A. If an Enrolled Agent (EA) discovers that a client has not complied with the revenue laws, the EA must:

B. Which of the following is a “Hot Asset” for a partnership?

C. A “Private Foundation” is generally subject to an “Excise Tax” on its:

D. “Direct Costs” for a manufacturer under UNICAP (Section 263A) include:

E. A partner’s “Holding Period” for a partnership interest acquired by contributing a capital asset (like land) includes:

F. An S Corporation’s “AAA” balance can be distributed tax-free even if the shareholder’s stock basis is zero.

G. A “Simplified Employee Pension” (SEP) plan must cover all employees who have reached age 21, worked for the employer in at least 3 of the last 5 years, and received at least how much in compensation (for 2026)?

H. “Form 5472” is used to report transactions between a 25% foreign-owned U.S. corporation and its foreign related parties. The penalty for failing to file this form or filing an incomplete form is (as of 2026):

I. Which of the following is NOT an “Accrual” method requirement for “Economic Performance” to occur?

J. Under the “Luxury Auto” limits (Section 280F) for 2026, if a business vehicle’s business use drops to 50% or less in the second year, the taxpayer must:

K. A “General Partnership” is formed. Partner A contributes $10,000 cash. Partner B contributes services worth $10,000 for a 50% capital interest. What is the partnership’s total “Inside Basis” in its assets immediately after formation?

L. To be a “Qualified Personal Service Corporation” (QPSC), what percentage of the stock must be held by current or retired employees?

M. An S Corporation shareholder has a $5,000 stock basis. The corporation distributes a piece of land with a basis of $2,000 and an FMV of $10,000. The corporation recognizes an $8,000 gain. How does this gain affect the shareholder’s basis before the distribution is accounted for?

N. Which form is used by a tax-exempt organization to report “Unrelated Business Taxable Income” (UBTI)?

O. A “Complex Trust” is required to distribute $5,000 of income annually. In the current year, it earns $10,000 and distributes $8,000. The trust’s “Distributable Net Income” (DNI) is $9,000. What is the trust’s income distribution deduction?

P. A partnership with $25 million in gross receipts is likely exempt from the “Business Interest Limitation” (Section 163(j)). For 2026, the statutory threshold to be considered a “Small Business” for this exemption is:

Q. Which of the following is a “Disqualified Person” regarding “Prohibited Transactions” with a qualified retirement plan?

R. In a “Section 332” Liquidation (liquidation of a subsidiary into a parent), the parent corporation recognizes:

S. An S Corporation’s “Accumulated Adjustments Account” (AAA) is NOT increased by:

T. For a “Qualified Appraisal” required for a large corporate charitable contribution of property, the appraisal must be made no earlier than how many days before the contribution?

U. Under Section 1245, if a business sells a car for a gain, the depreciation “Recapture” is limited to:

V. A corporation’s “Taxable Income” is $1,000,000. It receives a $50,000 dividend from a 10%-owned domestic corporation. What is the corporation’s “Dividends Received Deduction” (DRD)?

W. Which of the following is considered “Subpart F Income” for a Controlled Foreign Corporation (CFC)?

X. A domestic partnership has a foreign partner. The partnership has “Effectively Connected Income” (ECI) for the year. The partnership must pay a withholding tax (Section 1446) on the foreign partner’s share of ECI at what rate?

Y. An employer maintains a “401(k) Plan” and wishes to avoid annual nondiscrimination testing (ADP/ACP). Which of the following “Safe Harbor” contributions would allow them to do this?

Z. An S Corporation’s election is terminated if it has passive investment income exceeding 25% of gross receipts for how many consecutive years (if it has C-corp E&P)?

AA. Which of the following is a “Direct Expense” that a farmer can choose to either deduct or capitalize?

AB. A “Controlled Foreign Corporation” (CFC) triggers “Subpart F” income which is taxed to U.S. shareholders:

AC. Under Circular 230, a practitioner must not sign a tax return that they know contains a position that:

AD. A “Qualified Subchapter S Subsidiary” (QSub) is:

AE. “Section 179” property does NOT include:

AF. A partnership must file Form 1065 by which day of the 3rd month following the close of its tax year?

AG. To be a “Personal Holding Company,” more than 50% of the value of the stock must be owned by how many individuals during the last half of the year?

AH. “Section 1244 Stock” allows an individual to treat a loss on the sale of small business stock as an ordinary loss. The maximum ordinary loss deduction per year for a married couple filing jointly is:

AI. An S Corporation’s “Accumulated Adjustments Account” (AAA) balance is $10,000. It has $5,000 in Accumulated E&P. The corporation distributes $12,000 to a sole shareholder with a $20,000 basis. The distribution is:

AJ. Which of the following is a “Qualified Business” for the Section 199A (QBI) deduction?

AK. A partnership terminates for tax purposes if:

AL. For a “Cash Method” business, a deduction for an expense is generally allowed when:

AM. A corporation distributes a building (Basis $100k, FMV $250k) to a shareholder in a non-liquidating distribution. The building is subject to a $300k mortgage which the shareholder assumes. The corporation recognizes a gain of:

AN. Which of the following defines “Substantially Appreciated Inventory” for a partnership?

AO. A C Corporation has $500,000 of gross receipts and $600,000 of expenses, resulting in a ($100,000) Net Operating Loss (NOL) in 2026. This NOL can be:

AP. A partner’s “Outside Basis” is increased by their share of:

AQ. Under Section 1202, “Qualified Small Business Stock” (QSBS) acquired in 2026 and held for more than 5 years allows for a gain exclusion of:

AR. An S Corporation’s “Built-in Gains” (BIG) tax is limited by the corporation’s:

AS. Which form is used by a U.S. person to report their interest in a “Foreign Partnership”?

AT. For 2026, a “Large Food and Beverage Establishment” must allocate tip income to employees if the total tips reported by employees are less than what percentage of the establishment’s gross receipts?

AU. A C Corporation with $1,000,000 in taxable income (before the DRD) receives a $100,000 dividend from a domestic corporation in which it owns 25% of the stock. What is the allowed Dividends Received Deduction (DRD)?

AV. Which of the following is an “Ineligible Corporation” that cannot elect S-status?

AW. A partnership has a Section 754 election in effect. Partner A sells their 25% interest to Partner D for $50,000. Partner A’s share of the partnership’s inside basis was $30,000. What is the Section 743(b) adjustment for Partner D?

AX. In a “Type B” Reorganization, the acquiring corporation must acquire control of the target corporation using:

AY. A “Qualified Transportation Fringe Benefit” (e.g., parking) provided to an employee in 2026 is:

AZ. “Built-in Gains” (BIG) tax applies to an S Corporation that was previously a C Corporation. The tax is calculated using the:

BA. An Enrolled Agent (EA) is representing a client before the IRS. Under Circular 230, the EA must return all client records upon request, but may retain copies if:

BB. For a business to deduct “Client Gifts,” the deduction is limited to how much per person per year?

BC. A “Limited Liability Company” (LLC) with two members that does not file a “Check-the-box” election is treated as:

BD. When an S Corporation terminates its election, it generally cannot re-elect S-status for how many years?

BE. Which of the following taxes is NOT deductible for a C Corporation?

BF. A partner receives a “Liquidating Distribution” consisting of $30,000 cash. Their outside basis was $20,000. What is the tax result?

BG. A “Personal Service Corporation” (PSC) is subject to the Passive Activity Loss rules. However, unlike individuals, a “Closely Held C Corporation” that is NOT a PSC can offset passive losses against:

BH. Which IRS form is used by a partnership to report its “Net Earnings from Self-Employment” to its partners?

BI. A C Corporation has a Net Capital Loss in 2026. How is this loss treated?

BJ. Under the “Common Control” rules for retirement plans, two or more trades or businesses are treated as a single employer if:

BK. An S Corporation’s “Accumulated Adjustments Account” (AAA) is adjusted for:

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

BM. A partnership’s “Ordinary Business Income” (Page 1 of Form 1065) includes:

BN. For the “Work Opportunity Tax Credit” (WOTC), the credit for hiring a “Long-term Family Assistance Recipient” can be claimed over how many years?

BO. A corporation is formed under Section 351. Shareholder X contributes property with an adjusted basis of $10,000 and an FMV of $50,000. The corporation assumes a $12,000 mortgage on the property. What is Shareholder X’s recognized gain?

BP. If a partner sells their interest in a partnership that has “Unrealized Receivables,” the portion of the sale price attributable to those receivables is taxed as:

BQ. An S Corporation shareholder’s “Stock Basis” is decreased by which of the following?

BR. To be a “Qualified Small Business” exempt from the requirement to use the Accrual Method of accounting in 2026, the average annual gross receipts for the prior three years must not exceed:

BS. A C Corporation has a charitable contribution carryover of $5,000 from five years ago. In the current year (Year 6), it has another $2,000 in contributions. Which is true regarding the Year 6 return?

BT. Which of the following is an “Ordinary Income” item that must be stated separately on a Partnership Schedule K-1?

BU. An S Corporation must pay the “Passive Investment Income” tax if its passive income exceeds 25% of its gross receipts and it has:

BV. Under Section 754, if a partnership distributes property to a partner and the partner recognizes a gain because the cash received exceeds their outside basis, the partnership can:

BW. A corporation has a deficit in Accumulated E&P of ($100,000) and Current E&P of $40,000. It makes a distribution of $50,000 to its sole shareholder on July 1st. The shareholder’s basis in the stock is $20,000. What is the character of the $50,000 distribution?

BX. A corporation’s “Earnings & Profits” (E&P) are increased by which of the following?

BY. In a liquidating distribution, a partner receives $20,000 cash and a car (basis $5,000, FMV $8,000). The partner’s outside basis is $40,000. What is the partner’s basis in the car?

BZ. Which of the following is a “Separately Stated Item” for a partnership?

CA. An S-Corporation reports a “Net Recognized Built-in Gain” of $100,000. It has an NOL carryover from its C-corp years of $20,000. What is the taxable amount for the BIG tax?

CB. To qualify as a “Tax-Exempt Organization” under Section 501(c)(3), an entity must be organized and operated exclusively for specific purposes. Which of the following is a prohibited activity?

CC. A partnership makes a $5,000 “Guaranteed Payment” to Partner A for services. The partnership has a $2,000 ordinary loss before the payment. What is the final ordinary income/loss reported on the partnership’s Form 1065?

CD. A “Personal Holding Company” (PHC) is subject to a 20% tax on “Undistributed PHC Income.” Which of the following is considered PHC income?

CE. For 2026, the maximum Section 179 expense deduction is $1,290,000 (assumed inflation-adjusted). If a business buys $4,000,000 of equipment, what is the allowed Section 179 deduction?

CF. A farmer uses the “Accrual Method” of accounting. Which of the following is true?

CG. Which of the following is NOT a requirement to be a “Qualified Small Business Stock” (Section 1202) for the 100% gain exclusion?

CH. A partnership with a calendar year-end has three partners. Partner A (40% interest) uses a June 30 fiscal year. Partner B (40% interest) uses a June 30 fiscal year. Partner C (20% interest) uses a calendar year. What is the required tax year for the partnership?

CI. An S-Corporation has $20,000 in its Accumulated Adjustments Account (AAA) and $30,000 in Accumulated E&P from C-corp years. It distributes $25,000 to its sole shareholder (basis $50,000). How is the distribution treated?

CJ. Under Circular 230, a practitioner may not charge a “Contingent Fee” for:

CK. A C-Corporation shareholder receives a $100,000 distribution. The corporation has $30,000 in Current E&P and a ($50,000) deficit in Accumulated E&P. How much of the distribution is a taxable dividend?

CL. Which of the following is a “Hot Asset” that triggers ordinary income upon the sale of a partnership interest?

CM. In a Section 351 transaction, three individuals contribute property to form a corporation. Individual A gets 50% of the stock, Individual B gets 25%, and Individual C gets 5% plus a salary for future services. Does the transaction qualify for tax-free treatment for A and B?

CN. A business sells a machine for $50,000. It was purchased for $45,000, and $20,000 of depreciation was taken. How much of the gain is Section 1245 ordinary income?

CO. Which form is used by a corporation to request an automatic 6-month extension to file its income tax return?

CP. An S-Corporation shareholder has zero stock basis and $10,000 in debt basis (from a direct loan). The S-Corp reports $5,000 of ordinary income and $2,000 of tax-exempt income. What is the shareholder’s stock basis at year-end?

CQ. For a C Corporation, which of the following items is a permanent difference when reconciling book income to taxable income on Schedule M-1?

CR. Partner X has a 25% interest in Partnership XYZ. The partnership has $100,000 in “Qualified Nonrecourse Financing” and $40,000 in “Recourse Debt.” Partner X is not personally liable for any debt. What is Partner X’s increase to their “At-Risk” basis?

CS. A corporation incurs $52,000 in “Organizational Costs” and $51,000 in “Start-up Costs” in 2026. What is the total maximum immediate deduction allowed for both categories combined?

CT. Which of the following would cause an S-Corporation election to terminate involuntarily?

CU. Under the 2026 rules, a large C Corporation with “Adjusted Financial Statement Income” (AFSI) exceeding $1 billion over a three-year period is subject to the Corporate Alternative Minimum Tax (CAMT). The CAMT is generally what percentage of AFSI?

CV. A partnership distributes a piece of equipment to a partner in a non-liquidating distribution. The partnership’s basis in the equipment is $20,000, and its FMV is $15,000. The partner’s outside basis is $10,000. What is the partner’s basis in the equipment?