔✔Where is the tax home of a taxpayer who works permanently in a location away from
his/her principal residence? - ✔✔While traveling, this taxpayer is not considered to be
away from home. they are considered a transient, and their tax home is wherever they
work.
✔✔The standard mileage rate may be used if you own five or more cars that are used
for business as long as you alternate using (use at different times) the cars for business.
, (T/F) - ✔✔True. If you own five or more cars that are used for business at the same
time, you cannot use the standard mileage rate for the business use of any car.
However, you are not using cars at the same time if you use the cars at different times
for business purposes.
✔✔On January 1, Year 1, John made a loan of $6,000 to his neighbor. The loan was
evidenced by a written promise to repay the principal within 3 years and was to bear
interest at a rate of 6% per annum. John's neighbor paid only interest for the first year,
and he made no payments in Year 2 or Year 3. Then his financial condition
deteriorated. In Year 2, John learned that he would probably be able to recover only
$3,000 of the loan. The loan was not made in the course of John's business. John can
deduct $3,000 of the loan on his Year 2 tax return. - ✔✔A partially worthless
nonbusiness debt is not deductible (Reg. 1.166-5), and a wholly worthless nonbusiness
debt is treated as a loss from the sale or exchange of a capital asset held for 1 year or
less, i.e., a short-term capital loss [Sec. 166(d)]. Here, John has a partially worthless
nonbusiness debt. Therefore, it is not deductible.
✔✔Ms. X lives with her family in San Francisco, but works in Los Angeles. While in Los
Angeles, Ms. X stays in a hotel and eats in restaurants during the week. She returns to
San Francisco every weekend. Ms. X can deduct her expenses for travel, meals, and
lodging while in Los Angeles.
True. - ✔✔False.
Travel expenses are deductible only when the taxpayer is away from home for a
temporary period. Since Ms. X permanently works in Los Angeles, this is the location of
her tax home for purposes of determining travel expenses. Travel expenses to San
Francisco are not deductible since Ms. X's absence from her tax home does not relate
to her trade or business.
✔✔Ed incurred a loss on deposits when his bank became insolvent (bankrupt) and can
take a personal casualty loss deduction for the loss amount. - ✔✔False.
If the individual treats the nonbusiness account loss as a personal casualty loss, no
deduction is allowed after 2017. Alternatively, the individual can elect to treat the loss as
a nonbusiness ordinary loss arising from a transaction entered into for profit. If no
election is made, the default classification for the nonbusiness bad debt is a short-term
capital loss subject to a $3,000 annual limit.
✔✔Minimum use rental tests - ✔✔Rental use -- Pass if rented for more than 14 days.
Personal use -- Pass if personal use is less <=14 days or if personal use is less than
10% of total days rented.
If only the rental use test is passed, deductions are limited to profit. If both tests are
passed, a loss is allowed.
✔✔Mrs. W rented a portion of her personal residence to Ms. E, a college student. In
allocating the expenses between the rented portion and the personal portion of the
