ACCA Taxation Principles and Regulations 4

Question 1

A US corporation receives a $100,000 dividend from a 15%-owned foreign corporation. Under the TCJA, what is the dividends received deduction (DRD) percentage available?

Accepted Answer

65%

Answer

A 65% DRD applies to dividends from corporations in which the taxpayer owns at least 20% but less than 80% of stock; for less than 20% ownership, the DRD is 50%.

Question 2

Under the ACCA syllabus, what is the key difference between tax evasion and tax avoidance?

Accepted Answer

Tax evasion is illegal concealment of tax liability; tax avoidance is legal reduction of tax liability

Answer

Tax evasion involves illegal concealment or misrepresentation of income or assets, while tax avoidance involves legally reducing tax liability by exploiting provisions within the law.

Question 3

Under OECD BEPS Action Plan 13, what three-tiered documentation approach is required for multinational enterprises?

Accepted Answer

Country-by-Country Report, Master File, and Local File

Answer

BEPS Action 13 requires a Country-by-Country Report (CbCR), a Master File with group-level information, and a Local File with entity-specific transfer pricing documentation.

Question 4

Which of the following describes the 'economic substance' requirement for business entities in offshore jurisdictions?

Accepted Answer

Entities must have real employees, premises, and management decision-making in the jurisdiction

Answer

Economic substance requirements mandate that entities claiming tax residence in a jurisdiction have genuine employees, adequate expenditure, physical premises, and core income-generating activities there.

Question 5

A self-employed individual has net self-employment income of $100,000. What is the deductible portion of self-employment tax for income tax purposes?

Accepted Answer

One-half of the SE tax paid

Answer

Self-employed individuals may deduct one-half of their self-employment tax as an above-the-line deduction to reflect the employer's share of FICA taxes.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Taxation Principles and Regulations 4