Practice Test Geeks(CA) Chartered Certified Accountant Practice Test
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Taxation & Compliance Flashcards

7 cards from real CA 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 & Compliance flashcards as text

  1. Under IRC §199A, a qualified business income (QBI) deduction allows eligible taxpayers to deduct up to what percentage of QBI from a qualified trade or business?

    Answer: 20%

    IRC §199A allows a deduction of up to 20% of qualified business income from pass-through entities and sole proprietorships, subject to limitations.

  2. Which of the following is a 'specified service trade or business' (SSTB) excluded from the full §199A benefit at higher income levels?

    Answer: Law firm

    Law, health, consulting, financial services, and performing arts are SSTBs; engineering and architecture were explicitly carved out from the SSTB definition.

  3. A C corporation distributes $50,000 to its sole shareholder who has a $10,000 basis in the stock. The corporation has $60,000 of current E&P and $0 accumulated E&P. How is the distribution taxed?

    Answer: $50,000 ordinary dividend income

    Since the distribution ($50,000) does not exceed current E&P ($60,000), the entire amount is a qualified dividend taxable as ordinary income.

  4. Under the FBAR (FinCEN Form 114) rules, who must file if they have foreign financial accounts?

    Answer: Any U.S. person with aggregate foreign account balances exceeding $10,000 at any point during the calendar year

    Any U.S. person (including individuals, corporations, partnerships) must file FinCEN 114 if aggregate foreign account balances exceeded $10,000 at any time during the year.

  5. A partnership has a §754 election in effect. A partner sells their interest at a gain of $40,000 above their share of inside basis. What is the effect of the election?

    Answer: The partnership adjusts the basis of its assets by $40,000 for the purchasing partner under §743(b)

    A §754 election triggers a §743(b) basis adjustment for the purchasing partner equal to the difference between their cost basis and share of inside basis.

  6. Which depreciation method must be used for residential rental property placed in service after 1986 under MACRS?

    Answer: Straight-line over 27.5 years

    Residential rental property uses the straight-line method over a 27.5-year recovery period under the GDS of MACRS.

  7. Under the Affordable Care Act employer mandate, what is the threshold number of full-time equivalent employees that triggers the 'large employer' shared responsibility payment?

    Answer: 50 FTE employees

    Applicable Large Employers (ALEs) with 50 or more full-time equivalent employees may be subject to the employer shared responsibility payment under IRC §4980H.