Specialized Business Returns
Part 2 · 86 study cards · Active recall format
Q1.Alder wants to postpone gain on excess livestock sold because of weather conditions. Which requirement must be met?
Exam wording
The sale must occur solely because the weather affected livestock water, grazing, or other requirements
Q2.How is qualifying farm property expected to last more than one year generally recovered?
Exam wording
Its entire cost generally is not deducted in the acquisition year; it is recovered over time
Q3.What gross-rent test places a rental building or structure in the cited residential-rental class?
Exam wording
At least 80% of gross rental income is from dwelling units
Q4.How is rent treated when a dwelling used as a home is rented for fewer than 15 days during the year?
Exam wording
The rent generally is not included in income
Q5.When is advance rent generally included in rental income?
Exam wording
In the year received, regardless of the period covered or accounting method
Q6.How must expenses be handled for property used for both rental and personal purposes?
Exam wording
Allocate the expenses between rental and personal use
Q7.William is a qualified farmer that files on Schedule F. All of his income is from farming activities. He expects to owe $5,900 in estimated taxes for the year. William wants to file an extension and file his return as late as possible, on October 15. By which date must he make his required annual payment, in order to avoid an estimated tax penalty?
Exam wording
January 15
Q8.Tripp is a self-employed sheep farmer who files on Schedule F. On September 12, 2025, his farm was damaged and many of his livestock were killed by a hurricane. His farm was located in a Federally Declared Disaster Area. Tripp applied for disaster assistance and filed for insurance reimbursement to replace his livestock and repair his farm. He receives an insurance reimbursement on December 15, 2025, but he doesn’t purchase replacement livestock right away. What is the replacement period for the sale or exchange of livestock in an area eligible for federal disaster assistance?
Exam wording
Four years after the close of the first tax year in which the taxpayer realizes any part of his gain from the sale or exchange of livestock
Q9.Gary owns a 50-acre parcel of farmland that he rents for $3,200 a month to another farmer. What form should Gary use to report his rental income if he rents his farmland for a flat cash amount without providing services to the tenant?
Exam wording
Schedule E
Q10.Opie is a farmer who grows asparagus. All his income is from farming and he files Schedule F. Opie did not make any estimated tax payments throughout the year. What is the latest date that Opie can file his 2025 tax return and pay all the tax owed, and still avoid a penalty?
Exam wording
March 2, 2026
Q11.Ronald owns a timber farm which he operates himself. What form must he use to report the activity from his timber farming business?
Exam wording
Schedule F
Q12.Bobby owns a dairy farm. His business is organized as a single-member LLC. He has not filed an election to be treated as a corporation. What form should he use to report his business' earnings?
Exam wording
Schedule F
Q13.In some instances, qualified farmers can elect to postpone reporting gain from a forced sale of livestock due to weather-related conditions. Which of the following is required in order for a farmer to postpone gain due to weather conditions?
Exam wording
The sale must occur solely because the weather-related condition affected the water, grazing, or other requirements of the livestock.
Q14.Lorn is a farmer who grows alfalfa. His farm has $45,000 in profits for the year, and he will file Schedule F. Lorn did not make any estimated tax payments during the year. Lorn cannot file his tax return by March 1st, because his accountant is too busy to file Lorn's return by that date. He estimates that he will be able to file his return around April 10th. What is the latest date that Lorn can pay his 2025 estimated tax, and still avoid an estimated tax penalty?
Exam wording
January 15, 2026
Q15.Alder, an eligible exempt organization, has $150,000 of annual gross receipts and $400,000 of year-end assets. Which return may generally be available?
Exam wording
Form 990-EZ
Q16.The Alaskan Bird Rescue is a 501(c)(3) organization that is dedicated to saving wild birds. The organization was newly formed this year. What form must the organization file in order to request formal exemption from the IRS?
Exam wording
Form 1023
Q17.How must an exempt organization calculate unrelated business taxable income if it has more than one unrelated business activity?
Exam wording
Separately calculate unrelated business taxable income for each unrelated business activity
Q18.Which of the following tax-exempt organizations are eligible to file Form 990-EZ?
Exam wording
An organization with gross receipts of less than $200,000 a year and total assets at the end of the year of less than $500,000.
Q19.The Smith Family Foundation is a 501(c)3 private foundation founded by Bill and Betty Smith. The Smith Family Foundation is dedicated to the support and promotion of educational purposes for low-income families and impoverished children. The foundation had $90,000 in gross receipts for the year, and $100,000 in assets. Which annual tax form is the Smith Family Foundation required to file?
Exam wording
Form 990-PF
Q20.The Georgia Literary Association is an organization that fosters literacy programs for children and their parents. Which form should the organization use to apply for formal tax exemption under IRC section 501(c)(3)?
Exam wording
Form 1023
Q21.Which of the following acts may cause an exempt organization to lose its 501(c)(3) tax-exempt status?
Exam wording
Participating in a political campaign on behalf of a candidate running for public office.
Q22.Which of the following exempt entities is permitted to file a Form 990-N, e-postcard?
Exam wording
A public charity with gross receipts that are less than $50,000.
Q23.When are earnings on Alder Company retirement-plan contributions generally taxed?
Exam wording
Tax is generally deferred until distributions are received
Q24.Alder begins a new qualified defined-benefit plan. What federal tax benefit may be available?
Exam wording
A tax credit for beginning the plan
Q25.What is a general tax feature of Alder Company’s SEP, SIMPLE, or qualified plan?
Exam wording
It offers a tax-favored way to save for retirement
Q26.Alder, a sole proprietor, contributes to a qualifying small-business retirement plan for employees. Where is the contribution generally deducted?
Exam wording
Line 19 of Schedule C
Q27.What shared federal tax feature do SEP, SIMPLE, and qualified small-business plans offer?
Exam wording
A tax-favored way for the owner and employees to save for retirement
Q28.What can result when retirement funds are used in a prohibited transaction?
Exam wording
Excise taxes and other adverse tax consequences
Q29.For whom may an eligible small-business owner set up and maintain the retirement plans described in Publication 334?
Exam wording
For the owner and the owner’s employees
Q30.What core nondiscrimination requirement applies to contributions or benefits under a qualified retirement plan?
Exam wording
They must not discriminate in favor of highly compensated employees
Q31.When does the Alder Estate generally cease to exist?
Exam wording
After final distribution to heirs and beneficiaries
Q32.Before preparing Form 1041, how does a fiduciary determine an estate’s or trust’s accounting income?
Exam wording
Under the governing instrument and applicable local law
Q33.Which fact is a hallmark of an abusive trust arrangement?
Exam wording
Promised tax benefits without meaningful change in control or benefit
Q34.How are capital gains allocated to corpus and paid or permanently set aside for charitable purposes treated in the referenced Form 1041 computation line?
Exam wording
Do not include them on that line
Q35.When is Form 1041 generally due for a fiscal-year estate or trust?
Exam wording
The 15th day of the fourth month after the tax year closes
Q36.Which of the following entities may be required to file Form 706?
Exam wording
An estate.
Q37.A personal representative for a decedent's estate is also a:
Exam wording
Fiduciary.
Q38.When does a decedent's estate cease to exist?
Exam wording
Until the final distribution of the estate's assets is made to the heirs and other beneficiaries.
Q39.What annual tax return must be filed by a bankruptcy estate?
Exam wording
Form 1041
Q40.The Granger Irrevocable Trust is a simple trust whose governing instrument requires that all income be distributed during the year. What is the exemption amount for this type of trust in 2025?
Exam wording
300
Q41.The Saluki Trust is a U.S. trust. The trust has a governing instrument that requires all income to be distributed in the current year. It is not a qualified disability trust. What is the Saluki Trust’s exemption amount in 2025?
Exam wording
300
Q42.Which of the following is not considered a separate legal entity under federal tax law?
Exam wording
A grantor trust.
Q43.Warren died on October 18, 2025, leaving an estate valued at $33 million. His executor elects a calendar year for the estate. When is Form 1041 (the income tax return for the estate) due?
Exam wording
April 15, 2026
Q44.Which of the following business activities would not be considered a farming business?
Exam wording
A dog breeder.
Q45.With regards to farmers, what is Schedule J used for?
Exam wording
Schedule J allows a farmer to use income-averaging.
Q46.All of the following should be included in farming inventory except:
Exam wording
Farming machinery.
Q47.Enoch owns 150 acres of farmland that he rents to other farmers. His income from the rental is a crop-share and based on the productivity of the tenant-farmer. He does not actively participate in any of the farming activities. How should the income from this activity be reported?
Exam wording
As rental income on Form 4835.
Q48.All of the following would be considered section 1245 property except:
Exam wording
A barn that houses cows and horses and also serves for the storage of supplies.
Q49.Rowan owns a dairy farming business and has income from the following sources: Income from milk production: $50,000 Sale of old dairy cows no longer producing milk: $20,000 Sale of grain that was grown on the farm: $15,000 Sale of used farm machinery: $4,000 What amount of income should be reported on Rowan's Schedule F, Profit or Loss from Farming?
Exam wording
$65,000
Q50.The typical carryback period for farming losses in tax year 2025 is:
Exam wording
Two years.
Q51.Holly grows organic heirloom tomatoes and also raises pedigreed goats on her 200-acre farm. She also rents a portion of her farmland to a sharecropper. Holly is an accrual-basis farmer who has the following income in the current year: Rental of farmland in which she did not materially participate: $30,000 Sale of harvested tomatoes: $145,000 Gain from sale of goats held primarily for breeding: $85,000 Crop insurance payments: $115,000 What amount of farming income must Holly report on Schedule F?
Exam wording
$260,000
Q52.What is the "Crop Method" of accounting?
Exam wording
The crop method of accounting allows farmers to delay expense recognition for crops that they sell in the year after they are sown.
Q53.What of the following conditions will force a farming business to use the accrual method?
Exam wording
A farming corporation that is also a tax shelter.
Q54.All of the following are acceptable methods for valuation of farm inventory except:
Exam wording
Harvest discount method.
Q55.Which of the following statements about churches is correct?
Exam wording
A church is not required to file an annual information return.
Q56.Which kind of organization is allowed to file a Form 990-N, e-postcard?
Exam wording
A nonprofit with gross receipts of $50,000 or less.
Q57.An organization's tax-exempt status will be revoked if it fails to file required information returns for ____ years in a row.
Exam wording
Three.
Q58.Every tax-exempt entity must have ____, regardless of whether it has employees.
Exam wording
An employer identification number.
Q59.Child Rescue Inc. is a calendar-year nonprofit organization that helps prevent child abuse. It is required to file Form 990. What is the due date of its tax return, not including extensions?
Exam wording
May 15.
Q60.Which of the following organizations does not qualify for tax-exempt status?
Exam wording
An educational partnership.
Q61.The Immaculate Heart Church of Sacramento has two employees: Guadalupe, who works as a secretary in the church rectory, and Mauricio, who is the church custodian. Which return(s) must the church file in order to fulfill its IRS reporting obligations?
Exam wording
Form 941.
Q62.Damian is 62 and works for Bethel's Realty, a small business with 12 employees. Bethel's Realty has a SIMPLE IRA plan for its employees. The business has chosen to make \(2\%\) nonelective contributions. Damian earned $20,000 in wages for the year, but he did not contribute to his own retirement plan during the year because he was low on funds. How much will Bethel's Realty contribute to Damian's retirement account?
Exam wording
$400
Q63.Corex Devices, Inc. maintains a SIMPLE IRA for its employees. The business elected to make 3% matching contributions for the year. An employee, Opal, quit her job on January 31, 2025, after the business had already deducted $75 from her wages based upon her election to contribute to its SIMPLE IRA plan. Opal had earned $2,000 of wages before she quit. How must Corex Devices treat this $75 deduction from Opal's wages?
Exam wording
Corex Devices must deposit Opal's contribution and match her contribution to her SIMPLE IRA account, up to 3% of her $2,000 compensation ($60).
Q64.Generally, at what age can an employee withdraw from their 401(k) without incurring an early withdrawal penalty?
Exam wording
59½
Q65.Lifeline Software, Inc. has decided to establish a SEP-IRA for its ten employees. All of the following statements about Lifeline's retirement plan are correct except:
Exam wording
A SEP allows for different contribution rates based on length of service for each employee.
Q66."Prohibited transactions" are transactions between a retirement plan and a disqualified person. Which of the following is exempt from the prohibited transaction rules?
Exam wording
A disqualified person who receives a benefit to which they are entitled as a plan participant.
Q67.Maura, age 26, began participating in her employer's SIMPLE IRA retirement account 18 months ago, when she got hired. She took an early distribution from the account on January 26, 2025, in order to buy a car. She does not qualify for any of the exceptions to the early withdrawal penalty. The distribution amount was $10,000. What is the penalty amount that Maura must pay on the early distribution?
Exam wording
$2,500
Q68.Can a SIMPLE IRA plan be maintained on a fiscal-year basis?
Exam wording
No, a calendar year must be used.
Q69.The Dumas Partnership has fifteen employees and three general partners. The business contributes $3,000 to each employee's retirement account during the year. Identical contributions are made into each individual partner's retirement account. How is this transaction reported?
Exam wording
Deduct employee retirement contributions on Form 1065 Report partner retirement contributions to each partner on Schedule K-1
Q70.Hajima is a sole proprietor who establishes a SEP-IRA for her small gift shop. The shop has two employees. After figuring her deductions for the year, Hajima has a (\$5,000) net loss operating in 2025 on her Schedule C. Which of the following statements is correct?
Exam wording
Because the business shows a loss, she is prohibited from contributing to her retirement account, but she can contribute to the retirement accounts of her employees.
Q71.All the following are requirements of ERISA (Employee Retirement Income Security Act) except:
Exam wording
ERISA requires large employers to set up retirement plans for their employees.
Q72.What types of employers cannot establish a SEP-IRA?
Exam wording
All of the above can set up a SEP-IRA.
Q73.What happens if an eligible employee entitled to a contribution is unwilling to set up a SIMPLE IRA?
Exam wording
Eligible employees may not opt-out of a SIMPLE IRA.
Q74.Which of the following statements regarding a SEP-IRA is correct?
Exam wording
Money can be withdrawn from a SEP-IRA by the employee at any time, but taxes may apply.
Q75.What are the initial penalties imposed on a disqualified person who takes part in a prohibited transaction with an IRA?
Exam wording
An initial tax of 15% of the amount involved, and an additional tax of 100% if the transaction is not corrected within the taxable period.
Q76.Malena works full-time for the city of Las Vegas as a parking enforcement officer. She participates in the city's pension plan. She also has her own part-time bookkeeping business which she works in the evenings and weekends. She reports her bookkeeping income on Schedule C. Can Malena set up a SEP-IRA for her self-employment income, even though she is already participating in her employer's plan?
Exam wording
Yes, Malena can still set up a SEP-IRA for her Schedule C business.
Q77.Portland Plumbing, Inc. is a C corporation that offers a qualified retirement plan to its 200 employees. The plan is required to file a Form 5500 annually. Portland Plumbing has a calendar-year plan. When is the company's Form 5500 due for the 2025 plan year?
Exam wording
July 31, 2026
Q78.Elektra works for Damascus Manufacturing, a small business with 75 employees. Damascus Manufacturing decides to establish a SIMPLE IRA plan and will make a \(2\%\) nonelective contribution for each of its employees. Elektra has a salary of $40,000 and made only $100 in contributions to her SIMPLE IRA for the year because she was short on funds. How much will Elektra's employer contribute to her SIMPLE IRA retirement account?
Exam wording
$800
Q79.All of the following are characteristics of a simple trust except:
Exam wording
The trust may distribute assets to charity.
Q80.What is included in the gross estate?
Exam wording
The gross estate includes everything the taxpayer owns at the date of death.
Q81.When should Form 56 be filed?
Exam wording
As soon as the estate's EIN is received.
Q82.The Beaumont Estate is required to distribute all its income currently. The estate has distributable net income (DNI) of $20,000 on its 2025 return. The only distribution the executor made during the year was $5,000 in cash, paid to the decedent's son, Carlton Beaumont. According to the terms of the will, Carlton is entitled to 50% of the estate's DNI, and his sister, Jasmine Beaumont, is entitled to the other 50% of the estate's distributable net income. Which of the following statements is correct?
Exam wording
Carlton must pay tax on $10,000.
Q83.Which type of trusts are not subject to the Net Investment Income Tax?
Exam wording
Tax-exempt trusts
Q84.What is the purpose of Form 1310?
Exam wording
To claim a refund on behalf of a deceased taxpayer.
Q85.Alvin Lewis died three years ago. Alvin's eldest daughter, Connie, and her three younger brothers are all beneficiaries of their late father's estate. In 2025, the Estate of Alvin Lewis has distributable net income of $12,000, consisting of $6,000 of rents, $4,000 of dividends, and $2,000 of taxable interest. The estate's executor, a family lawyer, distributes the income under the provisions of Alvin Lewis' final will, which includes a stipulation that allocates all the dividend income to Connie. How is the distribution to Connie characterized for tax purposes?
Exam wording
$0 rents; $4,000 dividends; $0 taxable interest.
Q86.On September 10, 2025, Marcelle dies. At the time of his death, his combined assets are worth $29 million, so an estate tax return is required to be filed. When is the due date for the Form 706?
Exam wording
June 10, 2026
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