ACCA Taxation Principles and Regulations 5

Question 1

What is the US federal income tax treatment of qualified opportunity zone (QOZ) investments held for at least 10 years?

Accepted Answer

Appreciation in QOZ investment is excluded from income at sale

Answer

For QOZ investments held at least 10 years, the appreciation in the QOZ fund investment is permanently excluded from federal income tax upon sale.

Question 2

Under ACCA's Advanced Taxation module, which of the following is a key feature of the UK's Controlled Foreign Company (CFC) rules?

Accepted Answer

A charge arises when a UK company controls a low-taxed foreign company and the profits represent UK activities or finance income

Answer

UK CFC rules apply a charge to UK controlling companies when a foreign subsidiary is low-taxed and the profits arise from UK-connected activities or passive finance income.

Question 3

Which concept determines whether a taxpayer is a US 'tax resident' for purposes of worldwide income taxation?

Accepted Answer

Physical presence of more than 183 days in any calendar year, OR meeting the lawful permanent resident test

Answer

US tax residency is determined by either holding a green card (lawful permanent resident test) or meeting the substantial presence test of 183+ days using a weighted three-year formula.

Question 4

In a like-kind exchange under IRC Section 1031, which of the following would DISQUALIFY the transaction from nonrecognition treatment?

Accepted Answer

The taxpayer exchanges US real property for foreign real property

Answer

Post-TCJA, Section 1031 only applies to real property, and US real property cannot be exchanged for foreign real property in a qualifying like-kind exchange.

Question 5

What is the primary purpose of an Advance Pricing Agreement (APA) in international taxation?

Accepted Answer

To reach agreement with tax authorities on appropriate transfer pricing methodology for future transactions

Answer

An APA is an agreement between a taxpayer and one or more tax authorities establishing an agreed transfer pricing methodology for future related-party transactions, providing certainty.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Taxation Principles and Regulations 5