A. A Hurricane-damaged warehouse had an adjusted basis of $500,000 and a fair market value of $800,000 before the casualty. The owner received $600,000 in insurance proceeds and spent $700,000 to replace the warehouse within the required timeframe. What is the basis of the new warehouse?

B. Which of the following statements regarding the Section 179 deduction for 2025/2026 is false for a C Corporation?

C. Partnership XYZ distributes a parcel of land to Partner A in a liquidating distribution. Partner A’s outside basis is $50,000. The land has an adjusted basis to the partnership of $30,000 and an FMV of $70,000. XYZ also distributes $10,000 in cash to Partner A. What is Partner A’s basis in the land?

D. A C Corporation with $2,000,000 in gross receipts for the last three years is likely exempt from the Uniform Capitalization (UNICAP) rules. What is the current statutory gross receipts threshold for 2026 to be exempt from UNICAP?

E. Under Circular 230, if a practitioner finds an error in a client’s previously filed business return, the practitioner must:

F. Which of the following is considered “Hot Assets” (Section 751 property) in a partnership interest sale?

G. An S Corporation has $50,000 in AAA and $20,000 in E&P (from a prior C Corp history). It distributes $60,000 to its sole shareholder, whose basis is $100,000. How is the distribution taxed?

H. For an Enrolled Agent to represent a taxpayer in a case involving an Appeals conference, they must ensure the taxpayer has signed:

I. Which business entity type is prohibited from using the cash method of accounting if their gross receipts exceed the statutory threshold?

J. When a corporation is formed under Section 351, a shareholder contributes property with a basis of $40,000 and an FMV of $100,000. The shareholder receives stock and $10,000 in cash (boot). What is the shareholder’s recognized gain?

K. Under the Global Intangible Low-Taxed Income (GILTI) provisions, a U.S. shareholder of a Controlled Foreign Corporation (CFC) must include their share of GILTI in gross income. For a domestic C Corporation, what percentage of the GILTI inclusion is generally allowed as a deduction under Section 250 (subject to taxable income limitations)?

L. A partnership has two equal partners, A and B. Partner A contributes property with an adjusted basis of $20,000 and an FMV of $100,000. Partner B contributes $100,000 in cash. Two years later, the partnership sells the property for $120,000. How much gain is allocated to Partner A?

M. Which of the following is NOT a requirement for a corporation to be exempt from the “Accumulated Earnings Tax”?

N. A corporation distributes a piece of equipment to its sole shareholder as a property dividend. The equipment has an adjusted basis of $10,000 and an FMV of $25,000. The equipment is subject to a liability of $30,000, which the shareholder assumes. What is the corporation’s recognized gain on this distribution?

O. Regarding “Qualified Business Income” (QBI) for a Specified Service Trade or Business (SSTB), at what taxable income level (for a single filer in 2026) does the QBI deduction begin to phase out?

P. In a Section 338(h)(10) election, which of the following is true?

Q. Which of the following expenses is 100% deductible for a business in 2026?

R. An S Corporation with no C Corporation history distributes $10,000 to a shareholder. The shareholder’s stock basis at the beginning of the year was $5,000. The S Corp reports a $2,000 ordinary loss for the year. What is the shareholder’s taxable gain from the distribution?

S. A farmer receives “Crop Insurance Proceeds” in the current year due to damage that occurred in the same year. The farmer normally would have reported the income from these crops in the following year. Under what condition can the farmer elect to defer reporting this income until next year?

T. A taxpayer owns 100% of a C Corporation. The corporation has $0 E&P. The taxpayer’s basis in the stock is $50,000. The corporation distributes $65,000 to the taxpayer. How is this reported?

U. For a defined benefit plan, the maximum annual benefit an individual can receive in 2026 is generally limited to the lesser of 100% of the participant’s average high-three-year compensation or:

V. Which form is used by a partnership to report its “Built-in Gains” (Section 704(c)) to the partners?

W. Under Section 1245, “Recapture” of depreciation on the sale of a business machine is taxed as:

X. A tax-exempt organization has $2,000 in gross income from an unrelated trade or business. Its related expenses are $1,500. The specific deduction allowed for Unrelated Business Taxable Income (UBTI) is:

Y. A partner sells their 1/3 interest in a partnership for $50,000. Their basis is $30,000. The partnership has $15,000 in unrealized receivables. What is the amount and character of the partner’s gain?

Z. A corporation is in the process of a complete liquidation. It distributes land to a shareholder that has an adjusted basis of $60,000 and a fair market value of $40,000. In which of the following scenarios is the corporation prohibited from recognizing the $20,000 loss?

AA. For 2026, a business taxpayer is generally limited on their deduction for “Business Interest Expense” if their average annual gross receipts exceed $30 million. What is the standard limit for this deduction?

AB. An S Corporation shareholder has a $10,000 basis in their stock and a $5,000 basis in a loan they made to the corporation. The corporation passes through a $12,000 ordinary loss and a $4,000 non-deductible expense. What is the shareholder’s remaining basis in the loan at year-end?

AC. Which of the following taxes is a C Corporation allowed to deduct when calculating its federal taxable income?

AD. A partnership owns a “Section 1245” asset with an original cost of $100,000 and accumulated depreciation of $40,000. It sells the asset for $110,000. How is the gain characterized?

AE. Under the “Farming Syndicate” rules, when can a syndicate deduct the cost of feed, seed, and fertilizer?

AF. A “Personal Holding Company” (PHC) is subject to a penalty tax on its undistributed PHC income. Which of the following is one of the two tests used to identify a PHC?

AG. If a partner’s entire interest is liquidated and the partnership has “Unrealized Receivables,” any payments made for those receivables to a retiring general partner in a service-oriented partnership are treated as:

AH. In 2026, what is the maximum amount of “Start-up Costs” a new business can elect to deduct immediately, assuming total start-up costs do not exceed $50,000?

AI. A C Corporation has a Net Operating Loss (NOL) arising in 2026. How is this NOL treated for federal tax purposes?

AJ. For a “Qualified Transportation Fringe” benefit in 2026, which of the following is true regarding the employer’s deduction?

AK. When an S Corporation terminates its election mid-year, the “S Termination Year” is divided into an S short year and a C short year. What is the default method for allocating income between these two years?

AL. Which of the following entities is required to file Form 8832 to elect how it will be classified for federal tax purposes?

AM. A corporation’s “Charitable Contribution” deduction is limited to what percentage of its modified taxable income?

AN. Under Section 267, a C Corporation is denied a deduction for a loss on the sale of property to a “Related Person.” Who of the following is considered a related person?

AO. Which form is used by an S Corporation to report an involuntary termination of its S-status to the IRS?

AP. For “Heavy SUVs” (over 6,000 lbs but not more than 14,000 lbs) placed in service in 2026, the Section 179 expense is limited to:

AQ. A partnership makes a “Section 754” election. This election primarily affects:

AR. Which of the following is a “Specified Service Trade or Business” (SSTB) for purposes of the QBI deduction?

AS. A corporation pays a $5,000 premium on a life insurance policy for its CEO. The corporation is the beneficiary of the policy. How is this handled on the tax return?

AT. “Look-back” rules for Section 1231 gains require a taxpayer to characterize current year Section 1231 gain as ordinary income to the extent of:

AU. A partner’s “At-Risk” amount in a partnership is increased by:

AV. In a “Type A” reorganization (statutory merger or consolidation), the acquiring corporation’s basis in the assets received is:

AW. An employer provides “Educational Assistance” to an employee. What is the maximum amount that can be excluded from the employee’s income per year under Section 127?

AX. Which of the following must be capitalized rather than expensed for a new business?

AY. A domestic C Corporation owns 25% of a foreign corporation. Under the Participation Exemption (Section 245A), what percentage of the dividends received from the foreign corporation is generally deductible by the domestic corporation?

AZ. Partnership ABC makes a non-liquidating distribution of property to Partner A. The property has an adjusted basis to the partnership of $20,000 and an FMV of $35,000. Immediately before the distribution, Partner A’s outside basis in the partnership was $15,000. What is Partner A’s basis in the distributed property?

BA. Which of the following is an “Ordinary Income” item that must be stated separately on Schedule K of Form 1120-S?

BB. A corporation is considered a “Personal Service Corporation” (PSC) if its principal activity is the performance of personal services and those services are substantially performed by employee-owners. PSCs are generally required to use what tax year?

BC. In 2026, a business taxpayer is calculating the “Work Opportunity Tax Credit” (WOTC). For most target groups, the credit is 40% of qualified first-year wages, provided the employee works at least how many hours?

BD. Under the “Alternative Minimum Tax” (AMT) for corporations (if applicable for large corporations in 2026), which of the following is a common adjustment or preference item?

BE. An S Corporation has “Built-in Gains” (BIG) tax exposure. The BIG tax is triggered if the S Corporation disposes of an asset with a built-in gain within how many years of the S-election?

BF. Which of the following defines “Qualified Nonrecourse Financing” for purposes of increasing a partner’s at-risk basis?

BG. A C Corporation with $40,000 of current E&P and $10,000 of accumulated E&P distributes $60,000 to its sole shareholder. The shareholder’s basis in the stock is $20,000. How is the distribution taxed?

BH. Which IRS form is used to report the “Base Erosion and Anti-Abuse Tax” (BEAT) for certain large corporations?

BI. A partnership has “Substantially Appreciated Inventory” if its FMV exceeds what percentage of the partnership’s adjusted basis in the inventory?

BJ. If a corporation files a consolidated return, the “Dividends Received Deduction” (DRD) for dividends between members of the same consolidated group is:

BK. A taxpayer starts a business as a sole proprietor and incurs $60,000 in “Organizational Costs.” Assuming the business begins in 2026, what is the maximum amount that can be deducted in the first year?

BL. For a “Cash Method” business, when is a “Bad Debt” deductible?

BM. Which of the following is a “Section 197” intangible that must be amortized over 15 years?

BN. An S Corporation’s “Accumulated Adjustments Account” (AAA) can have a negative balance due to:

BO. In a “Section 351” exchange, “Control” is defined as owning at least what percentage of the total combined voting power and total number of shares of all other classes of stock?

BP. When a C Corporation liquidates, what is the tax effect on the shareholders?

BQ. Which of the following triggers “Recapture of the Investment Tax Credit”?

BR. A partner’s “Outside Basis” is decreased by which of the following?

BS. “Personal Holding Company Income” includes which of the following?

BT. To elect S Corporation status for the current tax year, Form 2553 must be filed no later than:

BU. Under Section 1250, “Unrecaptured Section 1250 Gain” on the sale of business real estate is taxed at a maximum rate of:

BV. A “Closely Held C Corporation” is subject to the “Passive Activity Loss” rules. It can offset passive losses against:

BW. Which entity is required to report “Total Assets” on Schedule L of its tax return, regardless of the size of its gross receipts?

BX. A “Simple IRA” plan is available to small businesses. What is the maximum number of employees an employer can have to be eligible to establish a SIMPLE IRA?

BY. Under the “Base Erosion and Anti-Abuse Tax” (BEAT), which of the following is considered a base erosion payment?

BZ. A partnership is required to withhold tax on a foreign partner’s “Effectively Connected Income” (ECI). Which form is used to report and pay this withholding tax annually?

CA. For a “Section 1244” stock loss to be treated as an ordinary loss, what is the maximum amount of capital a corporation can have raised at the time the stock was issued?

CB. An S Corporation’s “Built-in Gains” tax rate is equal to:

CC. Which of the following is a “Direct” skip for purposes of the Generation-Skipping Transfer (GST) tax in a business context?

CD. A “Qualified Personal Service Corporation” (QPSC) is taxed at what rate?

CE. In 2026, a “Small Business Taxpayer” (gross receipts under $30M) is exempt from using the percentage-of-completion method for long-term construction contracts if the contract is expected to be completed within:

CF. A partner has an outside basis of $40,000. In a liquidating distribution, they receive $10,000 cash and inventory with a partnership basis of $5,000 (FMV $12,000). What is the partner’s recognized loss?

CG. “Fringe Benefits” provided to a more-than-2% shareholder of an S Corporation are generally:

CH. Which of the following is true regarding a “Consolidated Return” election?

CI. A “Controlled Foreign Corporation” (CFC) is a foreign corporation where more than 50% of the total voting power or value is owned by:

CJ. An employer’s contribution to a “Simplified Employee Pension” (SEP) plan for an employee is limited to the lesser of 25% of compensation or (in 2026):

CK. If a business changes its “Accounting Method” (e.g., from Cash to Accrual), it must generally file Form 3115. A positive “Section 481(a) Adjustment” (which increases income) is generally spread over how many years?

CL. Which of the following is NOT a requirement for a “Qualified Subchapter S Subsidiary” (QSub)?

CM. For 2026, the “Standard Mileage Rate” for business use of a vehicle is used in lieu of actual expenses. Which of the following cannot be deducted separately if the standard rate is used?

CN. A “Personal Holding Company” pays a “Deficiency Dividend” to:

CO. When a partner contributes services in exchange for a “Capital Interest” in a partnership, the partner recognizes:

CP. “Form 1099-NEC” must be filed for non-employee compensation if the total paid to a service provider is at least:

CQ. A corporation’s “Taxable Income” is $100,000 before a dividends-received deduction (DRD). It received $20,000 in dividends from a 15%-owned domestic corporation. What is its DRD?

CR. A “Section 1231” loss is treated as:

CS. Which of the following is a “Prohibited Transaction” for a Qualified Retirement Plan?

CT. To qualify for the “Small Business Health Care Tax Credit,” an employer must have fewer than 25 full-time equivalent employees and pay average annual wages of less than:

CU. A partnership’s tax year must generally match the tax year of:

CV. For an Enrolled Agent, “Due Diligence” in tax return preparation means: