Tax Planning & Compliance Flashcards
7 cards from real CPA 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 & Compliance flashcards as text
Which of the following is a 'below-the-line' deduction available only to taxpayers who itemize?
Answer: State and local taxes (SALT) up to $10,000
SALT is an itemized deduction on Schedule A, capped at $10,000 for all filers after the TCJA; the other options are above-the-line deductions available regardless of itemizing.
Under the corporate dividends-received deduction (DRD), a domestic C corporation owning 20–79% of another domestic corporation may deduct what percentage of dividends received?
Answer: 65%
Under IRC Section 243, a corporation with 20–79% ownership deducts 65% of dividends received; 80%+ ownership qualifies for the 100% deduction.
What is the general statute of limitations for the IRS to assess additional federal income tax?
Answer: 3 years from the later of the return due date or the actual filing date
Under IRC Section 6501, the IRS generally has 3 years to assess additional tax; the period extends to 6 years if income is omitted by more than 25% and is unlimited for fraud.
A self-employed CPA contributes $23,000 to a Solo 401(k) as an employee elective deferral in 2024. What additional employer contribution can she make based on net self-employment earnings of $200,000?
Answer: Up to 25% of net self-employment compensation, subject to the overall $69,000 limit
As both employee and employer in a Solo 401(k), she can contribute up to 25% of net self-employment income as an employer profit-sharing contribution, not to exceed the overall §415 limit of $69,000 (2024).
Which of the following trusts is included in the grantor's gross estate for federal estate tax purposes?
Answer: A revocable living trust
Assets in a revocable trust are fully includable in the grantor's estate because the grantor retains the power to revoke, amend, or control the trust at any time.
Under the check-the-box regulations, a single-member LLC owned by an individual is treated as which entity for federal tax purposes by default?
Answer: A disregarded entity (sole proprietorship)
By default, a single-member LLC is a disregarded entity; the owner reports income and expenses directly on Schedule C (or E/F) as if the LLC did not exist.
Which tax planning strategy involves shifting income-producing assets to family members in lower tax brackets to reduce the family's overall tax burden?
Answer: Income shifting
Income shifting moves assets or income to family members in lower tax brackets, though the 'kiddie tax' rules limit this strategy for unearned income of children under age 19 (or 24 if full-time students).