CBS Tax Planning & Preparation 2

Question 1

A taxpayer sells a rental property held for 8 years at a $40,000 gain. Which tax rate applies to the long-term capital gain portion?

Accepted Answer

0%, 15%, or 20% depending on taxable income

Answer

Long-term capital gains on real property are taxed at 0%, 15%, or 20% based on the taxpayer's taxable income bracket.

Question 2

What is the purpose of IRS Form 1040-ES?

Accepted Answer

Filing estimated quarterly tax payments

Answer

Form 1040-ES is used to calculate and submit estimated quarterly tax payments for income not subject to withholding.

Question 3

Which of the following retirement contributions reduces a taxpayer's adjusted gross income (AGI) even if they do not itemize?

Accepted Answer

Traditional IRA contribution (if deductible)

Answer

Deductible Traditional IRA contributions are an above-the-line deduction that reduces AGI regardless of whether the taxpayer itemizes.

Question 4

A married couple filing jointly has $30,000 of net investment income and $180,000 in modified AGI. What surtax may apply?

Accepted Answer

3.8% Net Investment Income Tax on the lesser of NII or MAGI over $250,000

Answer

The 3.8% NIIT applies to the lesser of net investment income or the excess of MAGI over $250,000 for MFJ filers.

Question 5

Which tax strategy involves accelerating deductions into the current tax year and deferring income to the next year?

Accepted Answer

Bunching deductions / deferral strategy

Answer

Bunching deductions and deferring income reduces current-year taxable income by concentrating deductions now and pushing income forward.

(CBS) Certified Budget Specialist Practice Test