CA Tax Planning & Preparation 3

Question 1

A C corporation has taxable income of $500,000. What flat federal corporate income tax rate applies under current law (post-TCJA)?

Accepted Answer

21%

Answer

The Tax Cuts and Jobs Act of 2017 established a flat 21% federal corporate income tax rate for C corporations.

Question 2

Which of the following is NOT a qualifying reason to avoid the 10% early withdrawal penalty from a traditional IRA?

Accepted Answer

Purchase of a vacation home

Answer

Purchase of a vacation home is not a listed exception to the 10% early distribution penalty under IRC Section 72(t).

Question 3

A taxpayer contributes $6,000 to a Health Savings Account (HSA). What is the primary federal tax advantage of an HSA?

Accepted Answer

Contributions are deductible, grow tax-free, and qualified withdrawals are tax-free

Answer

HSAs offer a triple tax advantage: deductible contributions, tax-free growth, and tax-free qualified medical expense withdrawals.

Question 4

What is the 'kiddie tax' and who does it apply to?

Accepted Answer

A rule taxing a child's unearned income at the parent's marginal rate

Answer

The kiddie tax taxes a child's net unearned income exceeding a threshold at the parent's marginal tax rate to prevent income-shifting strategies.

Question 5

Under the alternative minimum tax (AMT) system, which of the following is an AMT preference item that may trigger AMT liability?

Accepted Answer

Accelerated depreciation on personal property

Answer

Accelerated MACRS depreciation in excess of straight-line depreciation is a preference item added back for AMT calculation purposes.

(CA) Chartered Certified Accountant Practice Test