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
Under IRC §1031, a like-kind exchange defers capital gain recognition. What is the deadline to identify replacement property after closing the relinquished property?
Answer: 45 days
The taxpayer must identify the replacement property within 45 days of transferring the relinquished property to qualify for §1031 deferral.
Which of the following best describes a net operating loss (NOL) carryforward under current US tax law after the TCJA?
Answer: No carryback, indefinite carryforward, 80% offset
Post-TCJA, NOLs generally cannot be carried back but can be carried forward indefinitely; however, they are limited to offsetting 80% of taxable income in a given year.
A controller is evaluating whether to structure a new venture as an S corporation vs. a C corporation. A primary tax advantage of the S corporation is:
Answer: Pass-through taxation eliminating entity-level income tax
S corporations are pass-through entities, meaning income is taxed only once at the shareholder level, avoiding the double taxation applicable to C corporations.
What is the primary purpose of a tax equalization policy in a multinational corporation?
Answer: Ensure expatriate employees pay no more or less tax than they would in their home country
Tax equalization ensures that an employee on international assignment pays the same hypothetical tax they would have paid at home, with the employer absorbing any excess foreign taxes.
Which tax concept allows a corporation to deduct interest on debt used to acquire another company, making leveraged buyouts tax-efficient?
Answer: Interest expense deductibility
Interest paid on acquisition debt is generally deductible under IRC §163, reducing taxable income and making debt-financed acquisitions more tax-efficient than equity-financed ones.
Transfer pricing rules under IRC §482 require transactions between related parties to be priced at what standard?
Answer: Arm's-length standard
§482 requires that transactions between related parties reflect what unrelated parties dealing at arm's length would charge, preventing profit shifting.
A company sells a capital asset held for 14 months at a gain. The gain will be taxed at which rate category?
Answer: Long-term capital gains rates
Assets held for more than 12 months qualify for long-term capital gains treatment, with preferential rates of 0%, 15%, or 20% depending on the taxpayer's income.