IRS Individual Taxpayer Data 3

Question 1

A taxpayer sells their primary residence for a $300,000 gain. They are married filing jointly and have lived in the home for 3 of the last 5 years. How much gain is excluded from income?

Accepted Answer

$300,000

Answer

Married filing jointly taxpayers can exclude up to $500,000 of gain on a primary residence sale if the ownership and use tests are met, so the entire $300,000 gain is excluded.

Question 2

Which form does an employer use to report wages paid and taxes withheld for employees?

Accepted Answer

Form W-2

Answer

Employers report wages, tips, and withheld taxes to each employee and the IRS on Form W-2.

Question 3

A taxpayer has a net operating loss (NOL) in 2023. Under current law, how many years can the NOL be carried forward?

Accepted Answer

Indefinitely, subject to an 80% of taxable income limitation

Answer

Under the Tax Cuts and Jobs Act, NOLs arising after 2017 can be carried forward indefinitely but are limited to offsetting 80% of taxable income in the carryforward year.

Question 4

A taxpayer receives a prize of $5,000 from a radio contest. How is this amount treated for federal income tax purposes?

Accepted Answer

Includable in gross income as ordinary income

Answer

Prizes and awards are generally includable in gross income as ordinary income under IRC §74.

Question 5

Which of the following taxpayers may NOT use the single filing status?

Accepted Answer

A taxpayer who is legally married as of December 31

Answer

Filing status is determined on the last day of the tax year; a taxpayer who is legally married on December 31 must file as married (MFJ or MFS), not single.

(IRS) Internal Revenue Service Certified Practice Test

(IRS) Internal Revenue Service Certified Practice Test

IRS Individual Taxpayer Data 3