Certified Public Accountant Taxation — Individual & Corporate 2

Question 1

What is the holding period required for long-term capital gains treatment on the sale of a capital asset?

Accepted Answer

More than 12 months

Answer

6 months

Answer

24 months

Answer

36 months

Question 2

Which of the following is NOT a requirement for a business to be classified as an S corporation for tax purposes?

Accepted Answer

Have at least two classes of shareholders

Answer

Have no more than 100 shareholders

Answer

Be a domestic corporation

Answer

Have only one class of stock

Question 3

What is the primary advantage of a Roth IRA compared to a traditional IRA?

Accepted Answer

Qualified distributions in retirement are tax-free

Answer

Contributions are tax-deductible in the current year

Answer

Higher annual contribution limits

Answer

No income limits for contributions

Question 4

Under the federal tax code, which method of accounting must a C corporation with average annual gross receipts over $30 million generally use?

Accepted Answer

Accrual method

Answer

Cash method

Answer

Hybrid method

Answer

Installment method

Question 5

What is the 'wash sale' rule under IRC Section 1091?

Accepted Answer

A loss on a security sale is disallowed if substantially identical securities are purchased within 30 days before or after the sale

Answer

Gains on securities held less than 30 days are ordinary income

Answer

Short sales must be reported as capital transactions

Answer

Securities received as compensation must be held 2 years for capital gain treatment

Question 6

Which type of entity avoids double taxation by passing income, deductions, and credits directly to its owners' individual tax returns?

Accepted Answer

S corporation

Answer

C corporation

Answer

Real Estate Investment Trust (REIT)

Answer

Both B and S corp are wrong