Taxation — Individual & Corporate Flashcards
6 cards from real Certified Public Accountant practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Taxation — Individual & Corporate flashcards as text
What is the holding period required for long-term capital gains treatment on the sale of a capital asset?
Answer: More than 12 months
A capital asset must be held for more than 12 months to qualify for long-term capital gains treatment and its preferential tax rates.
Which of the following is NOT a requirement for a business to be classified as an S corporation for tax purposes?
Answer: Have at least two classes of shareholders
S corporations must have only one class of stock; having two classes of shareholders (which implies a second class of stock) would disqualify a company from S corporation status.
What is the primary advantage of a Roth IRA compared to a traditional IRA?
Answer: Qualified distributions in retirement are tax-free
Roth IRA contributions are made with after-tax dollars, so qualified withdrawals in retirement are completely tax-free, including all earnings.
Under the federal tax code, which method of accounting must a C corporation with average annual gross receipts over $30 million generally use?
Answer: Accrual method
C corporations (other than farming businesses and qualified personal service corporations) with average annual gross receipts over $30 million (2024 threshold) must use the accrual method.
What is the 'wash sale' rule under IRC Section 1091?
Answer: A loss on a security sale is disallowed if substantially identical securities are purchased within 30 days before or after the sale
The wash sale rule disallows a capital loss deduction if the taxpayer buys substantially identical securities within the 30-day window before or after the sale creating the loss.
Which type of entity avoids double taxation by passing income, deductions, and credits directly to its owners' individual tax returns?
Answer: S corporation
S corporations are pass-through entities that avoid double taxation because income is not taxed at the corporate level but flows through to shareholders' individual returns.