CFC Tax Planning & Strategy 2

Question 1

A corporation has both domestic and foreign-source income. Which method allows it to reduce US tax on foreign income by crediting taxes paid abroad?

Accepted Answer

Foreign tax credit (FTC)

Answer

The foreign tax credit allows US corporations to credit taxes paid to foreign governments against their US tax liability on the same income.

Question 2

Under IRC §199A, qualified business income (QBI) deduction for pass-through entities is generally limited to what percentage?

Accepted Answer

20%

Answer

The §199A deduction allows eligible taxpayers to deduct up to 20% of qualified business income from pass-through entities.

Question 3

Which depreciation method accelerates deductions most aggressively in early years for tax planning purposes?

Accepted Answer

Double-declining balance

Answer

Double-declining balance applies twice the straight-line rate to the declining book value, front-loading the largest depreciation in early years.

Question 4

A company wants to defer income to the following tax year. Which of the following strategies best achieves this for a cash-basis taxpayer?

Accepted Answer

Delay sending invoices until early next year

Answer

A cash-basis taxpayer recognizes income when received, so delaying invoicing until next year defers the cash receipt and the tax liability.

Question 5

Which type of corporate reorganization under IRC §368 allows a company to acquire a target's assets in exchange for stock without triggering gain to the target?

Accepted Answer

Type C reorganization

Answer

A Type C reorganization involves the acquisition of substantially all of the target's assets in exchange for the acquiring corporation's voting stock, generally tax-free.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Tax Planning & Strategy 2