Free IRS Enrolled Agent SEE Part 1 (Individuals) Taxation Practice Questions
Other Taxes and Special Computations on the IRS SEE Part 1 covers AMT for individuals, NIIT under §1411, the additional Medicare tax, kiddie tax under §1(g), self-employment tax, household employment taxes, and the §72(t) early-distribution penalty.
Sample Questions
Question 1
Easy
Which statement best describes income in respect of a decedent (IRD) under IRC §691?
Solution
IRC §691(a) defines IRD as items of gross income to which the decedent had a right at death that are not properly includable in income for the period ending with the decedent's death under the decedent's method of accounting. Common examples include accrued but uncollected wages, accrued bond interest, unpaid commissions, and traditional IRA balances. IRD retains its character (e.g., capital gain remains capital gain).
Question 2
Medium
Which of the following items is excluded from net investment income for purposes of the 3.8% net investment income tax under IRC §1411?
Solution
Under IRC §1411(c)(1)(A) and (c)(2), net investment income includes income from a trade or business only if that business is (a) passive to the taxpayer within the meaning of IRC §469 or (b) trading in financial instruments or commodities. Income from a non-passive (materially participated) trade or business that is not a trading business is therefore excluded from NII.
Question 3
Hard
A taxpayer's 2024 total tax was $18,000 and her 2024 AGI was $172,000. Her 2025 total tax is projected at $24,000. To avoid an underpayment penalty under the safe harbor rules, what minimum amount must her 2025 estimated payments and withholding equal in total?
Solution
Under IRC §6654(d)(1)(B) and (C), a taxpayer avoids the underpayment penalty by paying through withholding and timely estimates the lesser of (i) 90% of current-year tax, or (ii) 100% of prior-year tax — but the 100% figure becomes **110%** when prior-year AGI exceeded $150,000 ($75,000 MFS). Her 2024 AGI of $172,000 exceeds $150,000, so the prior-year safe harbor is 110% × $18,000 = **$19,800**. The 90% current-year figure is $21,600. The lesser of $19,800 and $21,600 is $19,800. Form 2210 is used to compute any penalty if these payments are missed.