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Taxation & Business Law 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 Taxation & Business Law flashcards as text

  1. Under federal tax law, the standard deduction for a single filer is adjusted annually for inflation. Which code section governs this adjustment?

    Answer: IRC § 63

    IRC Section 63 defines taxable income and contains the standard deduction provisions including inflation adjustments.

  2. A general partnership is formed when:

    Answer: Two or more persons agree to carry on a business for profit as co-owners

    Under the Uniform Partnership Act, a partnership is formed by the association of two or more persons to carry on as co-owners a business for profit, and no formal filing is required.

  3. Which of the following payments is deductible as a business expense under IRC § 162?

    Answer: Ordinary and necessary expenses of operating a trade or business

    IRC Section 162 allows deductions for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

  4. Under the Statute of Frauds, which of the following contracts must be in writing to be enforceable?

    Answer: A contract to sell real property

    The Statute of Frauds requires contracts for the sale of real property to be evidenced by a writing signed by the party to be charged.

  5. The self-employment tax rate that applies to net self-employment income up to the Social Security wage base is:

    Answer: 15.3%

    The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare, applied to net self-employment earnings up to the wage base (for the Social Security portion).

  6. A limited liability company (LLC) with two members is taxed as which of the following by default?

    Answer: Partnership

    By default, a multi-member LLC is classified as a partnership for federal tax purposes unless it elects to be taxed as a corporation.

  7. Which of the following best describes the concept of 'constructive receipt' in tax law?

    Answer: Income is taxable when it is credited to an account or made available without substantial restrictions

    Under the constructive receipt doctrine, income is taxable when it is credited, set apart, or made available to the taxpayer, even if not actually received.