CTC Federal Taxation Principles & Compliance 2

Question 1

A taxpayer sells their primary residence in which they lived for 18 of the past 60 months due to a qualifying unforeseen circumstance. What is the maximum capital gain exclusion available?

Accepted Answer

$125,000 prorated based on time lived in the home

Answer

When the primary residence exclusion requirement is not fully met due to a qualifying event, a prorated exclusion equal to the fraction of the 2-year requirement satisfied is allowed.

Question 2

Under the passive activity rules, which of the following taxpayers may deduct up to $25,000 of passive rental real estate losses against non-passive income?

Accepted Answer

A taxpayer with $85,000 AGI who actively participates in rental activity

Answer

The $25,000 rental real estate allowance phases out between $100,000 and $150,000 AGI and requires only active participation (not material participation), so the $85,000 AGI taxpayer qualifies.

Question 3

A calendar-year S corporation fails to file its tax return by the extended due date. What is the monthly penalty per shareholder?

Accepted Answer

$205 per month per shareholder, up to 12 months

Answer

The failure-to-file penalty for S corporations is $205 per month (indexed) per shareholder, for a maximum of 12 months.

Question 4

Which of the following items is included in a taxpayer's alternative minimum taxable income (AMTI) as a preference item?

Accepted Answer

Accelerated depreciation on personal property placed in service before 1987

Answer

Accelerated depreciation on pre-1987 personal property is an AMT tax preference item added back to arrive at AMTI.

Question 5

An employer provides a group-term life insurance policy with a face value of $80,000 to an employee. How much of the coverage cost is includable in the employee's gross income?

Accepted Answer

The IRS table cost of coverage on $30,000 of insurance

Answer

The first $50,000 of employer-provided group-term life insurance is excluded; the employee must include the Table I cost of coverage for the excess $30,000.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Federal Taxation Principles & Compliance 2