EA Exam

A taxpayer must pay estimated tax if both of the following apply:

• The taxpayer expects to owe at least $1,000 in tax after subtracting withholding and credits.

• The taxpayer expects the amount owed after withholding and credits to be less than the smaller of:

1. 90% of the tax to be shown on the current year tax return, or

2. 100% of the tax shown on the prior-year tax return.

The 10-year collection statute of limitations from the IRS begins…

From the date the tax is assessed.

To receive a refund for an amended return, you must file 1040X within…

3 years of the date the return was filed or 2 years from the date the tax was paid, whichever is later.

Substantial understatement = 25% or more of gross income, IRS has how long to assess tax?

Six years

True or False: The IRS recognizes registered domestic partnerships and civil unions.

False

Qualified surviving spouse can be claimed in which year?

The two years following death provided you don’t remarry.

The qualifying child must live in the home for how long for HOH status to be used?

More than half of the year

Green card holders file using which form?

They should use Form 1040, not Form 1040-NR.

What is the filing threshold for MFS?

$5 or more of gross income

Who is the only qualifying dependent for HOH that can live outside the home?

A parent

Non-resident aliens not subject to backup withholding have until when to file taxes?

They have until June 15.

A dependent non-relative has to live with the taxpayer for how long to be considered a “member of household?”

7 Years

What is the gross income test amount for qualifying relatives in 2025?

$5200

In the case of divorce, which parent can claim EITC and HOH status if the non-custodial parent is allowed to claim the child?

The custodial parent. The custodial parent claims HOH and EITC (if applicable), while the non-custodial parent claims single and claims the child as a dependent.

If you fail to file a tax return, how long is the statute of limitations?

Forever

What is the allowable threshold for parking in 2025?

$325

What income threshold is for highly compensated employees in 2025?

$155k and/or 5% or more shareholder

Are disability retirement payments always taxable as wages?

No. If you retire at age 62 or later, the benefits are no longer taxable as wages, but rather pension income.

What is the interest exemption for Series I and EE bonds?

If you use them for higher ed expenses in the same year, the interest is tax-exempt. Does not include those MFS.

What filing status is not available to non-resident aliens?

Married filing jointly. Only QSS, single and MFS are available.

How is basis treated when loss property is gifted?

The donee’s basis is used to determine the gain if sold for more than the donor’s basis. If the property is sold at a loss, the FMV at the time of the gift is the basis used to determine the loss. If sold for an amount in between the FMV and the donor’s basis, no gain or loss is recognized.

In a multiple support agreement, how much support must be provided to claim the dependent?

More than 10%

How long do you have to amend a return to claim a loss from a worthless security?

You have up to 7 years.

Sec. 1244 - Losses from small business stock are capital or ordinary losses?

Ordinary and the $3,000 capital loss limit does not apply. Deduction is for up to $50k (single), $100k (joint filing)

1031 Exchange scenario that involves paying tax?

When boot is received - capital gain must be recognized to the extent of boot and FMV of unlike property received.

Cost basis of 1031 exchanged property in which cash is paid?

It’s the cost basis of the property given up increased by any additional funds paid.

If 1031 exchanging properties with a related party, how long must you hold it to take advantage of nonrecognition of gain?

Two years (except for death, involuntary conversion, or proving to the IRS that the exchange and disposition wasn’t done to avoid taxes.

If running a qualified joint venture with a spouse, should there be one or two Schedule C’s?

There should be two, so that both spouses show record of paying SE taxes, which include social security.

How are clergy members taxed?

Must pay income and SE taxes on salary as well as income received for services such as weddings and funerals. Housing allowance is exempt from income taxes but subject to SE taxes. Housing allowance is also excluded from gross income.

Calculate a reduced Section 121 exclusion.

Take the number of days lived in home and divide by 730. Then, multiply by the applicable exclusion amount (either $250k or $500k)

In the event of an involuntary conversion, how long do you have to acquire replacement property?

Two years from the end of the tax year in which any part of the gain is realized. Four years if it’s in a federally declared disaster area.

For mixed-use properties, what is the percentage of income that is residential rentals that classifies the building fully as a residential rental?

80% and if that’s the case, the building and improvements are depreciated over 27.5 years.

What constitutes active participation in a rental property?

10% ownership and making management decisions in a bonafide way.

To get the $12,500 rental loss allowance while MFS, what is required?

You must live apart from your spouse for the entire year and MAGI must be $50k or less.

What tests must one meet to be considered a real estate professional?

Materially participate for at least 750 hours, provide more than ½ of their total personal services in real estate activities,