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. A taxpayer has a net operating loss (NOL) generated in 2022. Under current law (post-TCJA), how may this NOL be carried forward?

    Answer: Carried forward indefinitely but limited to 80% of taxable income in the carryforward year

    Post-TCJA NOLs (2018 onward) may be carried forward indefinitely but can only offset 80% of taxable income in any carryforward year, with no carryback except for farming losses.

  2. Which of the following correctly describes the 'Step-Up in Basis' rule under IRC §1014 for inherited property?

    Answer: The beneficiary's basis equals the fair market value of the property at the date of death (or alternate valuation date)

    Under IRC §1014, inherited property receives a basis equal to its fair market value on the decedent's date of death, eliminating unrealized appreciation from income tax.

  3. A U.S. taxpayer living abroad can exclude foreign earned income under IRC §911. What is the maximum foreign earned income exclusion for 2024?

    Answer: $126,500

    For 2024, the foreign earned income exclusion under IRC §911 is $126,500, indexed annually for inflation.

  4. In a §338(h)(10) election, what is the primary tax effect on the target corporation's assets?

    Answer: The acquisition is treated as an asset purchase, triggering gain or loss at the target entity level with a stepped-up basis for the buyer

    A §338(h)(10) election treats the stock sale as a deemed asset sale, causing the target to recognize gain on its assets while giving the buyer a stepped-up basis equal to purchase price.

  5. Under the Uniform Capitalization Rules (UNICAP) of IRC §263A, which of the following costs must be capitalized into inventory by a manufacturer?

    Answer: Direct labor and allocable indirect production costs such as factory overhead

    IRC §263A requires manufacturers to capitalize direct material, direct labor, and allocable indirect costs (including factory overhead) into the cost of inventory.

  6. Which IRS form is used to report transactions with foreign trusts and receipt of certain foreign gifts under IRC §§6048 and 6039F?

    Answer: Form 3520

    Form 3520 is used to report transactions with foreign trusts and receipt of large foreign gifts or bequests exceeding threshold amounts.

  7. A corporation has a capital loss of $50,000 in the current year and no capital gains. How may this capital loss be treated?

    Answer: Carried back 3 years and forward 5 years to offset capital gains only

    Corporate capital losses may only offset capital gains; excess losses are carried back 3 years and forward 5 years as short-term capital losses.