AFTR AFTR Business Tax Basics 3

Question 1

When a business sells depreciable property used in a trade or business at a gain, the gain is reported on:

Accepted Answer

Form 4797, Sales of Business Property

Answer

Gains and losses from the sale of business property, including recaptured depreciation, are reported on Form 4797, which then flows to Form 1040.

Question 2

A net operating loss (NOL) generated in tax years after 2017 can generally be carried:

Accepted Answer

Forward indefinitely, limited to 80% of taxable income

Answer

Under the TCJA, NOLs arising after 2017 can no longer be carried back (with limited exceptions) but may be carried forward indefinitely, limited to 80% of taxable income in the carryforward year.

Question 3

The standard mileage rate method for vehicle deductions can generally NOT be used when:

Accepted Answer

The taxpayer used MACRS depreciation on the vehicle in a prior year

Answer

Taxpayers who previously claimed MACRS depreciation (or Section 179) on a vehicle generally cannot switch to the standard mileage rate method for that vehicle.

Question 4

Employers who pay wages must deposit employment taxes by using:

Accepted Answer

EFTPS (Electronic Federal Tax Payment System)

Answer

Employers must deposit federal employment taxes (income tax withheld, Social Security, and Medicare) through EFTPS; deposits by check directly to the IRS are no longer permitted.

Question 5

A corporation that accumulates earnings beyond the reasonable needs of the business may be subject to:

Accepted Answer

The Accumulated Earnings Tax (AET) of 20%

Answer

The Accumulated Earnings Tax (AET) of 20% is imposed on C corporations that accumulate earnings in excess of $250,000 ($150,000 for personal service corporations) without reasonable business justification.

AFTR - Annual Federal Tax Refresher Practice Test

AFTR - Annual Federal Tax Refresher Practice Test

AFTR AFTR Business Tax Basics 3