CCA Taxation & Regulatory Compliance 2 — Questions and Answers
Question 1: A corporation has a net operating loss (NOL) generated in 2023. Under current U.S. tax law (post-TCJA), what is the maximum percentage of taxable income that can be offset by an NOL carryforward?
- 100%
- 80% (Correct answer)
- 50%
- 60%
Correct answer: 80%
Post-TCJA, NOL carryforwards are limited to 80% of taxable income in any given year, though they may be carried forward indefinitely.
Question 2: Which IRS form must a C corporation file to report its annual income tax liability?
- Form 1120-S
- Form 1065
- Form 1120 (Correct answer)
- Form 990
Correct answer: Form 1120
C corporations file Form 1120 (U.S. Corporation Income Tax Return) annually to report income, deductions, and tax liability.
Question 3: Under the accumulated earnings tax (AET), at what rate is the accumulated earnings tax applied to excess accumulated earnings?
- 15%
- 20% (Correct answer)
- 21%
- 28%
Correct answer: 20%
The accumulated earnings tax is imposed at a flat 20% rate on accumulated taxable income deemed to be unreasonably retained.
Question 4: A U.S. company receives a $500,000 dividend from a 100%-owned foreign subsidiary. Under the participation exemption (Section 245A), what portion of this dividend may be deducted?
- 50%
- 65%
- 80%
- 100% (Correct answer)
Correct answer: 100%
Section 245A provides a 100% dividends-received deduction for foreign-source dividends received from a 10%-or-more owned foreign corporation.
Question 5: What is the primary purpose of a transfer pricing study in a multinational corporation?
- To minimize state income taxes
- To document that intercompany transactions are priced at arm's length (Correct answer)
- To calculate foreign tax credits
- To determine Section 199A deductions
Correct answer: To document that intercompany transactions are priced at arm's length
Transfer pricing documentation demonstrates that related-party transactions are conducted at prices consistent with what unrelated parties would charge, satisfying both IRS and OECD standards.
Question 6: Which of the following penalties applies when a corporation fails to disclose a listed transaction on its tax return?
- Section 6662 accuracy-related penalty
- Section 6707A reportable transaction penalty (Correct answer)
- Section 6651 failure-to-file penalty
- Section 6694 preparer penalty
Correct answer: Section 6707A reportable transaction penalty
Section 6707A imposes penalties specifically for failure to disclose reportable transactions, including listed transactions, with amounts up to $200,000 for corporations.
Question 7: A calendar-year corporation's estimated tax payments are due on which dates?
- March 15, June 15, September 15, December 15 (Correct answer)
- April 15, June 15, September 15, January 15
- April 15, July 15, October 15, January 15
- March 15, June 15, September 15, January 15
Correct answer: March 15, June 15, September 15, December 15
Corporate estimated tax payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year (April, June, September, December for calendar-year corps).
CCA Taxation & Regulatory Compliance 2
A corporation has a net operating loss (NOL) generated in 2023.
Under current U.S. tax law (post-TCJA), what is the maximum percentage of taxable income that can be offset by an NOL carryforward?