Taxation & Regulatory Compliance Flashcards

Under IRC Section 199A, which type of entity is eligible to claim the Qualified Business Income (QBI) deduction?

Answer: S corporations, partnerships, and sole proprietors

The Section 199A QBI deduction is available to non-corporate taxpayers — including S corporation shareholders, partnership partners, and sole proprietors — allowing up to a 20% deduction on qualified business income.

The Uniform Capitalization (UNICAP) rules under IRC Section 263A require which of the following?

Answer: Capitalization of direct and indirect costs into inventory or self-constructed assets

Section 263A requires producers and resellers to capitalize direct costs and an allocable share of indirect costs into inventory or self-constructed property rather than deducting them immediately.

What is the statute of limitations for the IRS to assess additional tax in the case of a substantial omission of gross income (more than 25% omitted)?

Answer: 6 years

When a taxpayer omits more than 25% of gross income from a return, the IRS has 6 years (rather than the standard 3 years) from the return filing date to assess additional tax.

Which anti-avoidance provision under IRC Section 269 allows the IRS to disallow deductions or credits when a corporation is acquired principally to evade tax?

Answer: The Section 269 acquisition-for-tax-avoidance rule

Section 269 authorizes the IRS to disallow deductions, credits, or other allowances when a corporation is acquired and a principal purpose of the acquisition was to evade or avoid federal income tax.

Under the Bank Secrecy Act (BSA), a corporation that has financial interest in or signature authority over foreign financial accounts must file an FBAR when the aggregate value exceeds:

Answer: $10,000 at any time during the year

FinCEN Form 114 (FBAR) must be filed when the aggregate value of foreign financial accounts exceeds $10,000 at any point during the calendar year.

Under IRC Section 461(l), which of the following best describes the excess business loss limitation for non-corporate taxpayers?

Answer: Business losses exceeding a threshold ($289,000 single/$578,000 married for 2023) are treated as NOL carryforwards

Section 461(l) limits non-corporate taxpayers from deducting excess business losses above the annual threshold, converting the excess into an NOL carryforward subject to the 80% limitation.

A domestic corporation that owns 20% of a foreign corporation's voting stock receives a $300,000 dividend. What is the applicable dividends-received deduction (DRD) percentage under IRC Section 243?

Answer: 65%

Under Section 243, a domestic corporation owning at least 20% but less than 80% of a domestic payer's stock is entitled to a 65% DRD; however, for foreign dividends qualifying under 245A, different rules apply — for domestic DRDs at 20%+ ownership, the rate is 65%.