Taxation — Enrolled Agent — SEE Part 1 (Individuals) Practice Test

This Enrolled Agent — SEE Part 1 (Individuals) Taxation practice set has 95 practice questions based on the official exam materials, each with an instant explanation.

Sample questions

Three questions from the Taxation bank with the correct answer and an explanation. The practice quiz above draws 30 questions at random from the same bank.

1. What is the general purpose of the alternative minimum tax (AMT) computed on Form 6251?

   • To ensure that taxpayers who benefit from certain deductions, exclusions, and preferences still pay a minimum amount of income tax — Correct answer
   • To impose an extra tax on all wage income above a fixed dollar ceiling regardless of deductions
   • To replace the regular income tax entirely for high-income taxpayers
   • To collect Social Security and Medicare taxes from self-employed individuals

   Explanation: The AMT (IRC §55) is a parallel tax that recomputes income by adding back certain preferences and adjustments so taxpayers who use tax-favored items still pay a minimum tax. It is calculated on Form 6251, and the taxpayer pays the AMT to the extent it exceeds the regular tax.

   Handbook: Taxation — Alternative Minimum Tax (Form 6251)

2. A taxpayer computes a tentative minimum tax of $18,000 on Form 6251 and a regular tax of $15,000. How much alternative minimum tax, if any, does the taxpayer owe in addition to the regular tax?

   • $3,000 — Correct answer
   • $18,000
   • $15,000
   • $0, because the regular tax is less than the tentative minimum tax

   Explanation: Under IRC §55, the AMT equals the excess of the tentative minimum tax over the regular tax. $18,000 − $15,000 = $3,000 of AMT is added on Form 6251, so the taxpayer's total tax is effectively the $18,000 tentative minimum tax.

   Handbook: Taxation — Alternative Minimum Tax Liability (IRC §55)

3. The minimum tax credit for prior-year AMT, claimed on Form 8801, is generally attributable to which type of AMT items?

   • Timing (deferral) items, such as AMT depreciation adjustments, that reverse in later years — Correct answer
   • Exclusion items, such as the disallowed state and local tax deduction, that never reverse
   • Any AMT paid in a prior year, regardless of the underlying item
   • Only the AMT generated by incentive stock option preferences in the current year

   Explanation: The prior-year minimum tax credit (IRC §53, Form 8801) arises only from AMT paid on timing/deferral items (e.g., depreciation differences) that reverse over time. AMT paid on permanent exclusion items (like the disallowed SALT deduction) generates no credit.

   Handbook: Taxation — Prior-Year Minimum Tax Credit (Form 8801)