Federal Taxation

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Examination Questions - 15 Hour California Tax Law

All questions pertain to Tax Year 2023 unless noted.

Lesson 1 1. If the taxpayer received unemployment (also known as unemployment insurance), the American Rescue Plan

(ARP) Act of 2021 reduced his or her Federal adjusted gross income (AGI) for 2020 tax return. This means he or she may now qualify to receive more money from all of the following California tax benefits except:

A. California Earned Income Tax Credit (CalEITC) B. Young Child Tax Credit (YCTC) C. The Golden State Stimulus payment D. The Standard Deduction

2. The State and Local Tax (SALT) cap workaround, resulting from AB 150, allows a taxpayer to pay pass-through

income elective tax at the entity level. This qualifies which of the following businesses to avoid the $10,000 Federal cap on state and local tax deductions?

A. Partnerships with members as individuals B. Entities that have a partnership as a partner C. Publicly traded company D. Self-employed taxpayers

3. ABC Tech LLC is a partnership with two equal partners. The company has a qualified net income of $200,000. If

both partners qualify and make the Pass-Through Entity (PTE) election, the partnership can pay a PTE elective tax of to the California Franchise Tax Board. Each partner will report $90,700 of net income (($200,000 – $18,600) X 50%) on their federal K-1. When the partners file their personal returns, their California returns will report $100,000 of net income from ABC Tech LLC and a tax credit of what amount against their individual California income tax?

A. $0 B. $5,000 C. $9,300 D. $10,000

4. As a result of the Tax Cuts and Jobs Act, under Federal tax law the tax preparation fees deduction are suspended

in tax year 2023. Therefore, under California tax law, a California taxpayer who itemizes his or her deductions and has an adjusted gross income (AGI) of $35,000, and no miscellaneous expenses other than tax preparation fees of $1,000, would be able to take a deduction of what amount on his or her California income tax return for tax year 2023?

A. $0 B. $300 C. $700 D. $1,000

5. Because of the Tax Cuts and Jobs Act, under Federal tax law the employee business expenses deduction are

suspended in tax year 2023. However, California does not conform to the Federal suspension of all miscellaneous itemized deductions. Therefore, under California tax law valid employee business expenses that are deductible on the California income tax return for tax year 2023 include all of the following except:

A. Expenses paid or incurred during the taxpayer’s tax year B. Expenses required to carry on a trade or business C. Expenses that are reimbursed by the taxpayer’s employer D. Expenses that are ordinary and necessary

Examination Questions - 15 Hour California Tax Law

6. Hannah is a California taxpayer. She is retired and receives a pension payment of $1,000 during 2022, and then in 2023 receives a letter from the pension administrator informing her that an internal audit of the pension computer system revealed that the administrator made a mistake and overpaid the $1,000 benefit in 2022. As such, they now want Hannah to repay (the $1,000 overpayment) by writing a check back to the pension plan in 2023. Under Section 1341, Claim of Right, Hannah is entitled to claim a deduction for what amount of the overpayment on her California income tax return for tax year 2023?

A. $500 B. $600 C. $1,000 D. $3,000

7. For tax year 2023, which of the following allowable itemized deductions is subject to a reduction of 6% based on the taxpayer’s adjusted gross income (AGI) stated on his or her California income tax return?

A. Legal fees B. Medical expenses C. Investment interest D. Wagering losses

8. Investment expenses are the taxpayer’s allowed deductions directly connected with the production of investment income. With regards to the Tax Cuts and Jobs Act, investment expenses that a taxpayer can deduct on his or her California income tax return for tax year 2023 include all of the following except:

A. Investment interest expense B. Depreciation allowed on assets that produce investment income C. Depletion allowed on assets that produce investment income D. Software or online services used to manage the taxpayer’s investments

9. For tax year 2023, the Tax Cuts and Jobs Act provisions have what effect on the overall limitation on itemized deductions on the taxpayer’s California income tax return?

A. The total amount of most otherwise allowable itemized deductions is limited for all taxpayers B. California will provide its own indexed-for-inflation limitation amounts for certain upper-income taxpayers C. The threshold amount will not include single taxpayers D. The otherwise allowable itemized deductions will not be reduced by more than 75% by reason of the

overall limit on itemized deductions 10. California tax law conforms to which of the following Tax Cuts and Jobs Act (TCJA) tax provisions?

A. Deduction for Pass-Through Income B. Section 199A Deduction C. California Achieving a Better Life Experience (ABLE) Program D. Suspension of all miscellaneous itemized deductions that are subject to the 2% floor

11. Which of the following is incorrect regarding Timeliness Penalty Abatement for California income tax purposes? A. The abatement is once-in-a-lifetime abatement B. The abatement is applicable for taxable years beginning on or after January 1, 2022 C. The abatement is applicable to fiduciaries, estates, or trust D. The abatement is a one-time cancellation of an individual taxpayer’s penalty for filing or paying his or her

taxes late

12. The taxpayer’s California Net Operating Loss (NOL) is generally calculated the same as the Federal. However, which of the following differs between the Federal and California calculation?

A. Allowable amounts B. Carryback period C. Carryforward period D. All of the above

13. For which of the following tax years did California suspend the net operating loss (NOL) carryover deduction? A. 2020 B. 2021 C. 2022 D. A and B

Examination Questions - 15 Hour California Tax Law

14. All of the following are true regarding California licensed cannabis businesses except: A. A licensed cannabis business files income tax returns just like other businesses B. Licensed cannabis businesses may deduct cost of goods sold, but may not deduct other business

expenses, such as rent and wages C. California allows individuals and other taxpayers operating under the personal income tax law to claim

credits and deductions of business expenses paid or incurred during the taxable year in conducting commercial cannabis activity

D. Cannabis businesses operating under required state licenses can choose any form of valid business structure for their business

15. Jacob and Mekayla did not have health coverage during 2023. They are married, filing jointly taxpayers with one

child and a gross household income of $150,000. Neither Jacob nor Mekayla qualifies for an exemption from the requirement to have coverage and the $57,994 is the state filing threshold for a married couple, both under 65 years old with one dependent for the 2023 tax year. Therefore, when they file their California income tax return they will pay an Individual Shared Responsibility Penalty for what amount?

A. $0 B. $1,500.25 C. $2,250.00 D. $2,300.15

16. A taxpayer uses which of the following forms to make adjustments to his or her Federal adjusted gross income

and to his or her Federal itemized deductions? A. Schedule P B. Schedule S C. Schedule CA D. Schedule D

17. Emma reduced her Federal mortgage interest deduction by $400 (the amount of her interest credit from Federal

Form 8396 - Mortgage Interest Credit). Therefore, she should increase her California itemized deductions by what amount on Schedule CA (540)?

A. $0 B. $100 C. $200 D. $400

18. California does not conform to the amendments in the Federal Coronavirus Aid, Relief, and Economic Security

(CARES) Act made to Internal Revenue Code (IRC) Section 461(l) by eliminating the excess business loss limitation of noncorporate taxpayers. A taxpayer should Complete FTB Form 3461 - California Limitation on Business Losses if he or she is a single, noncorporate taxpayer and his or her net losses from all of his or her trades or businesses are more than what amount in 2023?

A. $289,000 B. $309,000 C. $578,000 D. $628,000

Lesson 2 19. Jason is a California resident who lives and works as a computer consultant in Walnut Creek, CA. He earned

$75,000 while working for XYZ LTD in 2023. Jason additionally had a contract job from ABC Co. based in Washington. His contract earnings totaled $17,000 in 2023 and will total $15,000 in 2024. What amount is Jason’s total California resident income in 2023?

A. $75,000 B. $83,500 C. $90,000 D. $92,000

Examination Questions - 15 Hour California Tax Law

20. California tax law provides that an individual, who spends in the aggregate more than how many months of the taxable year in California, is presumed to be a resident?

A. Six Months B. Seven Months C. Eight Months D. Nine Months

21. A change of domicile requires all of the following except:

A. Abandonment of the taxpayer’s prior domicile B. Filing a change of address with the post office C. Physically moving to a new locality D. Physically residing in a new locality

22. Under California law, Registered Domestic Partners (RDP) must file their California income tax returns using which

filing status? A. Single B. Married/RDP filing jointly C. Married/RDP filing separately D. Either B or C

23. Erin receives and accepts a permanent job offer in Spain. She and her spouse or registered domestic partner

(RDP) sell their home in California, pack all of their possessions and move to Spain on May 5, 2023. Their children also relocate to Spain on the same date. They lease an apartment and enroll the children in school in Spain. They both obtain a driver’s license from Spain and make numerous social connections in their new home. They have no intention of returning to California. Which of the following statements is true?

A. Both Erin and her spouse or registered domestic partner are considered part-year residents of California B. The entire family are considered full-year California residents C. Erin is considered a part-year resident, but her spouse or registered domestic partner is considered a full-

year resident D. All of the above

24. Joe and Kathy are married and domiciled in California. Joe works full-time in Arizona and has nonresident status

while Kathy remains a California resident. Joe earned $66,000 in 2023 and Kathy earned $32,000. Which of the following statements is true with respect to Kathy and Joe?

A. Kathy need only pay California income tax on her earnings of $32,000 B. Kathy must pay income tax on all of her earnings plus one-half of Joe’s earnings based on community

income C. Kathy must pay California income tax on all of her earnings plus all of Joe’s earnings based on community

income D. Kathy has no California filing obligation because of her husband’s nonresident status

25. Phil is a California resident. He agreed to work overseas for one year. He returned to California after the

employment contract expired and stayed for three months. Then, he signed another contract with the same employer to work overseas for another year. Which of the following is true regarding Phil’s California residency status?

A. He cannot be considered a nonresident under the safe harbor rule B. He can be considered a nonresident under the safe harbor rule C. He can combine the days he was overseas from the two separate contracts D. He cannot be considered a nonresident because the principal purpose of his absence from California is

to avoid personal income tax

Examination Questions - 15 Hour California Tax Law

26. Until September 2023, Brad was a resident of California. At that time, he declared himself to be a resident of Nevada, where he has a summer home. He continues to spend six or seven months each year at his home in California, which he has retained. He spends only three to four months in Nevada and the rest of the time traveling in other states or countries. Brad transferred his bank accounts to Nevada. However, he continues to maintain his social club and business connections in California. Which of the following is true regarding Brad’s move out of state?

A. His declaration of residency in another state establishes residency in that state B. His closest connections are to Nevada, and he is, therefore, a resident of Nevada C. His absence from California is permanent and he is, therefore, a resident of Nevada D. His closest connections are to California and his absence from California is for temporary or transitory

purposes and he is, therefore, a resident of California 27. In December 2022, Matt moved to California on an indefinite job assignment. He rented an apartment in California

and continued to live in the apartment. Matt retained his home and bank account in Illinois until April 2023, at which time he sold his home and transferred his bank account to California. During 2023 Matt earned a salary of $50,000 and $1,000 interest from his bank in Illinois. When completing his California state tax return for 2023, Matt will be taxed on what amount of his total income?

A. $1,000 B. $25,000 C. $26,000 D. $51,000

28. Tax return preparers who prepare and file more than 100 timely original California personal income tax returns

during any calendar year and who prepare at least how many personal income tax returns using tax preparation software in the current calendar year must file all personal income tax returns for the current calendar year?

A. One B. Ten C. Eleven D. Twenty

29. Which of the following properties is defined as community property and subject to community property law?

A. Property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in the state of California

B. Property received separately as gifts or inheritances C. Property purchased with separate property funds D. Property acquired prior to the marriage

30. Eduardo and Maria are residents of California. For the first six months of the year, Eduardo earned wages of

$30,000. Maria did not earn any income. On June 30, Eduardo and Maria physically separated with no intention of reconciliation. During the last six months, Eduardo earned wages of $30,000 and Maria earned wages of $10,000. They have decided to file separate returns. What amount must Eduardo and Maria each report as community income on their individual returns?

A. $10,000 B. $15,000 C. $30,000 D. $40,000

31. Mixing or commingling separate property with community property will transmute the separate property into

community property unless the separate property component can be traced. All of the following are options for tracing except:

A. Allocating deposits between community property funds and separate property funds B. Allocating payments between community property funds and separate property funds C. Allocating interest between community property funds and separate property funds D. Allocating payments so that community property substantially benefits or improves separate property

Examination Questions - 15 Hour California Tax Law

32. Olivia owned a house before her marriage. She sold it and used the proceeds as a down payment on another house after getting married. The mortgage payments on the new house are made during the marriage using the earnings of both Olivia and her spouse. The result is that the equity in the house is what type of property?

A. Community property B. Commingled property C. Separate property D. Individual property

33. In California, separate property remains in the possession of the original owner, while community property is

divided equally between the divorcing parties. The challenge with separate property arises when it commingles with property accumulated during the marriage. Generally, commingled property can include all of the following except:

A. Inheritance specifically given to one party after a separation B. Real estate property C. Retirement accounts D. Pensions

34. Pat Wright retired this year after 30 years of civil service. He and his registered domestic partner (RDP) were

domiciled in California during the past 15 years. Previously, they lived in a non-community property state. Mr. Wright receives $1,000 a month in retirement pay. What amount is considered Pat’s part of the community income?

A. $100 B. $200 C. $250 D. $500

35. Income of a military service member’s nonmilitary spouse for services performed in California is not California

source income subject to state tax if which of the following is true? A. The spouse is in California to be with the service member serving in compliance with military orders B. The service member and spouse have the same domicile in a state other than California C. The active-duty military service member and spouse file a joint Federal tax return and file separate tax

returns for California D. Both A and B

36. If a taxpayer files a joint Federal tax return, he or she may file separately for California if either spouse was which

of the following? A. A nonresident for the entire year and had no income from California sources during the tax year B. A nonresident for 6 months of the year and had no income from California sources during the tax year C. A nonresident for 3 months of the year and had no income from California sources during the tax year D. A nonresident for the entire year and had income only from California sources during the tax year

37. Seaman Abbott, a Montana resident, is stationed in San Diego. He works a part-time job at Hardware Store Inc.

in the paint department. He earns $9,000 from Hardware Store Inc. in the current year and $19,000 from the U.S. Navy. What amount is subject to California tax?

A. $0 B. $9,000 C. $17,000 D. $19,000

38. Peyton is a California resident who is serving active military duty in California when he is transferred to North

Carolina under Permanent Change of Station (PCS) orders. His salary is $4,000 per month. Peyton is transferred on September 1 of the current year. How much of his income is taxable in California?

A. $0 B. $4,000 C. $16,000 D. $32,000

Examination Questions - 15 Hour California Tax Law

39. Carolina is a single filing California taxpayer. In 2023 her Federal adjusted gross income (AGI) was $237,127. For 2023, what is the amount of her California exemption credit?

A. $102 B. $138 C. $144 D. $288

40. In California, living together for what amount of time creates a common law marriage?

A. 5 years B. 7 years C. 10 years D. Common law marriage cannot be established in the State of California

41. Patricia is a 39-year-old single California resident and has a 12-year-old son named Luke. He lives with her during

the 9-month school year in California and spends the 3 summer months with his father in Idaho. She provides approximately 75% of his support. Which of the following regarding Luke’s dependency status is correct?

A. Patricia must alternate claiming Luke as a dependent with his father B. Based on Luke’s relationship with Patricia, his age, and that he lives with her for more than half the year,

she can claim him as a dependent C. Based on the fact Luke lives with Patricia for only 9 months a year, she cannot claim him as a dependent D. Since Patricia only provides 75% of Luke’s support, she cannot claim him as a dependent

42. Jesse has his retired father-in-law, Vick, living with him and his wife Sue for the past three years and they provide

approximately 90% of Vick’s support each year. Vick has $2,400 of gross income. Which of the following statements is accurate regarding Vick’s dependency status?

A. Vick cannot be claimed as a dependent based on his gross income B. Vick fails the relationship test and is not a qualifying relative C. Jesse and Sue only provide 90% of Vick’s support and in order to meet the qualifying relative test they

must provide 100% D. Since Vick lives with Jesse and Sue full time, they provide more than half his support, and his income is

less than $4,000, he can be claimed as a dependent based on the qualifying relative test 43. Company B, an out-of-state corporation, has $100,000 in total property, $200,000 in total payroll, $1,000,000 in

total sales. Company B has no property or payroll in California. However, Company B will be considered doing business in California if it has sales of what amount or more to California customers?

A. $250,000 B. $300,000 C. $450,000 D. $500,000

Lesson 3 44. A divorce decree showed James Tyler was to provide $1,500 a month of "family support" to his ex-spouse. No

amount of the family support is designated as child support. What amount of the payment is considered alimony? A. $0 B. $500 C. $1,000 D. $1,500

45. Catalina lived and worked exclusively in California until she retired on December 31, 2022. She moved to Nevada

on January 1, 2023. Her former California employer pays its employees on the 5th of every month. On January 10, 2023, Catalina received in the mail her last paycheck of $4,000 from her former California employer. What amount of the compensation is taxable by California?

A. $0 B. $1,000 C. $2,000 D. $4,000

Examination Questions - 15 Hour California Tax Law

46. Calvin has always lived in Arizona. He owns a siding company in Arizona and in 2023 he earned $120,000 including $30,000 from a separate and distinct job in California. What amount of his income is taxable in California?

A. $0 B. $15,000 C. $30,000 D. $120,000

47. Jerry permanently moved from Florida to California on January 1, 2023. He received $12,000 pension income during 2023 through a qualified plan from his former Florida employer. What amount of his qualified pension income is taxable by California?

A. $0 B. $1,200 C. $6,000 D. $12,000

48. Antonia is a nonresident of California who is under 50 years of age. During the year, she worked temporarily in

California. Her California compensation is $1,000, which she reported on Schedule CA (540NR), column E. Her Federal compensation is $10,000. Her allowable IRA deduction on her Federal return is $5,000. Antonia’s allowable California IRA deduction that she reports on Schedule CA (540NR), Part II, line 19, column E, is what amount?

A. $0 B. $1,000 C. $2,000 D. $4,000

49. Tony is 29 years old and single. In 2023, he was covered by a retirement plan at work. His salary is $98,500. His

modified adjusted gross income (MAGI) is $90,000. Tony makes a $6,500 IRA contribution for 2023. What amount of his IRA contribution can Tony deduct on his California tax return?

A. $0 B. $2,500 C. $3,250 D. $6,500

50. Foreign social security is taxable by California as which of the following types of income?

A. Capital gains income B. Annuity income C. Passive income D. California does not tax foreign social security income

51. Annabel and her husband file a joint California State tax return. She and her spouse are past the full retirement

age. In the joint return, she reports combined Social Security benefits of $37,000. When completing her 2023 California State tax return, Annabel will have to pay income tax of what amount on her benefits?

A. $0 B. $3,700 C. $5,550 D. $7,400

52. Lenore, a single California taxpayer, has taxable income before capital gains of $78,000 and a long-term capital

gain of $5,000 on the sale of RSS stock. What is the total amount of California state tax Lenore will pay on the capital gain?

A. $0 B. $465 C. $750 D. $1,215

Examination Questions - 15 Hour California Tax Law

53. Three properties (parcels) are sold within the same escrow agreement. Property A is sold for $50,000, Property B is sold for $10,000, and Property C is sold for $60,000. California real estate withholding is required because the total sale price of all three properties exceeds what amount?

A. $10,000 B. $50,000 C. $100,000 D. Real estate withholding is not required

54. Tricia had $100,000 in mortgage debt forgiven through a short sale on her principal residence on her Federal

income tax return. Generally, Tricia must include what amount of the discharge of indebtedness from the disposition of her principal residence when completing her Schedule CA for 2023?

A. $0 B. $25,000 C. $50,000 D. $100,000

55. Nora is completing her 2023 California tax return. She was a resident of California for all prior years and has a

California capital loss carryover of $1,000. What amount should she enter on her California tax return for the California capital loss carryover?

A. $0 B. $250 C. $500 D. $1,000

56. Which of the following is incorrect regarding the California suspension of net operating loss (NOL) carryover

deduction? A. For taxable years 2022, 2023 and 2024, California has suspended the NOL carryover deduction B. Both corporations and individual taxpayers may continue to compute and carryover an NOL during the

suspension period C. The suspension does not apply for individual taxpayers, if they have net business income or modified

adjusted gross income of less than $1 million D. NOL deductions disallowed during this time period will be extended for each year they are suspended

57. Ken has always been a nonresident of California. On March 1, 2022, he sold a California rental property in an

installment sale. During 2022 and 2023, he received installment proceeds comprised of capital gain income and interest income. Which of the following is incorrect regarding the capital gain income?

A. The capital gain income is taxable by California in both 2022 and 2023 because the property was located in California

B. The capital gain income is taxable by California only in 2023 because the property was located in California

C. The interest income is not taxable by California and has a source in Ken's state of residence D. California taxes the installment proceeds received by a nonresident to the extent the income from the sale

was from a California source 58. As a resident of Texas, Jim exchanged a condominium located in California for like-kind property located in Texas.

He realized a gain of $15,000 on the exchange that was properly deferred under IRC Section 1031. Jim then sold the Texas property in a nondeferred transaction and recognized a gain of $20,000. What amount of the deferred gain has a source in California and is taxable by California?

A. $0 B. $5,000 C. $15,000 D. $20,000

Examination Questions - 15 Hour California Tax Law

59. All of the following are true regarding California unemployment benefits except: A. Unemployment insurance (UI) provides temporary payments to individuals who are unemployed through

no fault of their own B. Unemployment insurance benefits are taxable income for Federal purposes C. Unemployment insurance benefits are not taxable by the State of California D. The Employment Development Department (EDD) sends a Form 1099-MISC to each individual for the

total unemployment insurance benefits paid during the prior year 60. California excludes which of the following from taxable income?

A. Payments received from the Paid Family Leave Insurance (PFL) program B. The cost of group term life insurance for retirees funded by the transfer of excess pension assets C. Wage income upon the exercise of a non-statutory stock option D. None of the above

61. California conforms to the Federal special allowance rules for those taxpayers who actively participate in rental

real estate activities. Under this rule, up to what amount of passive rental real estate losses may be used to offset non-passive income?

A. $10,000 B. $25,000 C. $50,000 D. $100,000

62. Interest on which of the following obligations are exempt from California tax?

A. Interest received from District of Columbia bonds issues after 1974 B. Bonds issued by the United States C. Bonds issued by the State of California D. Both B and C

63. Certain mutual funds pay “exempt-interest dividends.” If the mutual fund has at least what percentage of its assets

invested in tax-exempt U.S. obligations and/or in California or its municipal obligations, that amount of dividend is exempt from California tax?

A. 25% B. 30% C. 50% D. 51%

64. Entities paying more than what amount of Federal tax-exempt interest or interest-dividends that were earned on

bonds issued by a state or local government other than California are required to provide an information return to the Franchise Tax Board?

A. $10 B. $50 C. $100 D. $500

65. To claim the exclusion for compensation from exercising a California Qualified Stock Option (CQSO) the

taxpayer’s earned income must be what amount or less from the corporation granting the CQSO? A. $10,000 B. $25,000 C. $40,000 D. $50,000

66. Lana earned $100 interest from a California municipal bond and $30 from an Arizona municipal bond. What

amount is taxable income for her California tax return that is not taxable on her Federal return? A. $0 B. $30 C. $50 D. $100

Examination Questions - 15 Hour California Tax Law

67. Sonny won $1,000 from the California State Lottery and $600 from the Nevada State Lottery. What amount can he exclude from taxable income on his California tax return?

A. $0 B. $600 C. $1,000 D. $1,600

68. Generally, which of the following is true regarding a California personal income tax refund?

A. Federal law includes the state income tax refund in income if the taxpayer itemized deductions last year instead of taking the standard deduction, California excludes the state income tax refund from income

B. Federal law excludes the state income tax refund from income if the taxpayer itemized deductions last year instead of taking the standard deduction, California includes the state income tax refund in income

C. Federal law and California law always include the state income tax refund in income D. Federal law and California law always exclude the state income tax refund from income

69. California considers which of the following as income subject to state tax?

A. Beverage container recycling income B. California lottery winnings C. Gambling winnings D. Rewards received from a government authorized crime hotline

70. Under California Senate Bill 459 the state Labor and Workforce Development Agency has the power to fine

companies a penalty of up to what amount per violation for willfully misclassifying workers? A. $10,000 B. $25,000 C. $35,000 D. $50,000

71. The basic test for determining whether a worker is an independent contractor or an employee is whether the

principal has: A. The principal has the right to control the manner and means by which the work is performed B. The principal is entitled to the self-employed health insurance deduction C. The principal reports income on Schedule CA (540) D. The principal receives unreimbursed employee expenses

72. On November 3, 2020, California voters approved Proposition 22, an initiative backed by Uber, Lyft, and Door

Dash that legally designates drivers for app-based ride-hailing and delivery apps as which of the following? A. Part-time employees B. Full-time employees C. Independent contractors D. Temporary employees

Lesson 4 73. California law limits the standard deduction of a person who is claimed as a dependent. In 2023, the standard

deduction for dependents in California is what amount? A. $750 B. $800 C. $950 D. $1,250

Examination Questions - 15 Hour California Tax Law

74. Amanda was a Florida resident until March 31, 2023. While a Florida resident, she earned and received wage income of $15,000. On April 1, 2023, she permanently moved to California. While a California resident, she earned and received wage income of $65,000. Amanda is single and had itemized deductions from Florida and California totaling $24,000. What is Amanda’s California itemized deduction amount?

A. $4,500 B. $5,000 C. $15,000 D. $19,500

75. The itemized deductions of taxpayers in high-income brackets will be limited to the lesser of 6% of the excess of

adjusted gross income over the threshold amount or 80% of the amount of itemized deductions otherwise allowable for the tax year. For 2023, the California threshold is what amount for a single taxpayer?

A. $189,702 B. $197,730 C. $202,615 D. $237,035

76. Which expenses, subject to the 2% floor, can be itemized by a California-based individual taxpayer?

A. Professional books, magazines, journals, and periodicals B. Common office supplies such as paper C. Occupational safety and health equipment D. Fire extinguishers

77. California does not tax a reward authorized by a government agency and received from a crime hotline established

by a government agency or nonprofit organization. However, the taxpayer may not make this adjustment if he or she is which of the following?

A. A nonresident taxpayer B. An employee of the hotline C. A part-year taxpayer D. A married, filing separately taxpayer

78. Maribel sustained a disaster loss in August 2023. She can claim the loss on her 2023 tax return if she files it by

which date (not including weekends or holidays)? A. December 31, 2023 B. February 1, 2024 C. April 15, 2024 D. The taxpayer cannot claim a loss he or she sustained in 2023 on his or her 2023 tax return

79. For which of the following reason(s) should a taxpayer use FTB Form 3885A - Depreciation and Amortization Adjustments?

A. If there is a difference between the amount of depreciation and amortization allowed as a deduction using California law and the amount allowed using Federal law

B. If reporting a difference for assets related to a passive activity C. If reporting depreciation expense from Federal Form 2106 - Employee Business Expenses D. All of the above

80. Although Federal law made permanent the increased IRC Section 179 expense, for California purposes, the

maximum IRC Section 179 expense deduction remained at what amount in 2023? A. $25,000 B. $50,000 C. $100,000 D. $200,000

Examination Questions - 15 Hour California Tax Law

81. Regarding the IRC Section 179 expense deduction, California law conforms to the Federal law for which of the following?

A. California allows IRC Section 179 expense election for off-the-shelf computer software B. California law conforms to the Federal law which allows a deduction for business start-up and

organizational costs paid or incurred during a taxable year C. California law conforms to the Federal limitation amounts under IRC Section 179(b)(1) and (2). D. All of the above

82. In 2023, under the Tax Cuts and Jobs Act (TCJA), bonus depreciation increased to 80% and applies to both new and used property. However, for California tax purposes, bonus depreciation is what percentage?

A. 10% B. 25% C. 50% D. No bonus depreciation

83. A taxpayer can deduct the expenses of moving his or her household goods and personal effects, including all of

the following expenses except: A. Hauling a trailer B. Packing C. Moving furniture bought on the way from his or her old home to his or her new home D. Insurance

84. Hal had previously worked in Folsom, CA for Tasty Chip. His commute to work was a three-mile drive. In 2023,

he takes a new job 95 miles away at Luby’s Foods in Novato, CA. Which of the following is true regarding his moving expense deduction on his California income tax return?

A. Hal is not eligible since the move is not more than 150 miles from his previous location B. Hal is not eligible since the move is not more than 100 miles from his previous location C. Hal is eligible since the move is greater than 50 miles from his previous location D. Hal is eligible since the move required him to change companies

85. In 2023, California conforms to which of the following Federal tax law provisions?

A. A deduction for the employee's tax under the state unemployment insurance law B. The limit for charitable contributions to 60% of a taxpayer’s Federal adjusted gross income (AGI) C. The deduction for medical and dental expenses that exceed 7.5% of Federal adjusted gross income (AGI) D. The above-the-line deduction for certain expenses of elementary and secondary school teachers

86. Kristen reduced her Federal mortgage interest deduction by $500 (the amount of her mortgage interest credit from Federal Form 8396 - Mortgage Interest Credit). When completing her California tax return, she can increase the California itemized deductions for home mortgage interest by what amount?

A. $0 B. $100 C. $250 D. $500

87. If a taxpayer with an annual income of $75,000 paid $25,000 of alimony to their ex-spouse in 2023, he or she

could deduct what amount from his or her income on his or her California state income return? A. $0 B. $25,000 C. $50,000 D. $75,000

Examination Questions - 15 Hour California Tax Law

Lesson 5

88. For the 2023 tax year, which of the following is incorrect regarding the California Earned Income Tax Credit (CalEITC)?

A. The CalEITC is available to California households with California maximum earned income of less than $30,950 regardless of the number of qualifying children

B. The maximum amount of investment income to remain eligible for the CalEITC is $4,525 C. Taxpayers with only an Individual Taxpayer Identification Number (ITIN) are not eligible for the CalEITC D. If the taxpayer qualifies for CalEITC and has a child under the age of 6 as of the end of the tax year, he

or she may qualify for up to $1,117 through the Young Child Tax Credit (YCTC) 89. For which of the following reasons is a taxpayer ineligible for the refundable Young Child Tax Credit (YCTC) in

2023? A. He or she also qualifies for the California Earned Income Tax Credit (CalEITC) B. He or she has earned income of $45,000 C. He or she has at least one qualifying child for the CalEITC D. His or her qualifying child is younger than six years old as of the last day of the taxable year

90. To qualify for the Nonrefundable Renter's Credit, a taxpayer must meet all of the following requirements except:

A. He or she was a California resident in 2023 B. He or she paid rent for at least 3 months of 2023 for property in California that was his or her principal

residence C. He or she did not live with another person for more than half the year (such as a parent) who claimed him

or her as a dependent in 2023 D. He or she is not a minor living with and under the care of a parent, foster parent, or legal guardian

91. To qualify for the full Nonrefundable Renter's Credit a taxpayer must have California adjusted gross income (AGI) under certain levels. For 2023, the limit is what amount or less if the taxpayer’s filing status is single or married/RDP filing a separate return?

A. $43,476 B. $48,277 C. $50,746 D. $101,492

92. California residents are allowed a credit for net income taxes paid to another State on income also subject to the California income tax. However, the credit is not allowed for which of the following reasons?

A. If the other state allows California residents a credit for net income taxes paid to California B. If the income taxed by the other state has a source within the other state under California law C. If such states do not allow their residents a credit for net income taxes paid to California D. The amount of the credit is greater than the same proportion of the total California tax as the income taxed

by both states bears to the total income taxed by California

93. An income-tax credit is allowed for any excess employee contributions for disability insurance under the Unemployment Insurance Code. For 2023, the employee State Disability Insurance (SDI) was 0.9% and was taxed to a maximum withholding of what amount?

A. $900.50 B. $925.80 C. $1,378.48 D. $1,795.14

94. Zuri had specified costs of $6,000 for the adoption of Imani, who is a U.S. citizen minor child who was in the

custody of a California state public agency. All costs were directly related to the adoption and meet all other criteria. What amount can Zuri claim for the California Child Adoption Costs Credit?

A. $0 B. $2,500 C. $3,000 D. $5,000

Examination Questions - 15 Hour California Tax Law

95. For the 2023 tax year, Pierce meets all the requirements and qualifies for the Joint Custody Head of Household Credit. His California net tax on line 35 of his Form 540 is $1,000. Therefore, his Joint Custody Head of Household Credit for 2023 is what amount?

A. $0 B. $150 C. $300 D. $573

96. When determining if a taxpayer qualifies for the Joint Custody Head of Household Credit, he or she must have

kept up the taxpayer's home as a household that was the main home for the taxpayer's unmarried child, stepchild, or grandchild; or married child, stepchild, or child's descendant whom the taxpayer could claim as a dependent for at least how many days of the year?

A. 100 days B. 146 days C. 150 days D. 157 days

97. Lucia received $2,000 cash under her employer’s dependent care plan for 2023. The $2,000 is shown in box 10

of her Form W-2. She incurred $900 of qualified expenses in 2023 for the care of her 3-year-old dependent child. When claiming the Credit for Child and Dependent Care Expenses what amount should she report for dependent care benefits on line 13 of her FTB Form 3506 - Child and Dependent Care Expenses Credit?

A. $0 B. $900 C. $1,100 D. $2,000

98. Which of the following is incorrect regarding the California Child and Dependent Care Expenses Credit (CDC)?

A. A taxpayer may claim this credit if he or she paid someone to take care of his or her child while he or she worked or looked for work

B. Care must be provided in California for one or more qualifying persons C. If the taxpayer qualifies, he or she may only claim expenses up to $3,000 for 1 person D. The taxpayer is not required to have earned income during the year as this credit is refundable

99. In 2023, Audrey claimed $2,100 on her Federal tax return for her Child and Dependent Care Expenses Credit.

Her Federal adjusted gross income (AGI) was $32,750 and she meets all other requirements. What amount can she claim for the California Child and Dependent Care Expenses Credit (CDC)?

A. $0 B. $700 C. $1,050 D. $1,400

100. Which of the following is true regarding the California Competes Tax Credit (CCTC)?

A. The CCTC is refundable B. The CCTC cannot be used to reduce tax below tentative minimum tax C. Any CCTCs not used in the taxable year may be carried forward up to six years D. The CCTC does not apply to state income tax

101. An employer hires an individual who meets the qualifications for the Homeless Hiring Tax Credit (HHTC). The

employer obtains an HHTC certificate for the eligible employee from a certifying organization, pays the employee wages equal to or greater than 120% of their California minimum wage, and makes a tentative credit reservation within 30 days of completing the New Hire reporting requirement with the Employment Development Department. If the eligible employee works 1,200 hours during the taxable year the employer is eligible to claim the HHTC for what amount?

A. $2,500 B. $5,000 C. $7,500 D. $10,000

Examination Questions - 15 Hour California Tax Law

102. Which of the following is incorrect regarding the Main Street Small Business Tax Credit II established California’s Assembly Bill (AB) 150?

A. The taxpayer can claim this credit on an amended (not original) tax return B. The credit amount is equal to $1,000 for each net increase in qualified employees, measured by the

monthly average full-time employee equivalents C. Each employer is limited to no more than $150,000 in credit D. To qualify for the credit, taxpayers (qualified small business employers) must have 500 or fewer

employees on December 31, 2020 (all employees, including part-time employees), whose wages are subject to California withholding laws

103. Tim rolls over $1,250 from his Archer Medical Savings Account (MSA) to a Health Savings Account (HSA). What

amount of the distribution is subject to California income tax? A. $0 B. $125 C. $625 D. $1,250

104. Kelly sells products to Local Company. She and her spouse gave Local Company three gourmet gift baskets to

thank them for their business. They paid $80 for each gift basket, or $240 total. Three of Local Company's executives took the gift baskets home for their families' use. Kelly and her spouse have no independent business relationship with any of the executives' other family members. They can deduct a total of what amount for the gift baskets on their California State tax return?

A. $0 B. $25 C. $75 D. $240

105. The California Revenue and Taxation Code (R&TC) provides that no trade or business expense deduction is

allowed for expenditures made at, or payments made to, a club that restricts membership or the use of its services or facilities on the basis of which of the following?

A. Gender B. Race C. Religion D. All of the above

Lesson 6 106. Which of the following statement(s) concerning California taxes is correct?

A. Numerous rulings and decisions over the years have held specific foreign taxes as deductible under the income tax prohibition

B. California allows a credit for excess State Disability Insurance (SDI) if two or more of the taxpayer’s employers withheld more than the maximum amount for the year

C. A deduction is allowed for one-half of a taxpayer's Federal self-employment tax liability for the taxable year

D. Both B and C 107. Joel and Maria have a son named David who is a 20-year-old student at the University of Southern California.

David received $1,300 worth of investment income in 2023 and had earned income $1,700 but that was far less than half of the support he received from his parents. Both Joel and Maria are still alive. Based on this information, what can be said about the tax liability in California?

A. Both David’s parents were alive at the end of the year, so the Kiddie Tax is owed B. The Kiddie Tax is owed because David is a student under the age of 24 C. David had investment income less than $2,500 so there is no tax obligation D. David had earned income and must pay California taxes on his investment and earned income he

received

Examination Questions - 15 Hour California Tax Law

108. Nancy is a California resident who is filing her taxes as a head of household. Her alternative minimum taxable (AMT) income for 2023 is $179,000. What is her maximum alternative minimum tax (AMT) exemption amount?

A. $45,895 B. $63,481 C. $87,171 D. $91,793

109. The alternative minimum taxable income (AMTI) exclusion is available to certain small business taxpayers who

can exclude income, positive and negative adjustments, and preference items attributable to any trade or business when figuring AMTI. To qualify for this exemption, a taxpayer must own or have an ownership interest in a trade or business and have aggregate gross receipts, less returns and allowances, during the taxable year of less than what amount?

A. $1,000,000 B. $2,000,000 C. $3,000,000 D. $4,000,000

110. Retailers engaged in business in California must register with which of the following and pay the state's sales

tax, which applies to all retail sales of goods and merchandise except those sales specifically exempted by law? A. Franchise Tax Board (FTB) B. California Department of Tax and Fee Administration (CDTFA) C. California State Board of Equalization (BOE) D. California Office of Tax Appeals

111. Generally, if sales tax would apply when a taxpayer buys physical merchandise in California, which of the

following taxes applies when he or she makes a similar purchase without tax from a business located outside the state?

A. Use tax B. Income tax C. Property tax D. None of the above

112. Paula purchased a television for $2,000 from an out-of-state retailer that did not collect use tax. Which of the

following is true regarding the California use tax on the purchase? A. If a business is located outside of California, sales of physical products delivered to California locations

are generally subject to the state’s use tax and Paula must use the Use Tax Worksheet to calculate the Use Tax due on the price of the television

B. The purchase is only subject to use tax if the business has a permanent or temporary business location in California; therefore, Paula is not responsible to use the Use Tax Worksheet to calculate the Use Tax due on the price of the television

C. The purchase is only subject to use tax if the business has any kind of representative or agent in the state in California; therefore, Paula is not responsible to use the Use Tax Worksheet to calculate the Use Tax due on the price of the television

D. The purchase is only subject to use tax if the business installs or assembles merchandise in California; therefore, Paula is not responsible to use the Use Tax Worksheet to calculate the Use Tax due on the price of the television

113. Which of the following is a false statement regarding Form 1095-A - Health Insurance Marketplace Statement?

A. Form 1095-A is used to report certain information to the IRS about individuals who enroll in a qualified health plan through the Marketplace

B. Form 1095-A is furnished to individuals to allow them to claim the Premium Tax Credit C. Form 1095-A is furnished to individuals to allow them to reconcile the credit on their returns with advance

payments of the Premium Tax Credit (advance credit payments) D. Form 1095-A is used to report certain information to the IRS and to taxpayers about individuals who are

covered by minimum essential coverage and, therefore, are not liable for the individual shared responsibility payment

Examination Questions - 15 Hour California Tax Law

114. Employers are required to withhold mandatory employee payroll deductions to pay into state payroll taxes. Which of the following is not a California State payroll tax?

A. State Disability Insurance (SDI) B. Personal Income tax (PIT) C. Unemployment Insurance (UI) D. Franchise Tax

115. Sabrina is a married, filing separately taxpayer. She expects her withholding and credits to be less than 90% of

the tax shown on her 2023 California tax return. Therefore, Sabrina must make estimated tax payments if she expects to owe at least what amount in taxes for 2023 (after subtracting withholding and credits)?

A. $100 B. $250 C. $500 D. $1,000

116. The Franchise Tax Board modifies the use of the safe harbor rule for estimated taxes based on a taxpayer’s

adjusted gross income (AGI). Thus, taxpayers whose AGI is more than what amount must pay 110% of their prior year’s tax?

A. $150,000 B. $200,000 C. $250,000 D. $300,000

117. Web Pay is an online application to make electronic payments from a taxpayer’s bank account to pay personal and business income taxes. For which of the following would a California taxpayer not be able to use Web Pay?

A. To make an estimated tax payment B. To pay the balance due on his or her current-year tax return C. To request an installment agreement D. To make an amended return payment

118. All of the following are true regarding California individual tax penalties except:

A. The penalty for failure-to-pay the tax shown on an income tax return or an assessed deficiency by the due date is generally 50% of the tax not paid by the original due date of the return

B. Individual taxpayers may now be eligible for a one-time cancellation of a penalty for filing or paying their taxes late

C. The penalty for failure-to-file an income tax return by the due date is 5% of the amount of tax required to be shown on the return, less any earlier payments or credits, for the first month the return is late

D. The demand penalty is 25% of the total tax amount due, regardless of any payments or credits made on time

119. Individuals whose tax liability is greater than $80,000 or who make an estimated tax or extension payment that

exceeds $20,000 must: A. Request an installment agreement B. File an enforced collection action C. Make a payment with check, money order or cashier’s check D. Remit their tax payments electronically

Lesson 7 120. The minimum penalty for filing late in California is either 100% of the unpaid tax or what dollar amount, whichever

is less? A. $50 B. $75 C. $135 D. $150

Examination Questions - 15 Hour California Tax Law

121. Interest will be charged on any delinquent or late payment from the original due date of the return to the date paid. In addition, interest will be charged from the date of the billing notice until the date of payment, if other penalties are not paid within how many days of the date of the notice?

A. 10 days B. 14 days C. 15 days D. 20 days

122. Any taxpayer failing to provide requested information or failing to file a return after notice and demand, faces a

penalty of what percentage of total tax liability assessed without regard to any payments or credits? A. 10% B. 20% C. 25% D. 30%

123. Cost recovery fees may include which of the following?

A. A filing enforcement fee B. A collection fee C. A lien fee D. All of the above

124. If a tax return preparer was paid to complete a tax return for any taxpayer claiming the California Earned Income

Tax Credit (CalEITC), he or she must attach which of the following forms to the original or amended FTB Form 540?

A. Schedule CA B. Schedule P C. FTB Form 3596 D. FTB Form 3805P

125. In 2023, paid preparers of California income tax returns or claims for refund involving the California Earned

Income Tax Credit (CalEITC) must meet due diligence requirements in determining the taxpayer's eligibility for, and the amount of, the CalEITC. Failure to do so could result in a penalty of what for each failure?

A. $100 B. $500 C. $750 D. $1,000

126. An individual taxpayer wants to file a claim for refund for tax year 2019. What is the latest date the taxpayer could

be allowed the claim if the “look back” provision is not a factor? A. April 15, 2023 B. October 15, 2023 C. April 15, 2024 D. October 15, 2024

127. Evelyn filed her 2020 tax return on March 17, 2021. The statute of limitations for Franchise Tax Board (FTB) to

assess tax for this tax year would therefore expire on what date? A. April 15, 2022 B. April 15, 2023 C. April 15, 2024 D. April 15, 2025

Examination Questions - 15 Hour California Tax Law

128. If a taxpayer or the IRS reports a Federal adjustment to the Franchise Tax Board (FTB), or if a taxpayer files an amended California return reflecting the Federal adjustment, within six months after the final Federal determination date, the FTB may issue a proposed assessment. The assessment can be issued within the later of: 1) how many years after the date notice of the Federal adjustment was received, or 2) the expiration of any other open statute of limitation (SOL) under California law?

A. Two years B. Three years C. Four years D. Five years

129. A Power of Attorney (POA) Declaration gives all of the following general privileges to the taxpayer’s POA

representative except: A. Talk to the Franchise Tax Board (FTB) about a taxpayer’s account B. Receive and inspect taxpayer’s confidential tax information C. Represent the taxpayer in Franchise Tax Board (FTB) matters D. Receive and endorse a taxpayer’s refund check

130. In 2021, the Franchise Tax Board (FTB) launched FTB Form 3912 Power of Attorney - Active Representatives

on File letter. The purpose of the FTB Form 3912 is which of the following? A. FTB Form 3912 provides all taxpayers that have an active Power of Attorney (POA) with FTB a list of all

active POA representative relationships on their account B. FTB Form 3912 should be used for the purposes of revoking a POA C. FTB Form 3912 gives another person the legal right to look at a taxpayer’s account information D. FTB Form 3912 allows the taxpayer’s representative to waive the California statute of limitations