CAT Accounting Technician Taxation & Regulatory Compliance 3 — Questions and Answers
Question 1: Which of the following is a 'below-the-line' deduction on an individual tax return?
- Student loan interest deduction
- Alimony paid (pre-2019 divorce)
- Charitable contribution deduction (Correct answer)
- Health savings account contribution
Correct answer: Charitable contribution deduction
Charitable contribution deductions are itemized deductions taken below the line (after AGI), not adjustments to gross income.
Question 2: An S corporation election is made by filing which IRS form, and by what date for it to be effective for the current tax year (first 2.5 months)?
- Form 2553, within 75 days of year-start (Correct answer)
- Form 1120S, by the return due date
- Form 8832, by March 15
- Form 2553, within 30 days of incorporation
Correct answer: Form 2553, within 75 days of year-start
Form 2553 must be filed within the first 2 months and 15 days (75 days) of the tax year to be effective for that year.
Question 3: The Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies from bribing foreign officials. Which two key provisions does it contain?
- Anti-bribery and books/records provisions (Correct answer)
- Anti-money laundering and whistleblower provisions
- Export control and sanctions provisions
- Insider trading and disclosure provisions
Correct answer: Anti-bribery and books/records provisions
The FCPA has two main provisions: the anti-bribery provision and the accounting/books and records provision requiring accurate record-keeping.
Question 4: A business purchased equipment for $50,000. In Year 1, it claimed $20,000 of bonus depreciation. If the equipment is sold in Year 2 for $40,000, what is the adjusted basis for gain calculation?
- $50,000
- $40,000
- $30,000 (Correct answer)
- $20,000
Correct answer: $30,000
Adjusted basis equals original cost ($50,000) minus depreciation taken ($20,000), resulting in a $30,000 basis.
Question 5: Under the Bank Secrecy Act, a financial institution must file a Currency Transaction Report (CTR) for cash transactions exceeding what threshold?
- $5,000
- $7,500
- $10,000 (Correct answer)
- $25,000
Correct answer: $10,000
The Bank Secrecy Act requires CTR filings for cash transactions over $10,000 in a single business day.
Question 6: Which tax form does a partnership use to report its income, deductions, and credits to the IRS?
- Form 1065 (Correct answer)
- Form 1120
- Form 1041
- Form 1120-S
Correct answer: Form 1065
Partnerships file Form 1065, an informational return, and issue Schedule K-1s to each partner reporting their distributive share.
Question 7: Under IRC §179, a business elects to expense the cost of qualifying property immediately. For 2024, what is the approximate maximum §179 deduction limit?
- $500,000
- $750,000
- $1,000,000
- $1,160,000 (Correct answer)
Correct answer: $1,160,000
The §179 deduction limit is indexed for inflation and was approximately $1,160,000 for tax year 2023 (adjusted annually).
CAT Accounting Technician Taxation & Regulatory Compliance 3
Which of the following is a 'below-the-line' deduction on an individual tax return?