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
Which of the following is treated as an AMT preference item under IRC §57 (rather than an AMT adjustment under IRC §56) when computing alternative minimum taxable income for 2025?
Solution
IRC §57 enumerates tax preference items added in computing AMTI: interest on specified private activity bonds (excluding 2009–2010 ARRA-era issues, which Congress carved out), excess of percentage depletion over adjusted basis, intangible drilling cost preference, and accelerated depreciation on pre-1987 real property. Items in §56 are AMT adjustments — they can be positive or negative — and include the SALT addback, the ISO bargain element (timing), depreciation differences on post-1986 property, the alternative tax NOL, and installment-sale adjustments. Form 6251.