Practice Test Geeks(ABA) Accredited Business Accountant Practice Test
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Tax Preparation & Compliance Flashcards

7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Tax Preparation & Compliance flashcards as text

  1. What is the penalty rate for failing to pay taxes by the due date (underpayment penalty) per month under IRC §6651?

    Answer: 0.5% per month, up to 25%

    The failure-to-pay penalty under IRC §6651(a)(2) is 0.5% of unpaid tax per month (or part of a month), capped at 25% of the unpaid balance.

  2. For 2024, up to what amount of Social Security wages is subject to the 6.2% OASDI tax?

    Answer: $168,600

    The Social Security wage base for 2024 is $168,600; wages above this amount are not subject to the 6.2% OASDI portion of FICA.

  3. A taxpayer sells their primary residence of 6 years for a $320,000 gain. They are married filing jointly. How much gain is excludable?

    Answer: $500,000

    Under IRC §121, married couples filing jointly can exclude up to $500,000 of gain on the sale of a principal residence if ownership and use tests are met.

  4. Which depreciation method assigns equal expense amounts each year over an asset's useful life?

    Answer: Straight-line

    Straight-line depreciation divides the depreciable basis evenly over the asset's recovery period, yielding the same deduction each year.

  5. A corporation distributes $10,000 to a shareholder from its earnings and profits (E&P). The shareholder's tax basis in the stock is $3,000. How is the distribution classified?

    Answer: $10,000 ordinary dividend income

    Distributions from current or accumulated E&P are treated as ordinary dividends to the extent of E&P; since $10,000 ≤ E&P, the full amount is a dividend.

  6. What is the primary purpose of Form 4868?

    Answer: Request an automatic 6-month extension of time to file Form 1040

    Form 4868 grants an automatic 6-month extension to file Form 1040 but does NOT extend the time to pay any taxes due.

  7. Under the passive activity loss rules (IRC §469), which taxpayer can deduct up to $25,000 of rental real estate losses against ordinary income?

    Answer: Active participants with AGI up to $100,000 (phase-out begins at $100,000)

    Active participants in rental real estate can deduct up to $25,000 of passive losses if AGI does not exceed $100,000, with a phase-out through $150,000.