Free IRS Enrolled Agent SEE Part 2 (Businesses) Specialized Returns and Taxpayers Practice Questions
Specialized Returns and Taxpayers covers fiduciary income tax for trusts and estates (Form 1041, distributable net income, beneficiary K-1s), §501(c) exempt organizations and Form 990, qualified retirement plan rules for business sponsors, farm income (Schedule F), and rental real estate including passive-activity rules.
Sample Questions
Question 1
Easy
Schedule J (Form 1040) is used by an individual farmer or fisher to:
Solution
Schedule J implements the income-averaging election of §1301. A farmer or fisher computes current-year tax by treating one-third of "elected farm income" as if earned in each of the three prior years, applying those years' rate schedules. The election can be made, changed, or revoked through the statute of limitations. Pub 225, ch. 4.
Question 2
Medium
For income averaging on Schedule J, "elected farm income" under §1301 may include:
Solution
§1301(b)(1) defines elected farm income as taxable income attributable to a farming or fishing business. Treas. Reg. §1.1301-1(e) and Pub 225, ch. 4 specify that this includes Schedule F income, distributive shares of farming partnership/S-corporation income, and gain from the sale or other disposition of property (other than land) regularly used for a substantial period in a farming business. Gain from the sale of land is excluded from elected farm income.
Question 3
Hard
For tax years beginning after December 20, 2019, the §4940 excise tax on the net investment income of a private foundation is imposed at what rate?
Solution
Section 206 of the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (enacted December 20, 2019, as part of the SECURE Act package) replaced the prior two-tier 2%/1% structure under IRC §4940 with a single flat 1.39% rate on net investment income for tax years beginning after that date. The change eliminated the planning distortion the two-tier rate created around the qualifying distribution test.