Taxation & Regulatory Compliance Flashcards

Under IRC Section 382, what event triggers a limitation on the use of a corporation's pre-change NOLs?

Answer: An ownership change exceeding 50 percentage points over 3 years

Section 382 limits NOL usage after an ownership change, defined as more than a 50-percentage-point shift in stock ownership among 5%-or-greater shareholders over a 3-year testing period.

The Global Intangible Low-Taxed Income (GILTI) regime under Section 951A primarily targets which type of income?

Answer: Foreign subsidiary income exceeding a routine return on tangible assets

GILTI captures excess returns earned by controlled foreign corporations above 10% of their qualified business asset investment, targeting income attributable to intangibles in low-tax jurisdictions.

Which regulatory body administers the Foreign Corrupt Practices Act (FCPA) for enforcement against public companies?

Answer: Both the DOJ and the SEC

The FCPA is enforced jointly by the DOJ (criminal provisions) and the SEC (civil provisions for issuers registered with the SEC).

Under the Sarbanes-Oxley Act (SOX) Section 404, management must assess the effectiveness of internal controls over financial reporting using which recognized framework?

Answer: COSO Internal Control — Integrated Framework

SOX Section 404 requires management's internal control assessment to use a suitable, recognized framework, most commonly the COSO Internal Control — Integrated Framework.

A corporation makes a charitable contribution of $500,000 in a year when its taxable income (before the deduction) is $4,000,000. What is the maximum allowable deduction?

Answer: $400,000

Corporate charitable contribution deductions are limited to 10% of taxable income computed before the charitable deduction, so 10% × $4,000,000 = $400,000.

What is the purpose of the Base Erosion and Anti-Abuse Tax (BEAT) under IRC Section 59A?

Answer: To prevent profit-shifting through deductible payments to foreign related parties

BEAT imposes a minimum tax on large corporations that make deductible payments to foreign affiliates, preventing erosion of the U.S. tax base through intercompany pricing.

Which of the following correctly describes the 'check-the-box' regulations (Treasury Regulations §301.7701)?

Answer: They permit eligible entities to elect their federal tax classification

Check-the-box regulations allow eligible entities (LLCs, partnerships, certain foreign entities) to elect how they will be classified for federal tax purposes — as a corporation, partnership, or disregarded entity.