IRS Enrolled Agent Exam (SEE) — All Questions

A taxpayer's filing status for the year is generally determined as of:

• a.The first day of the tax year
• b.The date of the taxpayer's last marital change
• c.The last day of the tax year✓
• d.The date the return is filed

Filing status is determined by the taxpayer's marital and household situation on the last day of the tax year, December 31 for calendar-year taxpayers (§7703(a)(1)). A taxpayer whose spouse died during the year is treated as married for that year. The first day of the year, the filing date and the date of the last marital change are not the test.

Which requirement must be met to file as head of household?

• a.Unmarried or married, as long as the taxpayer pays over half the cost of the home
• b.Considered unmarried, paying over half the cost of a home for a qualifying person✓
• c.Unmarried, with a dependent of any kind, whether or not the dependent lives in the home
• d.Unmarried, paying over half the support of a qualifying person living anywhere

Head of household requires the taxpayer to be unmarried or considered unmarried on the last day of the year and to have paid more than half the cost of keeping up a home that was the main home of a qualifying person for more than half the year (a dependent parent may live elsewhere) (§2(b)). Paying support is not the test; the cost of keeping up the home is. A married taxpayer qualifies only if considered unmarried.

Which of the following is generally EXCLUDED from a taxpayer's gross income?

• a.A $5,000 prize won in a radio contest
• b.$5,000 of interest on a savings account
• c.$5,000 of state unemployment compensation
• d.A $5,000 cash gift from a parent✓

Property received by gift is excluded from the recipient's gross income (§102(a)); any gift tax falls on the donor. Prizes and awards (§74), interest (§61(a)(4)) and unemployment compensation (§85) are all includible.

A credit differs from a deduction in that a credit:

• a.Reduces the tax owed dollar for dollar✓
• b.Reduces taxable income at the marginal rate
• c.Reduces gross income to figure AGI
• d.Is refundable if it exceeds the tax owed

A credit reduces tax liability directly, dollar for dollar. A deduction reduces income (above the line to reach AGI, or below it to reach taxable income), so it saves tax only at the marginal rate. Only some credits are refundable.

Property sold for a gain after being held for more than one year generally receives:

• a.Short-term capital gain taxed at ordinary rates
• b.Long-term capital gain treatment at preferential rates✓
• c.Ordinary income unless held over 5 years
• d.Long-term treatment only if held more than 18 months

A capital asset held more than 1 year produces long-term capital gain, taxed at 0%, 15% or 20% (§1222(3), §1(h)). Holding it 1 year or less produces short-term gain taxed at ordinary rates. The 18-month and 5-year periods are not current holding-period rules.

Maya sells land for $50,000 and pays a $3,000 selling commission. She bought it for $20,000 and later paid $5,000 for grading. What is her gain?

• a.$25,000
• b.$27,000
• c.$30,000
• d.$22,000✓

Gain equals amount realized minus adjusted basis (§1001(a)). Amount realized: $50,000 − $3,000 selling expenses = $47,000. Adjusted basis: $20,000 cost + $5,000 improvement = $25,000. Gain: $22,000. $25,000 ignores the commission, $30,000 uses cost alone, and $27,000 ignores the improvement but deducts the commission.

Adjustments to income (above-the-line deductions) are important because they:

• a.Are available only to taxpayers who itemize deductions
• b.Reduce the tax owed directly, like a nonrefundable credit
• c.Reduce AGI to arrive at taxable income, like itemized deductions
• d.Reduce gross income to arrive at adjusted gross income✓

Adjustments to income on Schedule 1, such as the deductible half of SE tax, HSA contributions and student loan interest, reduce gross income to arrive at AGI (§62). They are available whether or not the taxpayer itemizes, and because AGI drives many phase-outs they can be worth more than an itemized deduction of the same amount.

A married couple wants the lowest combined tax and full access to credits. Which filing status is generally most advantageous and combines both spouses' income on one return?

• a.Qualifying surviving spouse
• b.Married filing separately
• c.Married filing jointly✓
• d.Head of household

Married filing jointly combines both spouses' income and deductions on one return (§6013) and generally gives the lowest combined tax and full access to credits such as the EITC and education credits, which are denied or limited for separate filers. A married couple living together cannot use head of household, and qualifying surviving spouse applies only after a spouse's death.

Leo's wife died in March 2025. He has not remarried and has no children. What is his best available filing status for 2025?

• a.Single
• b.Married filing jointly✓
• c.Qualifying surviving spouse
• d.Head of household

For the year of death the surviving spouse is still considered married and may file a joint return with the decedent if he does not remarry before year end (§6013(a)(2), (d)(1)). Qualifying surviving spouse status applies only to the 2 years after the year of death and requires a dependent child. Leo has no qualifying person for head of household.

To file as a qualifying surviving spouse in a year after the spouse's death, the taxpayer must, among other requirements:

• a.Have not remarried and have a dependent child who lives anywhere
• b.Have a dependent child living with them and pay over half the cost of the home✓
• c.Have a dependent of any kind and pay over half of that person's total support for the year
• d.Have been married for at least 2 years before the spouse's death

Qualifying surviving spouse status is available for the 2 years after the year of the spouse's death if the taxpayer has not remarried, could have filed jointly in the year of death, has a dependent son, daughter or stepchild who lived in the home all year, and paid more than half the cost of keeping up that home (§2(a)). A dependent other than a child does not qualify, and there is no minimum length of marriage.

A married taxpayer lived apart from their spouse for the last six months of the year and paid more than half the cost of a home that was the main home of their dependent child. This taxpayer may be treated as:

• a.Qualifying surviving spouse, since the child lived with him
• b.Head of household, as a spouse considered unmarried✓
• c.Single, since the spouses lived apart at year end
• d.Married filing separately only, since he is still married

A married taxpayer who files separately, pays more than half the cost of keeping up a home that was the main home of his dependent child for more than half the year, and whose spouse did not live in the home during the last 6 months of the year is considered unmarried and may file as head of household (§7703(b)). Living apart does not make him single, and qualifying surviving spouse requires a deceased spouse.

Which is a common disadvantage of the married filing separately (MFS) status?

• a.Each spouse is jointly liable for the tax shown on the other's return
• b.Each spouse must take the standard deduction, even if one itemizes
• c.The earned income credit and education credits are limited or denied✓
• d.The spouses must report their combined income on each separate return

Married filing separately generally denies or limits the education credits, the child and dependent care credit and (unless the separated-spouse rule is met) the earned income credit. If one spouse itemizes, the other must also itemize, the reverse of one distractor. Each separate return reports only that spouse's income, and joint and several liability applies to joint returns, not separate ones.

Sam, a U.S. citizen, is married at year end to a nonresident alien. They make no §6013(g) election, and Sam has no children or other dependents. Which filing status must Sam use?

• a.Head of household, as considered unmarried
• b.Married filing jointly
• c.Single
• d.Married filing separately✓

A joint return is not allowed if either spouse is a nonresident alien at any time during the year unless both elect under §6013(g) or (h) to treat the nonresident spouse as a U.S. resident (§6013(a)(1)); without the election Sam is still married and files married filing separately. Single is unavailable because he is married on December 31. A nonresident-alien spouse is disregarded for head of household purposes (§2(b)(2)(B)), but Sam still needs a qualifying person living with him, and he has none.

A couple obtains a final divorce decree on December 30. Their federal filing status for that entire tax year is determined as:

• a.Married for the months before the decree and single afterward
• b.Married for the whole year, since they were married most of it
• c.Unmarried: single, or head of household if qualified✓
• d.Married filing separately, since the decree was issued so late

Marital status is determined on the last day of the tax year. A taxpayer divorced under a final decree by December 31 is treated as unmarried for the entire year and files single or, if qualified, head of household (§7703(a)). There is no proration by months.

For head of household, the qualifying person generally must have lived with the taxpayer for more than half the year, EXCEPT that a dependent parent:

• a.Need not live with the taxpayer, but only if the parent has no gross income of any kind
• b.Must live with the taxpayer for more than half the year like any other qualifying person
• c.Qualifies only if the taxpayer pays more than half the cost of the taxpayer's own home
• d.Need not live with the taxpayer, who must pay over half the cost of the parent's home✓

A dependent parent is an exception to the live-with rule for head of household: the taxpayer qualifies by paying more than half the cost of keeping up a home, including a nursing home or assisted-living facility, that was the parent's main home for the whole year (§2(b)(1)(B)). The parent must still be the taxpayer's dependent, which allows some gross income below the qualifying-relative limit.

Which is one of the tests a person must meet to be the taxpayer's qualifying child?

• a.The taxpayer provided more than half of the child's total support
• b.The child is the taxpayer's own son or daughter
• c.The child did not provide more than half of his or her own support✓
• d.The child's gross income was below the qualifying-relative limit

A qualifying child must meet relationship, age, residency, joint-return and support tests; the support test asks only whether the child provided more than half of his or her own support (§152(c)(1)(D)). The gross income test and the taxpayer-provided-over-half support test belong to qualifying relatives. Siblings, half-siblings, step-siblings and their descendants also meet the relationship test.

Under the age test for a qualifying child, the child generally must be:

• a.Under 19, or under 24 if a full-time student, whatever the taxpayer's age
• b.Under 17, or under 24 if a full-time student, and younger than the taxpayer
• c.Under 19, or under 24 if a full-time student, and younger than the taxpayer✓
• d.Under 21, or under 24 if a full-time student, and younger than the taxpayer

The qualifying-child age test is met if the child is under 19 at year end, or under 24 if a full-time student for some part of 5 months, and younger than the taxpayer (or the spouse, if filing jointly) (§152(c)(3)). A permanently and totally disabled child meets it at any age. Under 17 is the child tax credit age limit, not the dependency test.

Rita supports her widowed mother, who does not live with her. Her mother's 2025 gross income is $4,800 of taxable interest plus $14,000 of Social Security benefits, none of which is taxable. Does the mother meet the qualifying-relative gross income test?

• a.Yes; her $4,800 of gross income is under $5,200✓
• b.Yes; relatives who are parents have no income test
• c.No; her total receipts of $18,800 exceed $5,200
• d.No; her gross income must be under $4,700

A qualifying relative's gross income must be less than the exemption amount used for this test, $5,200 for 2025 (§152(d)(1)(B); Rev. Proc. 2024-40 §3.24 and Pub 501). Gross income counts only income that is taxable, so nontaxable Social Security benefits are excluded: $4,800 is under the limit. $4,700 is the 2023 figure, and parents are subject to the test like any other qualifying relative.

The support test for a qualifying relative requires that:

• a.The taxpayer provided more than half of the person's total support✓
• b.The person provided less than half of his or her own support
• c.The taxpayer provided at least 10% of the person's total support
• d.The taxpayer paid over half the household's costs

For a qualifying relative the taxpayer must provide more than half of the person's total support for the year (§152(d)(1)(C)), unless a multiple support agreement or the divorced-parent rule applies. The child-provided-less-than-half test belongs to qualifying children, the household-cost test to head of household, and the 10% threshold to multiple support agreements.

Three siblings pay their mother's support: Ann 40%, Ben 35% and Cal 25%. No one else contributes. Which arrangement lets Ann claim her mother as a dependent?

• a.Ann claims her because she paid the most, and no signed statements are needed
• b.Ben and Cal each sign a statement not to claim her, and Ann files Form 2120✓
• c.Only Ben and Cal together may claim her, since they paid over half
• d.Ann claims her only if Ben and Cal each paid less than 10%

Under a multiple support agreement (§152(d)(3)), when no one pays over half but a group of eligible contributors together pays more than half, any member who paid more than 10% may claim the dependent if every other member who paid more than 10% signs a statement agreeing not to. The claimant files Form 2120 and keeps the statements. Paying the most is not enough on its own, and Ben and Cal each paid more than 10%, so their statements are required.

When a child is the qualifying child of both divorced parents, the tie-breaker rules generally award the dependency to:

• a.The parent who files first, since the IRS accepts the first claim
• b.The parent with the higher AGI, whatever the custody arrangement
• c.The parent who provided more than half of the child's support
• d.The parent with whom the child lived for more nights✓

When a child is the qualifying child of two parents who do not file jointly, the tie-breaker gives the child to the parent with whom the child lived the longer period, measured in nights; only if the nights are equal does the parent with the higher AGI win (§152(c)(4)(B)). Support is not the tie-breaker for qualifying children, and filing first gives no legal priority.

A custodial parent wishes to let the noncustodial parent claim the child as a dependent. The proper way to do this is:

• a.The noncustodial parent attaches a copy of the custody order to the return
• b.The custodial parent signs Form 8332 for the other parent to attach✓
• c.The custodial parent signs a Form 2120 statement not to claim the child
• d.The divorce decree states the right, and the noncustodial parent claims it

The custodial parent releases the claim by signing Form 8332 (or a substantially similar written declaration), which the noncustodial parent attaches to his or her return (§152(e)(2)). For decrees executed after 2008, the noncustodial parent cannot attach pages of a divorce decree or custody order instead. Form 2120 is for multiple support agreements.

A person filing a joint return with their spouse generally cannot be claimed as a dependent by another taxpayer. An exception exists when:

• a.The couple's combined gross income is below the qualifying-relative income limit
• b.The dependent is a full-time student under 24 and the couple lives with the taxpayer
• c.The joint return is only a refund claim and neither spouse would owe tax separately✓
• d.The dependent's spouse is also claimed as a dependent by the same taxpayer

A married person who files a joint return generally cannot be claimed as a dependent (§152(b)(2)). The exception applies when the couple files jointly only to claim a refund of withheld or estimated tax and neither spouse would have a tax liability on separate returns. Student status, low combined income or claiming both spouses does not override the joint return test.

The citizen or resident test for a dependent generally requires that the dependent be:

• a.A U.S. citizen or resident, or a resident of a treaty country
• b.A U.S. citizen, national or resident, or a resident of Canada or Mexico✓
• c.A U.S. citizen or national only, regardless of where the person lives
• d.A U.S. citizen or resident, or a resident of Canada or the Philippines

A dependent must be a U.S. citizen, U.S. national or U.S. resident alien, or a resident of Canada or Mexico, for some part of the year (§152(b)(3)(A)). An adopted child who lives with a U.S.-citizen taxpayer all year also qualifies. Residents of treaty countries in general, and of the Philippines, are not covered.

A taxpayer who can be claimed as a dependent on someone else's return:

• a.May claim his or her own children as dependents
• b.Cannot claim any dependents of his or her own✓
• c.May claim dependents if filing head of household
• d.May claim dependents if his or her income exceeds $5,200

Under the dependent taxpayer test, a person who can be claimed as a dependent by another taxpayer may not claim anyone as a dependent (§152(b)(1)), even if he or she has a qualifying child or files head of household. The qualifying-relative income limit is irrelevant to this rule.

A non-relative (such as a family friend) can be claimed as a qualifying relative only if the person:

• a.Is a U.S. citizen with no gross income for the year
• b.Lived with the taxpayer as a household member for the entire year✓
• c.Lived with the taxpayer as a household member for over half the year
• d.Is under age 19, or under 24 if a full-time student

A person not related to the taxpayer in one of the listed ways can be a qualifying relative only by living with the taxpayer as a member of the household for the entire year, and the relationship must not violate local law (§152(d)(2)(H)). The gross income and support tests also apply. The more-than-half-year test is the qualifying-child residency test, and the age test belongs to qualifying children.

A restaurant server receives $32,000 of cash and credit-card tips in 2025, all reported to her employer. Her MAGI is $60,000. How do the tips affect her 2025 federal return?

• a.All is income; up to $25,000 is deductible as tips✓
• b.All $32,000 is income, and no deduction is available for tips
• c.Only tips over $25,000 are income; the first $25,000 is excluded
• d.The $32,000 is excluded from income as a gift from customers

Tips are compensation and fully includible in gross income, and employees must report them to the employer (§61, §6053). For 2025-2028, OBBBA §224 allows a deduction for qualified tips up to $25,000, phased out above $150,000 of MAGI ($300,000 MFJ); the deduction is available whether or not she itemizes but does not exclude the tips from wages, so FICA still applies. Tips are not gifts.

Interest earned on bonds issued by a state or local government (municipal bonds) is generally:

• a.Taxable, like corporate bond interest
• b.Excluded from federal gross income✓
• c.Excluded only if the bond is held to maturity
• d.Taxable, but at capital gain rates

Interest on most state and local government bonds is excluded from federal gross income (§103(a)). It must still be reported as tax-exempt interest, counts in figuring how much Social Security is taxable, and private activity bond interest may be an AMT preference. Holding to maturity is not a condition.

For a dividend to be taxed at the lower qualified-dividend rates, the taxpayer generally must:

• a.Hold the stock for more than 60 days of the 121-day period around the ex-dividend date✓
• b.Receive the dividend from a domestic corporation only
• c.Own at least 10% of the paying corporation's outstanding shares
• d.Hold the stock for more than 1 year before the date the dividend is declared by the board

A dividend is qualified, and taxed at the 0%/15%/20% capital gain rates, only if the common stock was held more than 60 days during the 121-day period beginning 60 days before the ex-dividend date (§1(h)(11)(B)(iii)). Dividends from qualified foreign corporations can also qualify, and there is no ownership-percentage or 1-year requirement.

Capital gain distributions reported by a mutual fund on Form 1099-DIV are taxed to the shareholder as:

• a.Qualified dividends, taxed only if reinvested in new shares
• b.Ordinary dividends, since they are paid by a mutual fund
• c.Short-term capital gain if the shares were held 1 year or less
• d.Long-term capital gain, even if the shares were held 1 year or less✓

Capital gain distributions reported in box 2a of Form 1099-DIV are long-term capital gains to the shareholder regardless of how long the shareholder has owned the fund shares (§852(b)(3)(B)). Reinvestment does not change their treatment; reinvested distributions are income and add to basis.

A taxpayer buys stock for $5,000 and pays a $50 brokerage commission. The taxpayer's cost basis in the stock is:

• a.$4,950
• b.$5,000
• c.$5,100
• d.$5,050✓

Cost basis includes the purchase price plus acquisition costs such as brokerage commissions (§1012; Reg. 1.263(a)-2(e)): $5,000 + $50 = $5,050. Subtracting the commission ($4,950) treats it as a selling expense, and $5,100 double-counts it.

A beneficiary inherits stock that the decedent bought for $10,000; its fair market value on the date of death was $40,000. The beneficiary's basis is generally:

• a.$10,000, the decedent's cost carried over
• b.$40,000, its value at the date of death✓
• c.$40,000 less any estate tax paid on the stock
• d.$25,000, the average of cost and value

Property acquired from a decedent generally takes a basis equal to its fair market value at the date of death, or on the alternate valuation date if the executor elects it (§1014(a)): $40,000. Carryover basis applies to gifts, not inheritances, and estate tax paid does not reduce basis.

Property acquired from a decedent and later sold is treated as held:

• a.Long-term, regardless of how long the heir held it✓
• b.Short-term if sold within 6 months of the death
• c.Long-term only if the heir held it more than 1 year
• d.Measured from the decedent's original purchase date

Property acquired from a decedent whose basis is determined under §1014 is treated as held more than 1 year if sold by the heir, however briefly the heir held it (§1223(9)). The decedent's purchase date is irrelevant, and there is no 6-month rule.

A donor gives stock with a basis of $2,000 and a fair market value of $9,000 at the time of the gift. If the recipient later sells it for a gain, the recipient's basis for computing gain is generally:

• a.$9,000 plus any gift tax paid
• b.$2,000, the donor's basis✓
• c.$9,000, the value at the gift date
• d.$5,500, the average

For gifted property sold at a gain, the recipient uses the donor's adjusted basis, $2,000 (§1015(a)). The lower fair market value at the date of the gift is used only for figuring a loss when that value is below the donor's basis. Gift tax paid adds to basis only for the portion attributable to the appreciation, and none is indicated here.

When property received as a gift is sold, the recipient's holding period generally:

• a.Starts on the date of the gift, whatever basis the recipient ends up using
• b.Includes the donor's holding period when the donor's basis carries over✓
• c.Starts on the date of the gift, unless the donor held it 5 years
• d.Includes the donor's holding period only if gift tax was paid

When the recipient's basis is determined by reference to the donor's basis, the donor's holding period is tacked on (§1223(2)), so a recipient can have a long-term gain on a quick sale. The holding period starts at the gift date only when the lower FMV basis is used to figure a loss. Gift tax payment does not affect tacking.

On December 1, 2025, Nora sells 100 shares of X stock at a $4,000 loss. On December 20 she buys 100 shares of X for $12,000. What is the result?

• a.The loss is deductible, since she rebought after 15 days
• b.The loss is deductible up to $3,000, with the rest carried over
• c.The loss is disallowed and adds to her new shares' basis✓
• d.The loss is disallowed and permanently lost

A wash sale occurs when substantially identical stock is bought within 30 days before or after a loss sale (§1091). The $4,000 loss is disallowed and added to the basis of the replacement shares ($12,000 + $4,000 = $16,000), and their holding period includes that of the shares sold. The loss is deferred, not lost.

Chen has a $6,000 short-term gain, a $2,000 short-term loss, a $3,000 long-term gain and a $9,000 long-term loss in 2025. What is his net result?

• a.$2,000 net capital gain
• b.$6,000 net long-term loss
• c.$4,000 net short-term gain
• d.$2,000 net capital loss✓

Net within each class first: short-term $6,000 − $2,000 = $4,000 gain; long-term $3,000 − $9,000 = $6,000 loss (§1222). Then combine: $4,000 − $6,000 = $2,000 net capital loss, which is a net long-term loss deductible against ordinary income (up to $3,000). Stopping at either class leaves out the other.

A state income tax refund received in the current year is included in federal gross income:

• a.Never, since state tax refunds are a return of capital
• b.Only if the refund exceeds the prior year's standard deduction
• c.In full, whether or not the taxpayer itemized in the prior year
• d.Only to the extent the prior-year deduction reduced federal tax✓

Under the tax benefit rule (§111), a recovered amount is income only to the extent the earlier deduction reduced tax. A taxpayer who took the standard deduction received no benefit from deducting state taxes, so the refund is excluded. Where the SALT cap limited the prior deduction, only the benefited portion is taxable.

For divorce or separation agreements executed after 2018, alimony payments are:

• a.Neither deductible by the payer nor taxable to the recipient✓
• b.Deductible by the payer and includible in the recipient's income
• c.Deductible by the payer but not taxable to the recipient
• d.Taxable to the recipient but not deductible by the payer

For divorce or separation instruments executed after 2018 (or modified after 2018 to adopt the new rule), alimony is not deductible by the payer and not included in the recipient's income (TCJA §11051, repealing §71 and §215). Instruments executed before 2019 keep the old deductible-and-taxable treatment.

Unemployment compensation received under a state program is:

• a.Includible in gross income in full✓
• b.Excluded, as a state welfare benefit
• c.Excluded if the taxpayer's AGI is low
• d.Includible only above the first $2,400

Unemployment compensation is fully includible in gross income (§85) and reported on Form 1099-G. The $10,200 exclusion applied only to 2020, and there is no low-income or $2,400 exclusion for 2025. Recipients may request voluntary withholding on Form W-4V.