Part 2 Exam 4

EA Full Length Practice Test Part II – Exam 4

This is an EA full-length practice exam designed to replicate real test conditions as closely as possible.

📘 Exam Instructions

Before You Begin

Time Limit: 210 minutes (Timer will start when you click ‘Start’)
Format: 100 multiple-choice questions
Environment: Choose a quiet space with no distractions
No Resources: Close books, notes, and this guide
Answer Every Question: Even if unsure, make your best guess
Simulate Real Conditions:
- No phone
- No interruptions
- No unnecessary breaks

🧠 When You Start

Start the timer and begin with Question 1
Work steadily — do not spend too much time on one question
If a question is too difficult, skip it and return later if time allows
Stay focused and maintain a consistent pace

⏱️ After Completion

Stop immediately at 210 minutes, even if you are not finished
Do not check answers during the test
Review your answers only after completing the entire exam

1 / 100

Tags: taxpayer, placed, passenger, automobile

A. A taxpayer placed a passenger automobile (weighing less than 6,000 lbs) in service in 2026 for 100% business use. If the taxpayer does not claim bonus depreciation, the maximum Section 280F depreciation deduction for the first year is limited to approximately:

A. $10,200

B. $12,400

C. $19,200

D. $20,200

2 / 100

Tags: Which, following, Listed, property

B. Which of the following is “Listed Property” for depreciation purposes?

A. A heavy forklift used in a warehouse.

B. A digital camera used by a professional photographer.

C. A computer used 100% at a regular business establishment.

D. A passenger automobile.

3 / 100

Tags: Cash, method, farmer, receives

C. A “Cash Method” farmer who receives insurance proceeds for crop damage may elect to:

A. Deduct the loss immediately and ignore the insurance.

B. Include the proceeds in income in the year following the damage if they would have normally sold the crops in that year.

C. Treat the proceeds as a tax-free gift.

D. Capitalize the proceeds into the basis of the land.

4 / 100

Tags: Uniform, Capitalization, UNICAP, rules

D. Under the “Uniform Capitalization” (UNICAP) rules, which of the following is a “Mixed Service Cost” that must be allocated between production and non-production activities?

A. Direct materials.

B. Marketing and selling expenses.

C. Human Resources (Personnel) department costs.

D. Research and experimental costs.

5 / 100

Tags: Corporation, liquidates, distributes, asset

E. A corporation liquidates and distributes an asset (Basis $20k, FMV $50k) to a shareholder in exchange for their stock. The corporation recognizes:

A. No gain or loss.

B. $50,000 Capital Gain.

C. $30,000 Ordinary Income.

D. $30,000 Capital Gain.

6 / 100

Tags: Partnership, Section, requires, that

F. For a partnership, “Section 704(c)” requires that income, gain, loss, and deduction with respect to property contributed by a partner be shared among the partners so as to take account of:

A. The difference between the basis of the property and its FMV at the time of contribution.

B. The partner's capital account balance.

C. The partner's share of liabilities.

D. The partnership's net profit for the year.

7 / 100

Tags: Which, following, retirement, Plans

G. Which of the following “Retirement Plans” allows for “Catch-up” contributions for participants aged 50 or older?

A. SEP IRA

B. SIMPLE IRA

C. Qualified 401(k)

D. Both B and C

8 / 100

Tags: Corporation, must, LIFO, recapture

H. An S Corporation must pay the “LIFO Recapture Tax” if it was previously a C Corporation that used the LIFO inventory method. This tax is paid over:

A. One year (the year of election).

B. Three years.

C. Four years.

D. Five years.

9 / 100

Tags: Which, form, used, report

I. Which IRS form is used to report a “Reportable Transaction” (tax shelter)?

A. Form 8275

B. Form 8824

C. Form 8886

D. Form 8300

10 / 100

Tags: Specified, Service, Trade, business

J. A “Specified Service Trade or Business” (SSTB) for QBI purposes includes which of the following?

A. A retail clothing store.

B. An accounting firm.

C. A residential construction company.

D. A wholesaler of electronic parts.

11 / 100

Tags: Complex, trust, distributes, Beneficiary

K. A “Complex Trust” has $10,000 of DNI. It distributes $12,000 to Beneficiary A and $4,000 to Beneficiary B. How much income is allocated to Beneficiary B?

A. $2,500

B. $4,000

C. $10,000

D. $0

12 / 100

Tags: Amortization, Section, Intangible, begins

L. “Amortization” of a Section 197 intangible begins in:

A. The month the intangible is acquired.

B. The year the intangible is fully paid for.

C. The month the business starts operations.

D. Both A and C (whichever is later).

13 / 100

Tags: Partnership, Ordinary, business, income

M. A partnership’s “Ordinary Business Income” (Page 1) does NOT include:

A. Repairs and maintenance.

B. Rent expense for the office.

C. Charitable contributions.

D. Depreciation on shop equipment.

14 / 100

Tags: Circular, practitioner, must, return

N. Under Circular 230, a practitioner must return all client records upon request. However, “Client Records” do NOT include:

A. Documents provided to the practitioner by the client.

B. Documents prepared by the client's bank.

C. Tax returns or schedules prepared by the practitioner that are being withheld pending the client's payment of fees.

D. Receipts for business expenses.

15 / 100

Tags: Corporation, Charitable, contribution, Deduction

O. A corporation’s “Charitable Contribution” deduction is limited to what percentage of taxable income (calculated before certain deductions)?

A. 10%

B. 25%

C. 50%

D. 100%

16 / 100

Tags: Section, property, includes

P. “Section 1231” property includes:

A. Inventory held for sale.

B. Copyrights held by the creator.

C. Depreciable business property held for more than one year.

D. Accounts receivable.

17 / 100

Tags: Corp, shareholder, dies, election

Q. If an S-Corp shareholder dies, the S-election is terminated if the stock is inherited by:

A. An estate.

B. A grantor trust.

C. A U.S. citizen.

D. A non-resident alien.

18 / 100

Tags: Cash, method, business, Prepaid

R. For a “Cash Method” business, a “Prepaid Insurance” premium covering a period of 24 months is:

A. Deductible only to the extent of the current year's coverage.

B. Fully deductible when paid.

C. Not deductible until the policy expires.

D. Deductible over 15 years.

19 / 100

Tags: Partner, receives, current, liquidating

S. A partner receives a “Current (Non-liquidating) Distribution” of $20,000 cash. Their outside basis was $15,000. The partner recognizes:

A. No gain; basis becomes ($5,000).

B. $5,000 Capital Gain.

C. $5,000 Ordinary Income.

D. $20,000 Capital Gain.

20 / 100

Tags: Which, following, Qualified, small

T. Which of the following is a “Qualified Small Business” for the Section 448 “Gross Receipts Test” in 2026?

A. A corporation with average gross receipts of $20 million.

B. A corporation with average gross receipts of $40 million.

C. A tax shelter.

D. A corporation with average gross receipts of $35 million.

21 / 100

Tags: Bonus, Depreciation, Section, property

U. “Bonus Depreciation” (Section 168(k)) for property placed in service in 2026 is generally:

A. 100%

B. 80%

C. 60%

D. 0%

22 / 100

Tags: Corporation, election, effective, current

V. An S Corporation’s “Election” is effective for the current year if filed by:

A. The end of the tax year.

B. The 15th day of the 3rd month.

C. The 15th day of the 4th month.

D. January 31st.

23 / 100

Tags: Alternative, Depreciation, System, must

W. “Alternative Depreciation System” (ADS) must be used for which of the following?

A. Tangible property used predominantly outside the United States.

B. Any asset used less than 100% for business.

C. Computers used in a home office.

D. Inventory.

24 / 100

Tags: Personal, holding, Company, meant

X. A “Personal Holding Company” (PHC) tax is meant to prevent:

A. Corporations from paying too much in dividends.

B. Partnerships from becoming corporations.

C. S Corporations from having too many shareholders.

D. Individuals from "incorporating" their pocketbooks to avoid high personal tax rates on passive income.

25 / 100

Tags: Common, rules, individual, employee

Y. Under the “Common Law” rules, an individual is an “Employee” if:

A. They provide their own tools.

B. The employer has the right to control what will be done and how it will be done.

C. They work for more than one person.

D. They are paid on a commission basis.

26 / 100

Tags: years, beginning, maximum, Section

Z. For tax years beginning in 2026, the maximum Section 179 expense deduction is approximately:

A. $1,220,000

B. $2,000,000

C. $2,560,000

D. $5,000,000

27 / 100

Tags: Phase, threshold, Section, Deduction

AA. The “Phase-out Threshold” for the Section 179 deduction in 2026 begins when total qualified property placed in service exceeds:

A. $3,050,000

B. $4,090,000

C. $5,000,000

D. $10,000,000

28 / 100

Tags: Standard, Mileage, rate, deductible

AB. Under the 2026 standard mileage rate, the deductible amount for business use of an automobile is:

A. 72.5 cents per mile

B. 70 cents per mile

C. 67 cents per mile

D. 75 cents per mile

29 / 100

Tags: Section, Intangible, that, Self

AC. A “Section 197” intangible that is “Self-Created” (not acquired via a business purchase) is generally:

A. Amortized over 15 years.

B. Amortized over 5 years.

C. Not amortizable.

D. Deductible in full in the year created.

30 / 100

Tags: Which, following, true, regarding

AD. Which of the following is true regarding “Bonus Depreciation” (Section 168(k)) for qualified property placed in service in 2026?

A. It has phased down to 0%.

B. it is limited to 20%.

C. It only applies to used property.

D. It is 100% under the OBBB Act.

31 / 100

Tags: Partnership, partners, must, file

AE. A partnership with 100 partners must file its Form 1065 by the 15th day of the:

A. 3rd month following the close of the tax year.

B. 4th month following the close of the tax year.

C. 6th month following the close of the tax year.

D. 9th month following the close of the tax year.

32 / 100

Tags: gross, receipts, Test, allows

AF. The “Gross Receipts Test” for 2026 allows certain businesses to use the cash method of accounting if their average annual gross receipts for the 3 prior years do not exceed:

A. $5 million

B. $25 million

C. $30 million

D. $50 million

33 / 100

Tags: Corporation, accumulated, Adjustments, Account

AG. An S Corporation has $100,000 in “Accumulated Adjustments Account” (AAA) and $50,000 in “Accumulated Earnings and Profits” (E&P). It distributes $120,000 to its sole shareholder. The shareholder’s stock basis is $150,000. How is the distribution taxed?

A. $120,000 Tax-free.

B. $100,000 Tax-free; $20,000 Taxable Dividend.

C. $100,000 Tax-free; $20,000 Capital Gain.

D. $120,000 Taxable Dividend.

34 / 100

Tags: Cash, method, farmer, Prepaid

AH. For a “Cash Method” farmer, “Prepaid Farm Supplies” are generally deductible in the year of payment only if they do not exceed what percentage of other deductible farming expenses?

A. 10%

B. 25%

C. 50%

D. 100%

35 / 100

Tags: Qualified, Improvement, property, depreciated

AI. A “Qualified Improvement Property” (QIP) is depreciated over a MACRS recovery period of:

A. 5 years

B. 15 years

C. 27.5 years

D. 39 years

36 / 100

Tags: form, used, report, employee

AJ. “Form 1099-NEC” is used to report non-employee compensation of at least how much paid to a service provider?

A. $10

B. $400

C. $600

D. $1,000

37 / 100

Tags: Which, following, Investment, Interest

AK. Which of the following is “Investment Interest Expense” for a partnership?

A. Interest on a loan to purchase land held for speculation.

B. Interest on a loan to purchase shop equipment.

C. Interest on a business credit card.

D. Interest on a mortgage for the main office.

38 / 100

Tags: estate, Section, election, allows

AL. An estate with a “Section 645” election allows a “Qualified Revocable Trust” (QRT) to be treated as:

A. A separate partnership.

B. A tax-exempt entity.

C. A corporation.

D. Part of the estate for income tax purposes.

39 / 100

Tags: Circular, practitioner, discovers, error

AM. Under Circular 230, if a practitioner discovers an error on a previously filed return, they must:

A. Immediately notify the IRS.

B. Notify the client and advise them of the consequences of the error.

C. Refuse to work with the client until it is fixed.

D. Fix the error themselves without telling the client.

40 / 100

Tags: Corporation, Personal, Service, Corporation

AN. A corporation is a “Personal Service Corporation” (PSC) if more than what percentage of its stock is owned by employee-owners?

A. 5%

B. 10%

C. 50%

D. 80%

41 / 100

Tags: Section, recapture, applies, Which

AO. “Section 1245” recapture applies to which of the following?

A. Residential rental buildings.

B. Land.

C. Machinery and equipment.

D. Goodwill.

42 / 100

Tags: Qualified, Subchapter, Subsidiary, QSub

AP. A “Qualified Subchapter S Subsidiary” (QSub) election is made on:

A. Form 8869

B. Form 2553

C. Form 1120-S

D. Form 8832

43 / 100

Tags: business, deduct, much, Start

AQ. For 2026, a business can deduct up to how much in “Start-up Costs” in the first year of business?

A. $1,000

B. $15,000

C. $10,000

D. $5,000

44 / 100

Tags: Which, following, business, Credits

AR. Which of the following “Business Credits” has a 20-year carryforward period?

A. Foreign Tax Credit.

B. General Business Credit.

C. Child Tax Credit.

D. None of the above.

45 / 100

Tags: Schedule, required, corporations, total

AS. A “Schedule M-3” is required for corporations with total assets of at least:

A. $1 million

B. $5 million

C. $10 million

D. $50 million

46 / 100

Tags: consolidated, return, election, made

AT. A “Consolidated Return” election is made by the parent corporation by filing:

A. Form 1120 and Form 851.

B. Form 1120 and Form 2553.

C. Form 1065.

D. Form 8832.

47 / 100

Tags: Assets, Partnership, include

AU. “Hot Assets” in a partnership include:

A. Cash and marketable securities.

B. Land and buildings.

C. Inventory and unrealized receivables.

D. Furniture and fixtures.

48 / 100

Tags: Enrolled, Agent, required, complete

AV. An “Enrolled Agent” (EA) is required to complete how many hours of Continuing Professional Education (CPE) every three years?

A. 40 hours

B. 60 hours

C. 72 hours

D. 120 hours

49 / 100

Tags: Alternative, Minimum, taxable, income

AW. “Alternative Minimum Taxable Income” (AMTI) for a corporation starts with:

A. Gross Receipts.

B. Taxable Income.

C. Adjusted Gross Income.

D. Net Worth.

50 / 100

Tags: maximum, Self, Employment, calculated

AX. For 2026, the maximum “Self-Employment Tax” is calculated on a Social Security wage base of approximately (based on projected inflation):

A. $168,600

B. $174,900

C. $182,100

D. $190,000

51 / 100

Tags: OBBB, starting, corporations, face

AY. Under the OBBB Act of 2025, starting in 2026, C-Corporations face a new “floor” on charitable deductions. A corporation cannot deduct charitable contributions equal to what percentage of its taxable income?

A. 1%

B. 0.5%

C. 2%

D. 5%

52 / 100

Tags: Foreign, Corporation, that, engaged

AZ. A foreign corporation that is engaged in a U.S. trade or business must generally file which form to report its effectively connected income (ECI)?

A. Form 1120

B. Form 1040-NR

C. Form 1120-S

D. Form 1120-F

53 / 100

Tags: Heavy, GVWR, eligible, Section

BA. For 2026, a “Heavy SUV” (GVWR between 6,000 and 14,000 lbs) is eligible for a Section 179 deduction limited to: A. $12,200

A. $20,200

B. $31,300

C. $100,000

54 / 100

Tags: Which, following, true, regarding

BB. Which of the following is true regarding a “Section 734(b)” basis adjustment for a partnership?

A. It is only available if a Section 444 election is in effect.

B. It increases the basis of undistributed partnership property when a partner recognizes a gain on a distribution.

C. It is mandatory for all partnerships with more than 10 partners.

D. It only applies to the sale of a partnership interest.

55 / 100

Tags: elect, treated, Corporation, purposes

BC. To elect to be treated as a corporation for tax purposes, an eligible entity (like an LLC) must file Form 8832. This election generally cannot be changed again for how many months?

A. 12 months

B. 24 months

C. 60 months

D. 120 months

56 / 100

Tags: Corporation, allowed, have, Straight

BD. An S-Corporation is allowed to have “Straight Debt” without it being treated as a second class of stock. Which of the following is a requirement for “Straight Debt”?

A. The interest rate must vary based on corporate profits.

B. The debt must be convertible into stock at the holder's option.

C. The creditor must be an individual, estate, or certain trust/organization eligible to be an S-corp shareholder.

D. The debt must be oral rather than written.

57 / 100

Tags: Partnership, Substantial, Basis, reduction

BE. If a partnership has a “Substantial Basis Reduction” (exceeding $250,000) upon a distribution, a basis adjustment is: A. Optional.

A. Mandatory (even without a Section 754 election).

B. Prohibited.

C. Only required for foreign partnerships.

58 / 100

Tags: OBBB, rules, Corporation, carry

BF. Under the “OBBB Act” rules for 2026, a C-Corporation can carry forward unused charitable deductions for up to how many years?

A. 3 years

B. 5 years

C. 15 years

D. Indefinitely

59 / 100

Tags: Which, form, used, person

BG. Which form is used by a U.S. person to report their “Transfer of Property” to a foreign corporation in an exchange described in Section 351?

A. Form 5471

B. Form 5472

C. Form 8865

D. Form 926

60 / 100

Tags: qualifying, Beneficiary, Qualified, Subchapter

BH. A “Qualifying Beneficiary” of a Qualified Subchapter S Trust (QSST) must be:

A. A single individual (U.S. citizen or resident).

B. A partnership.

C. A corporation.

D. Any number of beneficiaries, as long as they are related.

61 / 100

Tags: Cash, method, business, Debts

BI. For a “Cash Method” business, “Bad Debts” are generally:

A. Deductible when the account is 90 days past due.

B. Deductible using the "Allowance Method."

C. Not deductible because the income was never recognized.

D. Deductible only if the debtor files for bankruptcy.

62 / 100

Tags: Section, election, allows, Partnership

BJ. A “Section 444” election allows a partnership or S-corp to have a tax year other than a required year. This election requires the entity to make:

A. A non-refundable gift to the IRS.

B. "Required Payments" that represent the value of the tax deferral.

C. A permanent change to the accrual method.

D. A public disclosure of all partner names.

63 / 100

Tags: Which, following, constitutes, Ineligible

BK. Which of the following constitutes “Ineligible Income” for the 90% test of a Publicly Traded Partnership (PTP) to avoid being taxed as a corporation?

A. Interest and dividends.

B. Income from mining and natural resources.

C. Rental income from real property.

D. Income from a high-frequency stock trading business.

64 / 100

Tags: Qualified, Subchapter, Subsidiary, QSub

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

A. Taxed as a separate C-Corporation.

B. Taxed as a partnership.

C. Disregarded as an entity separate from its S-corp parent.

D. Only allowed to have 10 shareholders.

65 / 100

Tags: Circular, diligence, accuracy, requires

BM. Under Circular 230, “Due Diligence” as to accuracy requires a practitioner to:

A. Verify every receipt provided by the client with third-party banks.

B. Exercise reasonable care in preparing returns and representations to the IRS.

C. Only use IRS-provided software.

D. Guarantee that the client will not be audited.

66 / 100

Tags: Qualified, Improvement, property, eligible

BN. For 2026, “Qualified Improvement Property” (QIP) is eligible for 100% bonus depreciation because it has a MACRS recovery period of:

A. 5 years

B. 10 years

C. 15 years

D. 20 years

67 / 100

Tags: Corporation, accumulated, reduced

BO. A corporation’s “Accumulated E&P” is reduced by:

A. Federal income taxes paid.

B. Tax-exempt interest income.

C. Stock splits.

D. Realized but unrecognized gains.

68 / 100

Tags: form, entity, Classification, filed

BP. “Form 8832” (Entity Classification) can be filed with a retroactive effective date, but it cannot be more than how many days prior to the filing date?

A. 30 days

B. 45 days

C. 75 days

D. 90 days

69 / 100

Tags: Enrolled, Agent, must, notify

BQ. An “Enrolled Agent” must notify the IRS of a change in their “Contact Information” (address/email) within how many days?

A. 10 days

B. 30 days

C. 60 days

D. 90 days

70 / 100

Tags: Personal, Service, Corporation, subject

BR. A “Personal Service Corporation” (PSC) is subject to the “Passive Activity Loss” rules:

A. In the same manner as individuals.

B. Only if it has more than 100 shareholders.

C. Only for rental activities.

D. Never; PSCs are exempt.

71 / 100

Tags: Partnership, liquidation, occurs

BS. A partnership “Liquidation” occurs when:

A. One partner sells their interest to a third party.

B. A new partner is admitted.

C. The partnership changes its name.

D. The partnership stops all business activity and distributes all assets.

72 / 100

Tags: Section, Interest, limitation, generally

BT. The “Section 163(j)” interest limitation generally limits the deduction for business interest to the sum of business interest income, floor plan financing interest, and what percentage of “Adjusted Taxable Income” (ATI)?

A. 10%

B. 30%

C. 50%

D. 80%

73 / 100

Tags: Which, following, separately, Stated

BU. Which of the following is a “Separately Stated Item” on a Partner’s K-1?

A. Utilities expense.

B. Cost of goods sold.

C. Office rent.

D. Section 179 deduction.

74 / 100

Tags: Grantor, trust, generally

BV. A “Grantor Trust” is generally:

A. A separate taxable entity filing Form 1041.

B. Taxed at the highest corporate rate.

C. Disregarded for tax purposes, with income reported on the grantor's 1040.

D. Only used for charitable purposes.

75 / 100

Tags: Alternative, Depreciation, System, Recovery

BW. “Alternative Depreciation System” (ADS) recovery periods are generally:

A. Longer than GDS (MACRS) periods.

B. Shorter than GDS (MACRS) periods.

C. The same as GDS (MACRS) periods.

D. Only used for inventory.

76 / 100

Tags: Corporation, shareholder, Basis, Corporation

BX. An S-Corporation shareholder’s basis is $50,000. The corporation has $20,000 in Accumulated E&P. It distributes $80,000 cash to the shareholder. How much is the taxable dividend?

A. $20,000

B. $0

C. $30,000

D. $80,000

77 / 100

Tags: Which, following, exempt, Organizations

BY. Which of the following “Tax-Exempt” organizations must file Form 990-N (the “e-Postcard”)?

A. A church.

B. A private foundation.

C. A small tax-exempt organization with gross receipts normally $leq$ $50,000.

D. A political organization.

78 / 100

Tags: OBBB, Executive, compensation, Deduction

BZ. Under the “OBBB Act” of 2025, the “Executive Compensation” deduction limit of $1 million (Section 162(m)) was expanded to include:

A. Any employee earning over $100,000.

B. All employees of a publicly traded corporation.

C. The 10 highest-compensated employees (up from 5).

D. Only the Board of Directors.

79 / 100

Tags: Section, election, terminated, entity

CA. A “Section 444” election is terminated if the entity:

A. Changes its name.

B. Increases its gross receipts.

C. Admits a new partner.

D. Becomes part of a tiered structure (unless all entities have the same year).

80 / 100

Tags: Section, liquidation, Subsidiary, parent

CB. In a “Section 332” liquidation of a subsidiary, the parent corporation recognizes:

A. Gain only to the extent of cash received.

B. No gain or loss.

C. Capital gain on the difference between basis and FMV.

D. Ordinary income.

81 / 100

Tags: Which, following, Direct, cost

CC. Which of the following is a “Direct Cost” that must be capitalized under UNICAP (Section 263A)?

A. On-site storage and warehousing costs.

B. Marketing and advertising.

C. General and administrative (G&A) expenses.

D. Research and experimental costs.

82 / 100

Tags: Partnership, Section, election, effect

CD. A partnership has a “Section 754” election in effect. When a partner sells their interest, the partnership must adjust the basis of its assets under:

A. Section 732

B. Section 734(b)

C. Section 743(b)

D. Section 751

83 / 100

Tags: form, used, report, Payment

CE. “Form 1099-K” is used to report “Payment Card and Third Party Network Transactions” if the total amount of such transactions exceeds:

A. $600 (with no transaction limit)

B. $20,000 and 200 transactions

C. $5,000

D. $1,200

84 / 100

Tags: Qualified, Personal, Service, Corporation

CF. A “Qualified Personal Service Corporation” (QPSC) is defined as a corporation where substantially all activities involve performance of services in specific fields. Which is NOT a QPSC field?

A. Engineering

B. Consulting

C. Veterinary Medicine

D. Manufacturing

85 / 100

Tags: Circular, practitioner, must, sign

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

A. Is not "more likely than not" to be sustained.

B. Lacks a "reasonable basis."

C. Is not supported by a "substantial authority."

D. Does not have a 100% chance of success.

86 / 100

Tags: limited, Liability, Company, members

CH. A “Limited Liability Company” (LLC) with two or more members is classified by default as:

A. A corporation.

B. An S-Corporation.

C. A disregarded entity.

D. A partnership.

87 / 100

Tags: business, Interest, expense, Deduction

CI. For 2026, the “Business Interest Expense” deduction is limited to the sum of business interest income, floor plan interest, and 30% of:

A. Gross Income.

B. Net Operating Loss.

C. Adjusted Taxable Income (ATI).

D. Total Assets.

88 / 100

Tags: Corporation, Adjustments, Account, primarily

CJ. An S-Corporation’s “Other Adjustments Account” (OAA) is primarily used to track:

A. Tax-exempt income and related non-deductible expenses.

B. Taxable interest.

C. Dividends from C-corporations.

D. Short-term capital gains.

89 / 100

Tags: practitioner, Suspended, practice, suspension

CK. If a practitioner is “Suspended” from practice before the IRS, the suspension period:

A. Is always permanent.

B. Ends automatically after 1 year.

C. Is for a fixed period of time specified in the decision.

D. Only applies to the state where the practitioner lives.

90 / 100

Tags: consolidated, Group, corporations, must

CL. A “Consolidated Group” of corporations must file which form to show the consent of each subsidiary to be included?

A. Form 851

B. Form 1122

C. Form 8832

D. Form 2553

91 / 100

Tags: Which, following, income, respect

CM. Which of the following is “Income in Respect of a Decedent” (IRD)?

A. Wages earned by the decedent but paid after death.

B. Life insurance proceeds paid due to death.

C. Inherited real estate.

D. A cash gift received from the decedent before death.

92 / 100

Tags: Section, loss, treated, Ordinary

CN. A “Section 1244” loss is treated as an “Ordinary Loss” for an individual up to:

A. $10,000

B. The entire amount of the loss.

C. $1,000,000

D. $50,000 ($100,000 if MFJ)

93 / 100

Tags: small, business, generally, exempt

CO. For 2026, a “Small Business” is generally exempt from the “Inventory” requirement if they meet the:

A. $30 Million Gross Receipts Test.

B. $5 Million Assets Test.

C. 100-employee limit.

D. PBIT (Profit Before Interest and Tax) test.

94 / 100

Tags: Complex, trust, allowed, Personal

CP. A “Complex Trust” is allowed a “Personal Exemption” of:

A. $100

B. $300

C. $600

D. $4,700

95 / 100

Tags: form, used, Which, following

CQ. “Form 8829” is used by which of the following to report “Expenses for Business Use of Your Home”?

A. C-Corporations

B. Partnerships

C. Sole Proprietors (filed with Schedule C)

D. S-Corporations

96 / 100

Tags: Distributable, income, calculation, trust

CR. A “Distributable Net Income” (DNI) calculation for a trust provides a limit on:

A. The amount of the trust's charitable contribution.

B. The deduction the trust can take for distributions to beneficiaries.

C. The trust's administrative fees.

D. The trustee's commission.

97 / 100

Tags: Enrolled, Agent, been, Inactive

CS. An “Enrolled Agent” (EA) who has been “Inactive” for a full enrollment cycle must:

A. Apply for "Reinstatement" and meet specific CPE requirements.

B. Retake the entire EA exam.

C. Only pay a late fee.

D. Start over as a CPA.

98 / 100

Tags: Section, losses, treated

CT. “Section 1231” losses are treated as:

A. Capital losses.

B. Ordinary losses.

C. Non-deductible.

D. Personal losses.

99 / 100

Tags: Which, following, Corp, items

CU. Which of the following “S-Corp” items is NOT “Separately Stated”?

A. Section 179 deduction.

B. Charitable contributions.

C. Salaries and wages paid to non-shareholders.

D. Tax-exempt interest.

100 / 100

Tags: Circular, Conflict, Interest, exists

CV. Under Circular 230, a “Conflict of Interest” exists if the representation of one client will be:

A. Expensive.

B. Directly adverse to another client.

C. Done by a different partner in the firm.

D. Completed after the deadline.

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