Free IRS Enrolled Agent SEE Part 1 (Individuals) Income and Assets Practice Questions
Income and Assets on the IRS SEE Part 1 covers wages and other compensation, interest and dividend income, retirement distributions, Schedule C self-employment, capital gains and losses, basis tracking, the §121 home-sale exclusion, and rules for reporting foreign-source income.
Sample Questions
Question 1
Easy
Which of the following is reported as a write-in adjustment to income on the 2025 Schedule 1, line 24?
Solution
Jury duty pay turned over to an employer (when the employer continued to pay the employee's regular salary during jury service) is reported as gross income but offset by a write-in adjustment on Schedule 1, line 24a, with the notation 'Jury Pay'. See Pub 525 and the Schedule 1 instructions for line 24.
Question 2
Medium
For 2025, which statement about the OBBBA no-tax-on-tips deduction is correct?
Solution
The tips deduction phases out once modified AGI exceeds $150,000 single / $300,000 MFJ. It is NOT an itemized deduction (it is claimed on Schedule 1-A whether or not the taxpayer itemizes), a married taxpayer must file jointly to claim it, and it is capped at $25,000 (a self-employed taxpayer is further limited to net income from the tipped trade, not unlimited).
Question 3
Hard
For federal income tax purposes, which factor most strongly supports classifying a taxpayer's securities activity as that of a "trader in securities" rather than as an "investor" for the 2025 tax year?
Solution
Trader status is a facts-and-circumstances determination developed through case law (e.g., Endicott v. Commissioner, 2013) and summarized by the IRS in the Topic 429 guidance and Pub 550, ch. 4 (Special Rules for Traders in Securities). The taxpayer's trading must be (a) substantial, regular, frequent, and continuous, and (b) directed at profiting from short-term market movements rather than from dividends, interest, or long-term capital appreciation. Trader status permits ordinary-loss treatment if a §475(f) mark-to-market election is made, and trading-related expenses become deductible above-the-line on Schedule C.