IRS - Internal Revenue Service Certified Income and Assets Questions and Answers

Question 1

Which of the following is generally considered taxable income by the IRS?

Accepted Answer

A cash prize won in a contest

Answer

A gift from a family member

Answer

Child support payments received

Answer

Life insurance proceeds received due to the death of the insured

Question 2

A taxpayer purchases a rental property for $250,000. They pay $20,000 in closing costs, including legal fees and transfer taxes. What is the taxpayer's cost basis in the property?

Accepted Answer

$270,000

Answer

$250,000

Answer

$230,000

Answer

$20,000

Question 3

A freelance graphic designer receives a check for a completed project on December 30th of the current tax year but does not deposit it until January 2nd of the following year. According to the doctrine of constructive receipt, in which year should the income be reported?

Accepted Answer

The current tax year, when the check was received

Answer

The following year, when the check was deposited

Answer

The income can be split between the two years

Answer

The year the project was initially commissioned

Question 4

Which of the following is NOT a capital asset according to the IRS?

Accepted Answer

Inventory of a business

Answer

A personal residence

Answer

Stocks and bonds held for investment

Answer

A valuable painting owned by a collector

Question 5

A taxpayer sells an investment property and has a capital gain. To be classified as a long-term capital gain, how long must the taxpayer have held the asset before selling it?

Accepted Answer

More than one year

Answer

Exactly one year

Answer

At least six months

Answer

Less than one year

Question 6

A taxpayer receives a state tax refund for a year in which they took the standard deduction on their federal return. How is this state tax refund treated for federal income tax purposes?

Accepted Answer

It is not taxable.

Answer

It is fully taxable as income.

Answer

It is partially taxable based on the taxpayer's income level.

Answer

It is treated as a long-term capital gain.