CA Taxation & Regulatory Compliance 3

Question 1

A sole proprietor's net self-employment income is $100,000. What is the deductible portion of self-employment tax on Schedule 1?

Accepted Answer

One-half of the SE tax calculated on Schedule SE

Answer

IRC Section 164(f) allows a deduction equal to one-half of the self-employment tax computed on Schedule SE, reducing adjusted gross income.

Question 2

Under the at-risk rules of IRC Section 465, a taxpayer's deductible loss is limited to the amount:

Accepted Answer

The taxpayer is personally liable for or has at risk

Answer

The at-risk rules limit deductions to amounts the taxpayer has personally invested plus recourse debt for which the taxpayer is personally liable.

Question 3

A corporation distributes a dividend of $10,000 to an individual shareholder. The dividends qualify as 'qualified dividends.' What is the maximum federal tax rate on this income for a high-income taxpayer?

Accepted Answer

23.8%

Answer

High-income taxpayers pay 20% on qualified dividends plus the 3.8% Net Investment Income Tax (NIIT), totaling 23.8%.

Question 4

Which of the following is NOT a requirement for the home office deduction under IRC Section 280A?

Accepted Answer

The taxpayer must own (not rent) the home

Answer

The home office deduction is available to both homeowners and renters; ownership of the home is not a requirement under Section 280A.

Question 5

When an S corporation has a built-in gain from its prior C corporation status, the built-in gains tax applies during the:

Accepted Answer

First 5 years after S election

Answer

The built-in gains tax under IRC Section 1374 applies to dispositions of assets within 5 years of the S corporation election (recognition period).

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Taxation & Regulatory Compliance 3