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Taxation Principles and Regulations Flashcards

7 cards from real ACCA 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 Principles and Regulations flashcards as text

  1. Under the US Internal Revenue Code, what is the standard deduction for a single filer for tax year 2024?

    Answer: $14,600

    For tax year 2024, the standard deduction for single filers is $14,600, adjusted annually for inflation.

  2. Which of the following best describes the concept of 'substance over form' in taxation?

    Answer: Tax authorities look at the economic reality of a transaction rather than its legal form

    The substance over form doctrine allows tax authorities to tax transactions based on their true economic substance rather than their legal characterization.

  3. A corporation has a net operating loss (NOL) in the current tax year. Under current US tax law, how may this NOL generally be treated?

    Answer: Carried forward indefinitely, limited to 80% of taxable income

    Post-2017 Tax Cuts and Jobs Act, NOLs are generally carried forward indefinitely but limited to 80% of taxable income in any carryforward year.

  4. Which type of tax treaty provision is specifically designed to prevent 'treaty shopping'?

    Answer: Limitation on Benefits (LOB) clause

    The Limitation on Benefits clause restricts treaty benefits to residents who meet specific ownership and activity tests, preventing third-country residents from exploiting treaties.

  5. Under ACCA's ATX module, what is the primary purpose of the General Anti-Abuse Rule (GAAR)?

    Answer: To counteract tax advantages from abusive arrangements that cannot reasonably be regarded as reasonable

    GAAR targets arrangements that are abusive—where obtaining a tax advantage cannot reasonably be regarded as a reasonable course of action in the circumstances.

  6. A US taxpayer receives a $10,000 foreign tax credit limitation. If actual foreign taxes paid are $12,000, what happens to the excess $2,000?

    Answer: It can be carried back 1 year and forward 10 years

    Excess foreign tax credits can be carried back one year and forward ten years to offset future or prior US tax liability.

  7. Which principle holds that income should be taxed to the person who earns it, preventing income-shifting to lower-bracket family members?

    Answer: The Assignment of Income Doctrine

    The Assignment of Income Doctrine, established in Lucas v. Earl, holds that income is taxed to the person who earns or owns the right to receive it.