©THESTAR 2024/2025 ALL RIGHTS RESERVED.
CPA Exam Questions And Answers 100%
Guaranteed Pass.
What are the sources of taxable income? - Answer✔-Wages&Salaries
-Portfolio Income
-Passive Income
-Capital Income
What are some nontaxable fringe benefits? - Answer✔-Insurance premium
-De minimis fringe benefits
-Qualified tuition reduction
-qualified employee discounts
Are insurance premiums paid by employers taxable? - Answer✔<$50,000 ... No
>$50,000 ... Yes, use tax table to figure out how much (not entire amount over 50k)
Give some examples of exempt interest - Answer✔-State and local government bonds
-bonds of US possession (territory)
-Series EE if used for higher education
-Interest on VA insurance
What is the tax treatment of unearned income of a child who falls under the "kiddie" tax"
rules? - Answer✔First 100ish is tax free, second is taxed at child's rate, anything over about
2500ish is taxed at parents rate
State the tax treatment of property settlements in a divorce - Answer✔Tax free
transfer/division of property
What are the requirements for alimony to be deductible by the paying former spouse and
includable by the recipient? - Answer✔-must be pursuant to written decree
-cash or its equivalent
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
-can't extend beyond life of payee
-can't be made to the same members of the household
-no joint tax return is filed
Describe the self-employment tax - Answer✔-2.9% medicare tax on earnigns up to 118,500 and
12.4 ss tax on everything
-one half is available to take as a for AGI deduction
On what property do the Uniform Capitalization Rules apply? - Answer✔-Manufacturer's
inventory, regular inventory, rental inventory
-N/A if gross recipients in past 3 years do not exceed 10m annually.
When are funds in a nondeductible IRA taxable? - Answer✔Principle is taxable when incurred
and interest when withdrawn
What is the formula to determine the excludable portion of an annuity? - Answer✔in years =
(investment in contract/Age factor in months)
What are the exceptions form the early withdrawal penalty for pensions? - Answer✔Home
buyer (first time) 10k max
Insurance (for SE or 12wk UNEmp)
Medical expense >10% AGI
Disability
Education (tuition, books, fees)
And
Death
How is rental income from a vacation house treated? - Answer✔<15 excluded from income
>15 days rented <15 days lived in ... rental property
.15 days rented and used(or 10% of days rented) allocated rental expense to the extent of
rental income
Define and give examples of passive activity - Answer✔Activity that the investor does not have
significant management say in how his/her money is managed (rental<<always, interests in lp,
s-corps)
What is the tax treatment of nondeductible passive activity loss? - Answer✔deductible to the
extent of gains with indefinite carry forward and become fully deductible in year of disposition
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
What are the rules to determine taxable SS benefits? - Answer✔low 0%
lower middle <50%
middle 50%
upper middle 50%-85%
upper 85%
(calc. as 50% ss plus tax-exempt interest)
Are scholarships and fellowships includable in gross income? - Answer✔As long as degree-
seeking student did not have to exchange for services (strictly merit based). If non=degree
seeking, then always fully taxable
What are the tests for the foreign-earned income exclusion? - Answer✔bona fide residence for
entire taxable year and physically present for >330 days
List some nontaxable misc items (exclusions) - Answer✔-Life insurance proceeds
-gifts and inheritance
-accident insurance premiums (when paid by taxpayer)
-foreign-earned income exclusion
-Worker's compensation
-Medicare benefits
Describe the employee and employer taxation of nonqualified employee stock options -
Answer✔employee pays ordinary tax on stock in granted if there is a readily ascertainable
value. If not, then use the FMV less any amount paid for the option on the exercise date.
Employer can deduct that amount. Gain on sale is capital and not deductible by employer
Describe the employee and employer taxation of incentive stock options (ISOs) and Employee
Stock Purchase Plans(ESPPs) - Answer✔ISO employee pays capital gains on gain in value from
exercise date and sale date (as long as exercise after 1 year from grant and sale occurs 2 years
from grant)
What are the criteria for filling "qualifying widow(er) (surviving spouse)? - Answer✔Spouse
must have passed in tax year OR in the last two years if son/daughter lives with tax payer
Name the tests for claiming an exemption for a "qualifying child" - Answer✔Close relative
Age (19/24)
Resident and filing requirements
3|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Eliminate gross income test
Support test modified
Name the tests for claiming an exemption for a "qualifying relative" - Answer✔Support (>50%)
test
Under the personal exemption of gross income test
Precludes dependent filing a joint tax return
Only citizens
Relative
Taxpayer lives with individual for whole year test
For AGI Deductions - Answer✔Ira
Moving expenses
One half SE tax
Alimony
Tuition
Health Savings Account
Attorney fees (spec)
SE health insurance
SE benefits
Interest penalty(early wdrwl)
DPAD
Educators Expenses
Student loan interest
For AGI rules regarding child support and alimony - Answer✔-Alimony paid and child support
received is deductible
-Alimony received and child support paid is not
Limits on IRA deduction - Answer✔-5500 per year (11000 if mfj) and another possible for
nondeductible IRA (provided gross inc is greater)
-phase out at 98k mfj, if actively enrolled in employer pension plan
4|Page
CPA Exam Questions And Answers 100%
Guaranteed Pass.
What are the sources of taxable income? - Answer✔-Wages&Salaries
-Portfolio Income
-Passive Income
-Capital Income
What are some nontaxable fringe benefits? - Answer✔-Insurance premium
-De minimis fringe benefits
-Qualified tuition reduction
-qualified employee discounts
Are insurance premiums paid by employers taxable? - Answer✔<$50,000 ... No
>$50,000 ... Yes, use tax table to figure out how much (not entire amount over 50k)
Give some examples of exempt interest - Answer✔-State and local government bonds
-bonds of US possession (territory)
-Series EE if used for higher education
-Interest on VA insurance
What is the tax treatment of unearned income of a child who falls under the "kiddie" tax"
rules? - Answer✔First 100ish is tax free, second is taxed at child's rate, anything over about
2500ish is taxed at parents rate
State the tax treatment of property settlements in a divorce - Answer✔Tax free
transfer/division of property
What are the requirements for alimony to be deductible by the paying former spouse and
includable by the recipient? - Answer✔-must be pursuant to written decree
-cash or its equivalent
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
-can't extend beyond life of payee
-can't be made to the same members of the household
-no joint tax return is filed
Describe the self-employment tax - Answer✔-2.9% medicare tax on earnigns up to 118,500 and
12.4 ss tax on everything
-one half is available to take as a for AGI deduction
On what property do the Uniform Capitalization Rules apply? - Answer✔-Manufacturer's
inventory, regular inventory, rental inventory
-N/A if gross recipients in past 3 years do not exceed 10m annually.
When are funds in a nondeductible IRA taxable? - Answer✔Principle is taxable when incurred
and interest when withdrawn
What is the formula to determine the excludable portion of an annuity? - Answer✔in years =
(investment in contract/Age factor in months)
What are the exceptions form the early withdrawal penalty for pensions? - Answer✔Home
buyer (first time) 10k max
Insurance (for SE or 12wk UNEmp)
Medical expense >10% AGI
Disability
Education (tuition, books, fees)
And
Death
How is rental income from a vacation house treated? - Answer✔<15 excluded from income
>15 days rented <15 days lived in ... rental property
.15 days rented and used(or 10% of days rented) allocated rental expense to the extent of
rental income
Define and give examples of passive activity - Answer✔Activity that the investor does not have
significant management say in how his/her money is managed (rental<<always, interests in lp,
s-corps)
What is the tax treatment of nondeductible passive activity loss? - Answer✔deductible to the
extent of gains with indefinite carry forward and become fully deductible in year of disposition
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
What are the rules to determine taxable SS benefits? - Answer✔low 0%
lower middle <50%
middle 50%
upper middle 50%-85%
upper 85%
(calc. as 50% ss plus tax-exempt interest)
Are scholarships and fellowships includable in gross income? - Answer✔As long as degree-
seeking student did not have to exchange for services (strictly merit based). If non=degree
seeking, then always fully taxable
What are the tests for the foreign-earned income exclusion? - Answer✔bona fide residence for
entire taxable year and physically present for >330 days
List some nontaxable misc items (exclusions) - Answer✔-Life insurance proceeds
-gifts and inheritance
-accident insurance premiums (when paid by taxpayer)
-foreign-earned income exclusion
-Worker's compensation
-Medicare benefits
Describe the employee and employer taxation of nonqualified employee stock options -
Answer✔employee pays ordinary tax on stock in granted if there is a readily ascertainable
value. If not, then use the FMV less any amount paid for the option on the exercise date.
Employer can deduct that amount. Gain on sale is capital and not deductible by employer
Describe the employee and employer taxation of incentive stock options (ISOs) and Employee
Stock Purchase Plans(ESPPs) - Answer✔ISO employee pays capital gains on gain in value from
exercise date and sale date (as long as exercise after 1 year from grant and sale occurs 2 years
from grant)
What are the criteria for filling "qualifying widow(er) (surviving spouse)? - Answer✔Spouse
must have passed in tax year OR in the last two years if son/daughter lives with tax payer
Name the tests for claiming an exemption for a "qualifying child" - Answer✔Close relative
Age (19/24)
Resident and filing requirements
3|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Eliminate gross income test
Support test modified
Name the tests for claiming an exemption for a "qualifying relative" - Answer✔Support (>50%)
test
Under the personal exemption of gross income test
Precludes dependent filing a joint tax return
Only citizens
Relative
Taxpayer lives with individual for whole year test
For AGI Deductions - Answer✔Ira
Moving expenses
One half SE tax
Alimony
Tuition
Health Savings Account
Attorney fees (spec)
SE health insurance
SE benefits
Interest penalty(early wdrwl)
DPAD
Educators Expenses
Student loan interest
For AGI rules regarding child support and alimony - Answer✔-Alimony paid and child support
received is deductible
-Alimony received and child support paid is not
Limits on IRA deduction - Answer✔-5500 per year (11000 if mfj) and another possible for
nondeductible IRA (provided gross inc is greater)
-phase out at 98k mfj, if actively enrolled in employer pension plan
4|Page
