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Free Tax Compliance and Planning (TCP) Exam Questions and Answers
Last updated: May 11, 2025
Examtopics Tax Compliance and Planning (TCP) Prepaway Real Exam Questions and dumps free download
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Tax Compliance and Planning (TCP)
#Question
A business owner is concerned about the tax implications of a merger. What should they ensure regarding their tax strategy?
A.
Ignore property transfer
B.
Negotiate seller terms only
C.
Focus on income after merger
D.
Understand the basis of exchanged assets
Correct Answer:
D
Understanding the basis of exchanged assets is crucial for accurately reporting taxes after a merger.
#Question
A client is considering converting a traditional IRA to a Roth IRA. What tax implication should they be aware of?
A.
Only capital gains taxed
B.
Only taxed at a reduced rate
C.
No tax implications
D.
Income tax on converted amount
Correct Answer:
D
Converting a traditional IRA to a Roth IRA is considered a taxable event on the amount converted.
#Question
A taxpayer files a joint return and has $100,000 in student loan debt. How much of the student loan interest is potentially deductible?
A.
Full amount
B.
$0
C.
$1,000
D.
Up to $2,500
Correct Answer:
D
Taxpayers may deduct up to $2,500 of student loan interest paid in the tax year, subject to income limits.
#Question
A client has $3,000 in gambling winnings. What must they do tax-wise?
A.
Report winnings only
B.
Report winnings and losses
C.
Deduct losses against winnings
D.
No requirement
Correct Answer:
B
Gambling winnings must be reported, and losses can be deducted up to the amount of winnings.
#Question
A taxpayer buys a house for $350,000 and sells it for $400,000 three years later. What is the taxable gain if the home was a primary residence?
A.
$50,000
B.
$350,000
C.
$0
D.
$400,000
Correct Answer:
C
If qualifying for exclusion, $250,000 (single) or $500,000 (married) may be excluded from taxable gain.
#Question
A couple wishes to contribute to a Health Savings Account (HSA). What is the maximum contribution for family coverage in 2023?
A.
$3,000
B.
$6,000
C.
$7,300
D.
$3,650
Correct Answer:
C
The maximum contribution for a family HSA in 2023 is $7,300.
#Question
A taxpayer sells collectibles for a profit of $1,500. What type of tax is this profit subject to?
A.
Capital gains tax
B.
Ordinary income tax
C.
Excise tax
D.
No tax
Correct Answer:
A
Profits from the sale of collectibles are subject to capital gains tax, often at a higher rate for collectibles.
Tax Compliance and Planning (TCP)
#Question
A business owner is concerned about the tax implications of a merger. What should they ensure regarding their tax strategy?
A.
Ignore property transfer
B.
Negotiate seller terms only
C.
Focus on income after merger
D.
Understand the basis of exchanged assets
Correct Answer:
D
Understanding the basis of exchanged assets is crucial for accurately reporting taxes after a merger.
#Question
A client is considering converting a traditional IRA to a Roth IRA. What tax implication should they be aware of?
A.
Only capital gains taxed
B.
Only taxed at a reduced rate
C.
No tax implications
D.
Income tax on converted amount
Correct Answer:
D
Converting a traditional IRA to a Roth IRA is considered a taxable event on the amount converted.
#Question
A taxpayer files a joint return and has $100,000 in student loan debt. How much of the student loan interest is potentially deductible?
A.
Full amount
B.
$0
C.
$1,000
D.
Up to $2,500
Correct Answer:
D
Taxpayers may deduct up to $2,500 of student loan interest paid in the tax year, subject to income limits.
#Question
A client has $3,000 in gambling winnings. What must they do tax-wise?
A.
Report winnings only
B.
Report winnings and losses
C.
Deduct losses against winnings
D.
No requirement
Correct Answer:
B
Gambling winnings must be reported, and losses can be deducted up to the amount of winnings.
#Question
A taxpayer buys a house for $350,000 and sells it for $400,000 three years later. What is the taxable gain if the home was a primary residence?
A.
$50,000
B.
$350,000
C.
$0
D.
$400,000
Correct Answer:
C
If qualifying for exclusion, $250,000 (single) or $500,000 (married) may be excluded from taxable gain.
#Question
A couple wishes to contribute to a Health Savings Account (HSA). What is the maximum contribution for family coverage in 2023?
A.
$3,000
B.
$6,000
C.
$7,300
D.
$3,650
Correct Answer:
C
The maximum contribution for a family HSA in 2023 is $7,300.
#Question
A taxpayer sells collectibles for a profit of $1,500. What type of tax is this profit subject to?
A.
Capital gains tax
B.
Ordinary income tax
C.
Excise tax
D.
No tax
Correct Answer:
A
Profits from the sale of collectibles are subject to capital gains tax, often at a higher rate for collectibles.
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