Mixed Deck — All CTA Topics Flashcards
100 cards from real CTA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 20 Mixed Deck — All CTA Topics flashcards as text
The Low-Income Housing Tax Credit (LIHTC) under Section 42 incentivizes:
Answer: Investment in affordable rental housing development
The LIHTC provides tax credits to investors in qualifying low-income housing projects, incentivizing the development and preservation of affordable rental housing.
The taxpayer penalty for substantial understatement of income tax is:
Answer: 20% of the portion of the underpayment attributable to the substantial understatement
The accuracy-related penalty for substantial understatement of income tax is 20% of the understatement attributable to the substantial understatement.
Which of the following is a key characteristic of an S corporation?
Answer: Income passes through to shareholders' personal returns
S corporations are pass-through entities where income and losses flow through to shareholders' individual tax returns.
The step-up in basis at death allows heirs to:
Answer: Receive inherited assets with a cost basis equal to fair market value at date of death
Assets inherited from a decedent receive a new cost basis equal to fair market value at the date of death, potentially eliminating built-in capital gains.
What is the current flat federal corporate income tax rate under the Tax Cuts and Jobs Act?
Answer: 21%
The Tax Cuts and Jobs Act of 2017 established a flat 21% federal corporate income tax rate.
The alternative minimum tax (AMT) was designed primarily to ensure that:
Answer: High-income taxpayers cannot use too many deductions to eliminate their tax liability
The AMT was enacted to prevent high-income taxpayers from using deductions and credits to avoid paying federal income tax.
The statute of limitations for the IRS to assess additional tax on a return is generally:
Answer: 3 years from the due date or filing date, whichever is later
The IRS generally has three years from the date a return is filed or its due date (whichever is later) to assess additional taxes.
A partnership files which informational return with the IRS?
Answer: Form 1065
Partnerships file Form 1065, an informational return that reports income, deductions, and each partner's distributive share.
What is the tax treatment of a Roth IRA qualified distribution?
Answer: Tax-free and penalty-free
Qualified Roth IRA distributions are completely tax-free and penalty-free because contributions were made with after-tax dollars.
Under the MACRS system, what is the recovery period for 5-year property (e.g., automobiles, computers)?
Answer: 5 years
Under MACRS, 5-year property has a 5-year recovery period using the 200% declining balance method.
What is the maximum contribution limit to a traditional IRA for taxpayers under age 50 in 2024?
Answer: $7,000
The IRA contribution limit for 2024 is $7,000 for taxpayers under age 50.
Alimony received under a divorce agreement finalized after December 31, 2018 is treated how for federal income tax purposes?
Answer: Tax-exempt
Under the Tax Cuts and Jobs Act, alimony received under post-2018 agreements is no longer includable in the recipient's gross income.
The Research and Development Tax Credit (Section 41) is available to businesses that incur qualified research expenses in what type of activities?
Answer: Research to develop new or improved business components through technological uncertainty
The R&D credit applies to qualifying research activities that meet a 4-part test including technological uncertainty and elimination of uncertainty through experimentation.
Qualified Opportunity Zone (QOZ) investments offer which tax benefit?
Answer: Deferral and potential reduction of capital gains taxes, plus exclusion of gains from QOZ investment appreciation
QOZ investments allow deferral of existing capital gains, a step-up in basis for long-held investments, and exclusion of gains on QOZ fund appreciation held over 10 years.
The economic substance doctrine is used by the IRS to challenge transactions that:
Answer: Lack business purpose or economic substance beyond tax benefits
The economic substance doctrine disallows tax benefits from transactions that have no genuine economic substance or legitimate non-tax business purpose.
The Business Energy Investment Tax Credit (ITC) under Section 48 incentivizes investment in which type of property?
Answer: Qualifying renewable energy property like solar panels
Section 48 provides an investment tax credit for qualifying renewable energy property including solar, wind, and other clean energy installations.
What is the minimum penalty for failure to file a tax return that is more than 60 days late (for returns due after 2015)?
Answer: The lesser of $485 (indexed for inflation) or 100% of the tax owed
Under IRC Section 6651, if a return is more than 60 days late, the minimum failure-to-file penalty is the lesser of the indexed minimum amount (approximately $485 for 2024) or 100% of the unpaid tax.
What is the accuracy-related penalty percentage imposed under IRC Section 6662 for a substantial understatement of income tax or negligence?
Answer: 20% of the underpayment attributable to the violation
IRC Section 6662 imposes an accuracy-related penalty of 20% of the portion of the underpayment attributable to negligence, disregard of rules, or a substantial understatement of income tax.
A taxpayer who has an unpaid tax liability and the IRS has filed a Notice of Federal Tax Lien (NFTL) wants to sell their home. What IRS document would allow the property to be sold free and clear of the lien?
Answer: Certificate of Discharge of Federal Tax Lien
A Certificate of Discharge removes the federal tax lien from a specific property, allowing it to be sold free and clear, even while the underlying tax liability remains and the lien attaches to other property.
A special use valuation election under IRC Section 2032A allows an estate to value farm or business real property at:
Answer: Its actual use value rather than its highest and best use value
Section 2032A allows qualifying farm and business real property to be valued based on its actual use rather than its fair market value, potentially reducing estate taxes significantly.