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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. A taxpayer's passive activity loss (PAL) that cannot be deducted in the current year is:

    Answer: Suspended and carried forward to offset future passive income or recognized on disposition

    Disallowed passive activity losses are suspended and carried forward indefinitely to offset future passive income or are fully deductible when the taxpayer disposes of the activity.

  2. Under securities law, which exemption allows small companies to raise up to $5 million in a 12-month period through offerings to accredited and non-accredited investors without full SEC registration?

    Answer: Regulation Crowdfunding

    Regulation Crowdfunding (Reg CF) allows issuers to raise up to a specified limit (currently $5 million) via SEC-registered crowdfunding portals from both accredited and non-accredited investors.

  3. Which of the following best describes a 'like-kind exchange' under IRC § 1031?

    Answer: A deferral of gain when real property held for business or investment is exchanged for other qualifying real property

    IRC Section 1031 allows deferral (not elimination) of gain when qualifying real property used in a trade or business or for investment is exchanged for other like-kind real property.

  4. A contract formed under duress is:

    Answer: Voidable by the coerced party

    A contract entered into under duress is voidable at the option of the coerced party, who may choose to affirm or rescind it.

  5. For federal tax purposes, which of the following retirement plan contribution limits applies to a 401(k) employee elective deferral for 2023 (under age 50)?

    Answer: $22,500

    For 2023, the IRC Section 402(g) limit on employee elective deferrals to a 401(k) plan is $22,500 for participants under age 50.

  6. Under the Foreign Corrupt Practices Act (FCPA), it is illegal for U.S. companies to:

    Answer: Bribe foreign government officials to obtain or retain business

    The FCPA prohibits U.S. persons and companies from paying bribes to foreign government officials to obtain or retain business advantages.

  7. Which of the following taxpayers may claim the Earned Income Tax Credit (EITC)?

    Answer: A low-income worker with earned income below the applicable threshold

    The EITC is available to taxpayers with earned income below specified thresholds; married filing separately, high-income earners, and nonresident aliens are generally disqualified.