CTA Individual Income Tax 2 — Questions and Answers
Question 1: Which of the following is NOT included in gross income under IRC Section 61?
- Rental income
- Gambling winnings
- Child support received (Correct answer)
- Royalties
Correct answer: Child support received
Child support payments are not included in the recipient's gross income under federal tax law.
Question 2: What is the maximum contribution limit to a traditional IRA for taxpayers under age 50 in 2024?
- $5,500
- $6,000
- $7,000 (Correct answer)
- $7,500
Correct answer: $7,000
The IRA contribution limit for 2024 is $7,000 for taxpayers under age 50.
Question 3: Which tax form reports interest income received from a bank or financial institution?
- Form 1099-DIV
- Form 1099-INT (Correct answer)
- Form 1099-MISC
- Form 1099-B
Correct answer: Form 1099-INT
Form 1099-INT reports interest income paid by financial institutions.
Question 4: What is the holding period required for a capital gain to be classified as long-term?
- More than 6 months
- More than 9 months
- More than 1 year (Correct answer)
- More than 2 years
Correct answer: More than 1 year
An asset must be held for more than one year to qualify for long-term capital gains treatment.
Question 5: Which of the following education benefits is excluded from an employee's gross income?
- Employer-paid graduate tuition above $5,250
- Employer-provided educational assistance up to $5,250 (Correct answer)
- Personal education expenses paid by employer
- 529 plan earnings used for K-12 expenses
Correct answer: Employer-provided educational assistance up to $5,250
Under IRC Section 127, employer-provided educational assistance up to $5,250 per year is excluded from the employee's gross income.
Question 6: The alternative minimum tax (AMT) was designed primarily to ensure that:
- All taxpayers pay at least a minimum amount of tax
- High-income taxpayers cannot use too many deductions to eliminate their tax liability (Correct answer)
- Self-employed taxpayers pay Social Security taxes
- Corporations pay the same rate as individuals
Correct answer: High-income taxpayers cannot use too many deductions to eliminate their tax liability
The AMT was enacted to prevent high-income taxpayers from using deductions and credits to avoid paying federal income tax.
CTA Individual Income Tax 2
Which of the following is NOT included in gross income under IRC Section 61?