Tax Planning & Strategy Flashcards
7 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Tax Planning & Strategy flashcards as text
A corporation has both domestic and foreign-source income. Which method allows it to reduce US tax on foreign income by crediting taxes paid abroad?
Answer: Foreign tax credit (FTC)
The foreign tax credit allows US corporations to credit taxes paid to foreign governments against their US tax liability on the same income.
Under IRC §199A, qualified business income (QBI) deduction for pass-through entities is generally limited to what percentage?
Answer: 20%
The §199A deduction allows eligible taxpayers to deduct up to 20% of qualified business income from pass-through entities.
Which depreciation method accelerates deductions most aggressively in early years for tax planning purposes?
Answer: Double-declining balance
Double-declining balance applies twice the straight-line rate to the declining book value, front-loading the largest depreciation in early years.
A company wants to defer income to the following tax year. Which of the following strategies best achieves this for a cash-basis taxpayer?
Answer: Delay sending invoices until early next year
A cash-basis taxpayer recognizes income when received, so delaying invoicing until next year defers the cash receipt and the tax liability.
Which type of corporate reorganization under IRC §368 allows a company to acquire a target's assets in exchange for stock without triggering gain to the target?
Answer: Type C reorganization
A Type C reorganization involves the acquisition of substantially all of the target's assets in exchange for the acquiring corporation's voting stock, generally tax-free.
A US parent receives dividends from a wholly-owned foreign subsidiary. Under the TCJA participation exemption, what percentage of foreign-source dividends may be deducted?
Answer: 100%
IRC §245A provides a 100% dividends-received deduction for dividends from specified 10%-owned foreign corporations, creating a territorial tax system.
Which tax planning strategy involves shifting income to a lower-bracket family member through the use of gifts of income-producing property?
Answer: Income splitting
Income splitting transfers income-producing assets to lower-bracket taxpayers (e.g., family members) to reduce the overall family tax burden.