Free EA Exam Practice Questions: Test Yourself (2026)

Correct Answer: A

Under the tiebreaker rules for a qualifying child, if both parents claim the child and do not file a joint return, the child is treated as the qualifying child of the parent with whom the child resided for the longer period of time. If the child resided with each parent for the same amount of time (as in this "lived together all year" scenario), the parent with the higher AGI prevails. Option B is incorrect because the residency time is equal. Option C is incorrect because the support test for a qualifying child only requires that the child not provide more than half of their own support; the relative support provided by parents is not a tiebreaker. Option D is incorrect because a qualifying child cannot be split between taxpayers.

Correct Answer: B

The One Big Beautiful Bill Act (OBBBA) raised the SALT deduction cap to $40,000 for married couples filing jointly for the years 2025 through 2029. Although the couple paid a total of $47,000 ($35,000 + $12,000), their deduction is limited by the new $40,000 cap. Option A reflects the old TCJA cap. Option C is incorrect because it ignores the cap entirely. Option D is incorrect as it does not correspond to any specific rule. Note that the high-income phaseout for the SALT cap begins at $500,000 MAGI, so it does not apply to this couple.

Correct Answer: B

Under OBBBA, the maximum Child Tax Credit for 2026 is $2,200 per child, totaling $4,400 for two children. However, the credit begins to phase out at $400,000 for MFJ taxpayers. The credit is reduced by $50 for each $1,000 (or fraction thereof) by which MAGI exceeds the threshold. Here, the excess is $10,000 ($410,000 - $400,000). The reduction is 10 × $50 = $500. Therefore, the allowable credit is $4,400 - $500 = $3,900. Option A is the un-phased-out amount. Option C is the old TCJA amount per child. Option D is a miscalculation of the phaseout.

Correct Answer: B

For the 2026 tax year, OBBBA increased the maximum Section 179 deduction to $2,500,000. The phaseout threshold was also raised to $4,000,000. Since the total cost of qualified property placed in service ($3,200,000) is below the $4,000,000 threshold, no phaseout applies. The corporation can deduct the full $2,500,000 (limited by taxable income, which is sufficient here). Option A is the approximate pre-OBBBA limit. Option C is the total cost, which exceeds the statutory limit. Option D is a miscalculation.

Correct Answer: C

Under Section 722, a partner's basis in their interest is the adjusted basis of the contributed property ($30,000). This basis is then adjusted for liabilities under Section 752. The basis is decreased by the portion of the liability assumed by the other partners (60% of $10,000 = $6,000). Thus, Alice's basis is $30,000 - $6,000 = $24,000. Option A ignores the liability adjustment. Option B subtracts the entire liability. Option D incorrectly adds her share of the liability to the FMV.

Correct Answer: A

In an S corporation, basis is increased by items of income before considering distributions. The shareholder's basis increases from $15,000 to $23,000 ($15,000 + $8,000). Distributions are tax-free to the extent of the shareholder's basis. Since the $20,000 distribution is less than the $23,000 basis, the entire distribution is tax-free and reduces the basis to $3,000. No capital gain is recognized. Option B, C, and D are incorrect because they fail to increase basis by income first or miscalculate the remaining basis.

Correct Answer: B

Circular 230 Section 10.22 and 10.34 state that a practitioner may generally rely in good faith without verification on information furnished by the client. However, the practitioner cannot ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete. Option A is incorrect as an audit is not required. Option C is incorrect because a practitioner cannot ignore obviously incorrect info. Option D is incorrect because reasonable inquiries are required when specific documentation is mandated by law (e.g., for travel and entertainment).

Correct Answer: C

Doubt as to Liability exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law. Option A (Doubt as to Collectibility) is used when the taxpayer's assets and income are less than the full amount of the tax liability. Option B (Effective Tax Administration) is used when the tax is legally owed and could be collected, but collection would create an economic hardship or would be unfair and inequitable. Option D is a separate form of relief, not a ground for an OIC.

Correct Answer: B

A representative can only sign a tax return for a taxpayer if specifically authorized on Form 2848 AND if such signature is permitted under the Internal Revenue Code and Treasury Regulations (e.g., due to disease, injury, or continuous absence from the U.S. for at least 60 days). Options A, C, and D are standard authorities granted by a properly executed Form 2848 without needing additional specific check-boxes or language, although the scope of the POA is generally limited to the tax matters and years listed.