Tax Planning & Preparation Flashcards
7 cards from real CAT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Tax Planning & Preparation flashcards as text
A taxpayer over age 73 must take a Required Minimum Distribution (RMD) from a traditional IRA. Failure to take the RMD results in an excise tax of:
Answer: 25% of the amount not distributed
SECURE 2.0 reduced the RMD failure penalty from 50% to 25% (and potentially 10% if corrected promptly), effective for tax years beginning in 2023.
Under the wash-sale rule, a taxpayer CANNOT claim a loss on the sale of a security if they purchase a substantially identical security within:
Answer: 30 days before or after the sale
The wash-sale rule disallows a loss if the same or substantially identical security is purchased within 30 days before or after the loss sale.
Alimony paid under a divorce or separation agreement executed after December 31, 2018, is treated as:
Answer: Not deductible by the payer and not taxable to the recipient
Under the Tax Cuts and Jobs Act, for agreements executed after 2018, alimony is neither deductible by the payer nor included in the recipient's gross income.
The Section 199A deduction (qualified business income deduction) allows eligible pass-through business owners to deduct up to what percentage of qualified business income?
Answer: 20%
The Section 199A deduction allows owners of sole proprietorships, S corporations, and partnerships to deduct up to 20% of qualified business income, subject to limitations.
A taxpayer who cannot file their federal return by the due date should file Form 4868 to obtain an automatic extension of:
Answer: 6 months
Form 4868 grants an automatic 6-month extension to file a federal income tax return, but it does NOT extend the time to pay any taxes owed.
Which of the following credits is REFUNDABLE, meaning the taxpayer can receive a refund even if the credit exceeds tax liability?
Answer: Earned Income Tax Credit (EITC)
The Earned Income Tax Credit is fully refundable, so eligible taxpayers can receive a refund even if the credit exceeds their total tax liability.
A C corporation is subject to federal income tax at a flat rate of:
Answer: 21%
The Tax Cuts and Jobs Act of 2017 permanently reduced the C corporation federal income tax rate to a flat 21%, eliminating the prior graduated rate structure.