CA Taxation & Compliance 3

Question 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?

Accepted Answer

20%

Answer

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

Question 2

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

Accepted Answer

Law firm

Answer

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

Question 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?

Accepted Answer

$50,000 ordinary dividend income

Answer

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

Question 4

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

Accepted Answer

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

Answer

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.

Question 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?

Accepted Answer

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

Answer

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.

(CA) Chartered Certified Accountant Practice Test

(CA) Chartered Certified Accountant Practice Test

CA Taxation & Compliance 3