Practice Test Geeks(CTP) Certified Tax Professional Practice Test
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Tax Preparation & Filing Flashcards

7 cards from real CTP 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 & Filing flashcards as text

  1. A taxpayer converts a traditional IRA to a Roth IRA. What is the tax consequence in the year of conversion?

    Answer: The converted amount is included in gross income as ordinary income

    When converting a traditional IRA to a Roth IRA, the pre-tax amount converted is included in gross income as ordinary income in the year of conversion.

  2. What is the statute of limitations for the IRS to assess additional tax on a standard federal income tax return?

    Answer: 3 years from the later of the filing date or due date

    The standard statute of limitations is 3 years from the later of the date the return was filed or the original due date of the return.

  3. A taxpayer receives a 1099-C for $8,000 of cancelled credit card debt. Under what circumstance might this amount NOT be taxable?

    Answer: If the taxpayer was insolvent immediately before the cancellation

    Cancelled debt is excludable from income to the extent the taxpayer was insolvent (liabilities exceeded assets) immediately before the cancellation under IRC §108.

  4. Which form do employers use to reconcile annual W-2 filings with the Social Security Administration?

    Answer: Form W-3

    Form W-3 (Transmittal of Wage and Tax Statements) is submitted to the SSA along with Copy A of all W-2 forms to reconcile totals.

  5. A taxpayer sells their primary residence for a $300,000 gain after living there 3 of the last 5 years. How much gain is taxable if they file as Single?

    Answer: $50,000 — only gains above $250,000 are taxable

    Single filers can exclude up to $250,000 of gain on a primary residence sale under IRC §121, so $300,000 - $250,000 = $50,000 is taxable.

  6. Which of the following is an 'above-the-line' deduction that reduces AGI regardless of whether the taxpayer itemizes?

    Answer: Contributions to a Health Savings Account (HSA)

    HSA contributions made by the taxpayer (not through employer payroll) are an above-the-line deduction reducing AGI, available even to non-itemizers.

  7. What does the term 'basis' mean in the context of tax preparation?

    Answer: The taxpayer's cost or investment in an asset used to calculate gain or loss

    Basis generally represents the taxpayer's investment in an asset (usually cost), which is subtracted from the sale price to determine the taxable gain or deductible loss.