ABA Tax Preparation & Compliance 3

Question 1

What is the penalty rate for failing to pay taxes by the due date (underpayment penalty) per month under IRC §6651?

Accepted Answer

0.5% per month, up to 25%

Answer

The failure-to-pay penalty under IRC §6651(a)(2) is 0.5% of unpaid tax per month (or part of a month), capped at 25% of the unpaid balance.

Question 2

For 2024, up to what amount of Social Security wages is subject to the 6.2% OASDI tax?

Accepted Answer

$168,600

Answer

The Social Security wage base for 2024 is $168,600; wages above this amount are not subject to the 6.2% OASDI portion of FICA.

Question 3

A taxpayer sells their primary residence of 6 years for a $320,000 gain. They are married filing jointly. How much gain is excludable?

Accepted Answer

$500,000

Answer

Under IRC §121, married couples filing jointly can exclude up to $500,000 of gain on the sale of a principal residence if ownership and use tests are met.

Question 4

Which depreciation method assigns equal expense amounts each year over an asset's useful life?

Accepted Answer

Straight-line

Answer

Straight-line depreciation divides the depreciable basis evenly over the asset's recovery period, yielding the same deduction each year.

Question 5

A corporation distributes $10,000 to a shareholder from its earnings and profits (E&P). The shareholder's tax basis in the stock is $3,000. How is the distribution classified?

Accepted Answer

$10,000 ordinary dividend income

Answer

Distributions from current or accumulated E&P are treated as ordinary dividends to the extent of E&P; since $10,000 ≤ E&P, the full amount is a dividend.

(ABA) Accredited Business Accountant Practice Test

(ABA) Accredited Business Accountant Practice Test

ABA Tax Preparation & Compliance 3