Liberty Tax School Practice Test

These questions are part of the practice quiz. Start practicing

• What is an aspect of determining a person's dependency status as a qualifying relative?
• Which condition is related to the nature of work performed by an independent contractor?
• What is the definition of an injured spouse in the context of tax refunds?
• What is termed for any part of the net capital gain from selling section 1250 real property due to depreciation?
• Which of the following describes a "call" option?
• What are payments made to a partner that are determined without regard to the partnership income called?
• In order to pass the member of the household test, a dependent must what?
• How are stock dividends treated for tax purposes?
• Which of the following is not considered alimony?
• What term describes certain charges that a borrower pays to obtain a home mortgage?
• What defines a household employee?
• What does business use refer to?
• What is the purpose of personal property taxes?
• How is the total depreciation for a year calculated?
• What does the at-risk rule limit?
• Which filing status is considered for a widow or widower with dependent children?
• What is typically the purpose of a fellowship?
• What does permanent withdrawal from use in a trade or business refer to?
• What kind of income comes from an employer's disability insurance and replaces wages missed due to disability?
• What is stripped preferred stock characterized by?
• How is a capitalized amount treated for tax purposes?
• Which filing status is associated with a qualifying widow(er) with a dependent child?
• What is a partner whose personal liability for partnership debts is limited to their contributions called?
• What method estimates depreciation based on the number of units produced before property is worn out?
• Which program assists college students in financing their education?
• Which of the following is not included in portfolio income?
• What do you call income that is exempt from federal income tax?
• Which of the following represents income that is not part of the taxpayer's gross income?
• What is the term for the difference between the stated redemption price and the issue price of a debt instrument?
• What term is used to describe the basis of an item of property for figuring gain on a sale without considering earlier depreciation?
• What is the name of the credit that can be given to low-income workers?
• Which of the following describes the Section 179 deduction?
• What occurs when a tax credit exceeds the amount of tax owed?
• Which form is used to calculate self-employment tax?
• What financial situation does insolvency describe?
• What is the term for property acquired during marriage in a community property state?
• Which age requirement is part of the dependency tests for a qualifying child?
• What is the yearly deduction called that allows recovery of investment in minerals or standing timber?
• What does Section 1245 property refer to?
• What type of health plan must be in place to be eligible for contributions to a Health Savings Account (HSA)?
• Which term describes obligations with fixed maturity dates of up to one year from their issue date?
• What kind of education typically comes after high school?
• What characteristic defines an independent contractor under common law rules when distributing specified goods?
• What types of payments are included under compensation?
• What is considered property used in a business context?
• What is an alien called who has both nonresident and resident status during the same tax year?
• What must be true for a married person filing a joint return to be claimed as a dependent?
• Which of the following is NOT considered listed property?
• Which type of IRA does not offer deductible contributions as adjustments to income?
• What are business assets?
• What occurs when a credit exceeds the tax owed?
• What is a capital gain?
• What does the term "transportation expenses" specifically refer to for service members?
• What is classified as a casualty loss?
• Which of the following is NOT a type of withholding tax?
• Which type of plan allows employees to make contributions from their paycheck before or after tax?
• What defines a regulated futures contract?
• What type of income is classified as excludable income?
• What is the term for an agreement between an employer and an employee for future compensation?
• What is significant about the contributions made to a Roth IRA after age 70½?
• When might unpaid tax liability be forgiven?
• What defines a straddle in the context of personal property?
• What type of loan is payable at a rate below the applicable federal rate?
• What is the purpose of the Alternative Minimum Tax?
• Which plan requires an employer to make contributions that match employee contributions?
• What term describes the part of an estate left after all other provisions of a will are satisfied?
• What is a deduction that lowers your taxable income called?
• What are Section 197 intangibles associated with?
• What is a scholarship primarily used for in educational institutions?
• Which condition indicates that a taxpayer could be considered an injured spouse?
• Who may receive income upon exercising a stock option?
• What qualifies as a full-time student under tax definitions?
• What characterizes a general partnership?
• Withholding tax is deposited for which of the following entities?
• What does a bond premium represent?
• What does FICA require from employers in relation to employee salaries?
• What term describes a sale of stock or securities at a loss within 30 days before or after acquiring substantially identical stock or securities?
• What is the primary investment focus of an Employee Stock Ownership Plan (ESOP)?
• What term refers to the period during which an asset is held for tax purposes?
• How is a life interest in property defined?
• What signifies a full-time student according to the tax code?
• Who is typically not considered a general partner?
• Who is recognized as a market maker or specialist in listed options?
• What area is defined as having U.S. Armed Forces engaged in combat for tax benefits?
• What is a term loan?
• What determination is made regarding a taxpayer's insolvency?
• Under what circumstance is canceled debt usually reportable as income?
• Which of the following best describes nonpassive income?
• Which of the following best defines an equity option?
• Which of the following would qualify as a qualified hazard duty area?
• Which of the following activities is excluded when determining if someone is a real estate professional?
• What defines an S Corporation?
• What is the definition of high withholding tax interest?
• What refers to the tax on purchases for which no state sales tax has been charged?
• Which of the following is NOT covered under a Coverdell education savings account?
• What does a conversion transaction include?
• What constitutes theft loss?
• Which of the following describes tax-exempt interest?
• Which type of income is typically not taxable and is not included in gross income calculations?
• Who is defined as the individual named to receive the benefit of the funds in an account/plan?
• Which criteria must be met for income to be exempt from federal income tax withholding?
• What is the role of the amortization process?
• What is the requirement for a child to be considered a qualifying child for dependency purposes?
• What is required of property used in business?
• What is the use of the foreign tax credit?
• Which depreciation method deducts the same amount each year throughout the recovery period?
• In tax terminology, what is meant by the term 'exempt'?
• What form determines college students' eligibility for financial aid?
• Which factor could prevent a person from being claimed as a dependent?
• Who can be considered a step-relative in tax terms?
• What is a separate legal entity that holds property or assets for the benefit of a specific person or group?
• What does the cash method of accounting report?
• What type of interest is paid or accrued on money borrowed for investment properties?
• What is the filing status for married taxpayers who file a joint return?
• What does a third-party designee help a taxpayer with?
• To meet the physical presence test, how many full days must a taxpayer be present in a foreign country?
• What is the method of paying tax on income not subject to withholding called?
• What is a capital gain distribution?
• Which filing status applies to someone who is unmarried on the last day of the year?
• What may not impact the status of a household employee?
• If you sell your home and hold a note, what type of income must you report separately?
• What is the term for income earned from employment such as wages or commissions?
• What is the term for an amount that can be claimed for dependents in tax calculations?
• What is basis in terms of property?
• Which type of option is described as being traded on a qualified board or exchange?
• What term describes the situation when passive activity losses exceed passive activity income?
• Which term describes a student enrolled for at least half of the full-time academic workload?
• Which of the following can be classified as a direct ancestor under tax definitions?
• Which of the following is a requirement to be eligible for having contributions made to your HSA?
• What is the definition of a publicly traded partnership (PTP)?
• Which type of worker is considered a statutory employee?
• What type of income is defined as income other than pay for work performed?
• Which type of income includes wages and salaries?
• What does ordinary and necessary business expenses include?
• What is required for a taxpayer to claim a dependent?
• What type of income includes interest, dividends, and capital gains?
• What is referred to as the decedent estate?
• What is one characteristic of a full-time traveling salesperson?
• How is an individual classified as a U.S. resident alien?
• Which of the following is not one of the five filing statuses?
• Which of the following is NOT a criterion for determining material participation?
• What type of tax credit could indicate a taxpayer is an injured spouse?
• Which of the following is used by employers to determine how much income tax to withhold from employee wages?
• What is the term for the amount of depreciation that must be reported as ordinary income when property is sold at a gain?
• What is the effect of prior year unallowed losses on current year passive activity losses?
• What is a property class under MACRS primarily used for?
• What is considered a capital asset?
• What type of tax is a sales tax?
• What allows eligible taxpayers to avoid paying federal income tax on foreign earned income?
• What type of option includes debt options, commodity futures, and currency options?
• What type of income is received from certain financial accounts or lending money to others?
• In calculating net investment income, which factor is included?
• Which type of account allows for educational savings for both postsecondary and K-12 education?
• What type of sale allows you to receive at least one payment after the tax year of the sale?
• What is the main consequence for an employee if too little withholding tax is taken from their paycheck?
• In tax terms, what describes the practice of marking to market?
• What is generally the time period covered by a tax return?
• What is considered the period of stay for foreign earned income exclusion eligibility?
• What type of military income is referred to as active pay?
• Who is defined as a general partner in a partnership?
• The half of self-employment tax that can be deducted is used to calculate:
• Which characteristic does a High Deductible Health Plan (HDHP) typically have?
• Which of the following is NOT included in the definition of assets in business?
• What benefit applies to U.S. military personnel who die while serving in a combat zone?
• What is the salvage value of property?
• What type of taxes are levied on assets such as real estate, boats, and automobiles?
• What defines blocked income for taxpayers?
• Which depreciation method allows for an accelerated manner of depreciation?
• Over how many years is the basis of a property typically recovered?
• What is a key characteristic of fair market value?
• Which type of tax is typically classified as a deductible real estate tax?
• What is the purpose of the Supplemental Security Income program?
• What defines a temporary work location for service members?
• Which type of bond is characterized by being part of a government bond issue?
• What is the requirement for student loan interest to be tax deductible?
• What is the American Opportunity Credit applicable to?
• Who qualifies as a self-employed individual?
• What must an adopted child have legally to qualify as a tax dependent?
• What typically must happen when a debt is canceled?
• What is defined as a payment to a spouse under a divorce or separation agreement?
• Which of the following qualifies as an allowable deduction in determining MAGI?
• What implication does a straddle transaction have?
• Which term refers to an intangible property that represents added business value?
• What does commuting refer to in terms of tax?
• What is the term for daily expenses or reimbursements for employees?
• Which of the following is an example of a passive activity?
• Which of the following can be amortized?
• What is a degree candidate?
• What kinds of expenses can be claimed as itemized deductions?
• For a child to be considered a permanently and totally disabled child, what conditions must be met according to the definition?
• Which accounting method reports income when earned and expenses when incurred?
• What term is used for the deductions made from an employee's earnings for tax purposes?
• Which of the following accurately describes the role of employers regarding withholding tax?
• What condition must be met for a dividend on stock to be considered payable?
• What does active participation in a rental property involve?
• What defines adjusted gross income (AGI)?
• Which expense could be categorized as a rental expense?
• What does a SIMPLE plan primarily provide for small employers?
• What type of deduction allows taxpayers to recover the cost of property used in a trade or business?
• What does the standard mileage rate relate to in tax deductions?
• What is the name of the tax-exempt account established to pay or reimburse certain medical expenses?
• Which of the following is NOT considered a dependent care benefit?
• Which criterion must be met for an activity to be classified as non-passive?
• What does circumstantial evidence help to indicate?
• In which scenario does the married filing jointly status apply?
• What describes the relationship among two or more persons who collaborate in business?
• What is expected of partners in a business partnership?
• Which of the following is considered unearned income?
• What type of tax is primarily for individuals who work for themselves?
• What does 'investment use' usually represent in terms of property?
• Who qualifies as a commodities trader?
• What is a characteristic of a limited liability partnership (LLP)?
• What benefit is typically offered by an HDHP regarding preventive care?
• What term describes property that has value but cannot be seen or touched?
• What happens to the value of property with going concern value?
• What type of income is subject to federal income tax?
• In what scenario is rental real estate not considered a passive activity?
• What is the term for the difference between the stated redemption price and the basis for a bond?
• What is a pension defined as?
• What type of property is defined as most real property other than residential rental property?
• What is classified as a qualified 5-year gain?
• What does tax-exempt mean?
• When is bonus depreciation taken for eligible property?
• What is a Section 1256 contract?
• Which of the following is NOT a requirement for a child to meet the kiddie tax rules?
• What term is used for deductions that are subtracted from gross income to determine adjusted gross income?
• Which consequence may result from failing to provide the buyer of your home with your SSN?
• In which situation is military pay excluded from taxable income?
• Which of the following would be considered part of a child's support?
• In a transaction, who assumes liabilities in 'amount realized'?
• What must a doctor determine regarding the condition of a permanently and totally disabled child?
• In which year did MACRS become mandatory for property placed in service?
• What does an Individual Retirement Arrangement (IRA) primarily provide for?
• What is the maximum percentage an employer can contribute as a match in a 401(k) plan?
• Which deduction is relevant when calculating unadjusted basis?
• What is a futures contract primarily associated with?
• What is a fungible commodity?
• What term describes the original cost of property adjusted by certain additions and deductions?
• What term describes land and anything attached to it, such as a building?
• To qualify as significant participation, how many hours must be participated in an activity?
• Which method determines the business portion of automobile expenses, including fuel and maintenance?
• What is the timing of income recognition for nonstatutory stock options?
• What is the requirement for a taxpayer to qualify for a higher standard deduction if they are blind?
• What types of taxes are commonly withheld from employee paychecks?
• The term "withholding allowance" primarily affects which aspect of an employee's finances?
• How is the amount of withholding tax determined for an employee?
• What is the purpose of a Flexible Spending Arrangement (FSA)?
• What is the most common form of military move?
• What are travel expenses for service members?
• What is the role of a third-party designee in tax matters?
• What is an essential characteristic of MACRS?
• Which of the following describes a relative in terms of tax relations?
• To qualify as a real estate professional, what is one condition that must be met?
• If someone has earned income and claims an earned income credit, how is this related to being classified as an injured spouse?
• What are the conditions for an employee reimbursement plan to be considered accountable?
• Which of the following would NOT qualify as self-employment income?
• What is included when considering qualified education expenses for higher education?
• What constitutes a lump-sum distribution from retirement plans?
• What penalty may apply if you do not pay sufficient tax throughout the year?
• What are contributions to a Traditional IRA called when they cannot be deducted from adjusted gross income?
• Which type of asset can be considered part of a decedent estate?
• What term describes someone who acts on behalf of another in a fiduciary capacity?
• What is a requirement for a child to qualify as a dependent under the relationship test?
• Which of the following statements about term loans is correct?
• What is medical severance pay classified as?
• Under what condition can passive activity losses be used to offset income?
• Which of the following is true regarding a seller-financed mortgage?
• Where would statutory employee income and expenses be reported?
• What does "placed in service" refer to in taxation?
• What determines the exchange rate when converting foreign currency to U.S. dollars?
• What is an adopted child classified as under tax purposes?
• A short sale involves the sale of property that you:
• What is the purpose of itemized deductions when calculating taxable income?
• What is the term for a person, other than the taxpayer or the taxpayer's spouse, for whom an exemption can be claimed?
• What characterizes a demand loan?
• What does going concern value represent?
• What is the term for an addition to property that increases its value or adapts it for a different use?
• What is typically associated with self-employed individuals for retirement plans?
• What is the main characteristic of an independent contractor?
• What does an exchange refer to in financial terms?
• What type of property is referred to as tangible property?
• What is the temporary taxpayer identification number for a child in a domestic adoption called?
• How are business expenses defined?
• What is an Individual Taxpayer Identification Number (ITIN) used for?
• What type of income includes gains from the sale or trade of property not related to a trade or business?
• What defines a net operating loss (NOL)?
• What is an example of tax-exempt interest?
• What term describes the income from sources not directly related to employment?
• Which type of income does not include pensions and annuities?
• What are itemized deductions allowed on Schedule A for?
• Which of the following describes an employee’s survivor benefit?
• What type of contract is made on a commodity exchange for future transactions?
• When is a gain or loss considered short-term for tax purposes?
• What is taxable income derived from passive activities called?
• What does a rollover refer to in tax terms?
• What is defined as a contract to deliver a fixed amount of property for a fixed price?
• What is the potential benefit for an employee when taxes are withheld from their paycheck?
• Which of the following terms refers to the overall financial impact of a bond?
• What is a transfer in the context of tax-favored plans?
• What significant factor affects the investment account value in a defined contribution plan?
• What is NOT a component of Tier 1 railroad retirement benefits?
• What expenses are included under the American opportunity credit for education?
• What is a key characteristic of guaranteed payments in a partnership?
• What is the most common method for computing self-employment tax?
• What is a direct reduction of the taxpayer’s liability referred to as?
• What term is used for compensation for the use or forbearance of money?
• What type of retirement plan allows an employer to contribute to employees' IRAs without typical reporting requirements?
• Which statement is true regarding a limited liability company (LLC)?
• What term describes the total amounts received from all sources for the year before subtracting costs or expenses?
• What type of taxes are excluded from deductibility for real estate taxes?
• What defines rental-related property management costs?
• What constitutes community income?
• What type of loans does bonus depreciation supplement?
• What forms the basis for determining whether a participant in a trade or business is actively engaged?
• What is the filing status for married individuals who report income and deductions on separate returns?
• What are tips assigned by an employer to an employee called?
• What type of option allows the holder to sell property at a specified price before a future date?
• Which includes amounts contributed to a plan that are excludable from gross income?
• What is a real estate mortgage investment conduit (REMIC) designed to do?
• What is the term for a distribution of money made by a corporation to its shareholders?
• What does hospitalization that qualifies for combat zone benefits typically refer to?
• What defines a defined contribution plan?
• What is the definition of post-secondary education?
• What does the term premium refer to in bond investments?
• Which test states that you cannot claim dependents if you or your spouse can be claimed as a dependent by another taxpayer?
• What type of benefits include amounts employers pay to a taxpayer or directly to the care provider?
• What are railroad retirement benefits compared to in terms of social security?
• Under the regular method for computing self-employment tax, the net income is derived from which schedules?
• For someone to be considered your qualifying relative, which must be true?
• What type of losses does the passive activity rule relate to?
• Which of the following is NOT considered Section 1245 property?
• What does investment income include?
• What category does tangible property fall into?
• What distinguishes a nonrefundable credit from a refundable credit?
• What qualifies someone as a qualified performing artist (QPA)?
• What defines a gift loan?
• Which type of property is specifically identified as not being real property?
• What does the term structural components refer to?
• What is the primary purpose of the Modified Accelerated Cost Recovery System (MACRS)?
• What is an annuity?
• What does Social Security benefits include?
• When must a child meet the age test to be claimed as a qualifying child?
• How is taxable income calculated?
• What does the term 'support' refer to in the context of determining a child's needs?
• What is considered rental income?
• What government agency administers Social Security benefits?
• Which requirement must a qualifying relative meet regarding gross income?
• What characterizes a regulated futures contract?
• When contributions to a Traditional IRA are partially deductible, what term is used to describe those contributions that cannot be deducted?
• Which of the following statements is true regarding FSAs?
• What is included in gross income for tax reporting?
• What does TANF stand for in the context of welfare benefits?
• What does the term 'amount realized' include?
• What is required for a person to be claimed as a dependent on a tax return?
• What relationship of partners in an LLP primarily protects against liability?
• What defines like-kind property for tax purposes?
• What constitutes material participation in an activity for tax purposes?
• Which of the following can reduce adjusted gross income?
• Which of the following properties can have real estate taxes deducted?
• What can Earned Income Credit be guaranteed to?
• Which of the following illustrates a situation of passive activity participation?
• Which of the following best describes a term interest?
• What does the amortization of a bond premium generally offset?
• What is the term for the conversion of property that is destroyed, stolen, or condemned?
• What distinguishes a private activity bond from other bonds?
• Who must receive a certified statement from an eye doctor to qualify for the higher blindness deduction?
• What term is used for the document sent to discharged service members regarding severance pay subject to medical disability?
• What is the term for payments made to a taxpayer who retires due to a disability before the minimum retirement age?
• For what reason might an employee claim fewer allowances on their W-4?
• What form is used to file an amended tax return?
• Which of the following is NOT included in community income?
• What types of contributions are part of a SIMPLE plan?
• Which term refers to taxes on both earned and unearned income?
• Which statement best describes the nature of alimony?
• Which act mandates the withholding of a percentage of an employee's salary for social security?
• What is a key feature of the SIMPLE retirement plan?
• Which of the following statements is true regarding wage earners and Social Security taxes?
• Which of the following is NOT included in investment income?
• What form do employees use to claim the number of allowances for income tax withholding?
• What type of bond has a market discount when the value decreases after its issue date?
• What describes stock received for services that is subject to forfeiture?
• What are transportation expenses for service members?
• What happens under the cash method when income is received?
• Which method for calculating depreciation uses the property's placed-in-service date?
• What is a Roth IRA?
• What is the term for the distribution of a participant's entire balance from qualified retirement plans within a tax year?
• A nominee is defined as which of the following?
• What are qualified education expenses reduced by certain tax-free benefits called?
• What rule treats each Section 1256 contract as if it were sold for fair market value at year-end?
• What type of credit does the child and dependent care credit provide?
• How is self-employment income characterized?
• What happens to the funds in a Health Savings Account if they are not used in a given year?
• Which tax is collected by retailers on taxable retail sales?
• Who is known as the grantor in a property transfer?
• What is the tax rate on unearned income exceeding $1,900 for affected children?
• What refers to amounts contributed to a retirement plan by the employer at the employee's election?
• What is the requirement for a child to be considered your dependent?
• Which aspect affects the amount of depreciation allowed to a taxpayer?
• What is commonly referred to as a tax levied on the value of real property you own?
• What is the criteria for a child under 24 to be subjected to kiddie tax rules?
• What does documentary evidence serve as?
• Which of the following best defines a casualty loss?
• What is the primary purpose of TANF?
• What happens to income tax credits or deductions when modified adjusted gross income (MAGI) exceeds specific limits?
• What should an employee do if they want to change their withholding allowances?
• What is the capital gains tax rate on the sale of collectibles or qualified small business stock held for more than 5 years?
• What is an essential aspect of being classified as an employee?
• Which type of rental property generates at least 80% of its annual gross rental income from dwelling units?
• Which of the following best defines 'involuntary exchanges'?
• What is the term for a defined period of study at an educational institution?
• How is fair market value (FMV) defined?
• Why is knowing gross income important for tax purposes?
• What must a certified statement include if a person is partly blind?
• What type of fees are generally paid by a buyer to research the title of real property?
• Which of the following is an example of a capital asset?
• What does inventory refer to in tax terminology?
• What is constructive receipt of income?
• Which method is used for calculating business automobile expenses by multiplying business miles by a set rate?
• Which bonds are exceptions when classifying market discount bonds?
• Which of the following is NOT a characteristic of a futures contract?
• What is an exemption in tax terms?
• Which of the following is a requirement to be a candidate for a degree?
• What is the bona fide residence test used for?
• Which filing status applies to unmarried taxpayers who pay more than half of the costs for a qualified person?
• What is the purpose of withholding tax from employee paychecks?
• What is a defined benefit plan?
• What is required for taxpayers with blocked income to report?
• What is the filing status for individuals who are married or live together in a common law marriage?
• Which term describes the number of years that establishes the property class and recovery period under the General Depreciation System?
• Which income sources are classified as nonpassive income?
• What defines the active conduct of a trade or business for tax purposes?
• What is necessary for the Earned Income Credit (EIC) to be received by taxpayers?
• What does general limitation income refer to?
• What does beginning inventory consist of?
• Who is eligible for cash assistance under the Supplemental Security Income program?
• In what context is the Section 179 deduction primarily used?
• What tax is imposed on purchases made outside the state for use within the state?
• What term is used for property such as passenger automobiles and computers used for personal entertainment?
• What describes a taxpayer's tax liability?
• What does the term 'tax home' refer to?
• Which system must be used for depreciating property placed in service after 1986?
• What is the part of the sales price treated as interest in an installment contract with little or no stated interest?
• Which filing status might typically result in the lowest tax amount?
• Which type of property falls under Section 1250?
• What is defined as a taxpayer's legal, permanent residence?
• What determines the classification of an LLC for federal tax purposes?
• What does 'recapture' refer to in tax terms?
• What type of dividends are eligible for lower tax rates that apply to a net capital gain?
• What does foregone interest refer to?
• Which of the following is included in the calculation of modified adjusted gross income (MAGI)?
• Which tax rule applies to children under age 18 with unearned income over $1,900?
• What happens if a child files a joint return for the year?
• What must all reimbursements in an accountable plan be?
• What happens if the standard deduction is chosen in terms of itemized deductions?
• What is the systematic allocation of the cost of a tangible asset over its useful life called?
• What type of benefits can goodwill include?
• For tax purposes, what is the significant feature of a limited liability company (LLC)?
• Which of the following scenarios qualifies as material participation?
• What is the purpose of Form 1099-C?