CFC Tax Planning & Strategy 3

Question 1

Under IRC §1031, a like-kind exchange defers capital gain recognition. What is the deadline to identify replacement property after closing the relinquished property?

Accepted Answer

45 days

Answer

The taxpayer must identify the replacement property within 45 days of transferring the relinquished property to qualify for §1031 deferral.

Question 2

Which of the following best describes a net operating loss (NOL) carryforward under current US tax law after the TCJA?

Accepted Answer

No carryback, indefinite carryforward, 80% offset

Answer

Post-TCJA, NOLs generally cannot be carried back but can be carried forward indefinitely; however, they are limited to offsetting 80% of taxable income in a given year.

Question 3

A controller is evaluating whether to structure a new venture as an S corporation vs. a C corporation. A primary tax advantage of the S corporation is:

Accepted Answer

Pass-through taxation eliminating entity-level income tax

Answer

S corporations are pass-through entities, meaning income is taxed only once at the shareholder level, avoiding the double taxation applicable to C corporations.

Question 4

What is the primary purpose of a tax equalization policy in a multinational corporation?

Accepted Answer

Ensure expatriate employees pay no more or less tax than they would in their home country

Answer

Tax equalization ensures that an employee on international assignment pays the same hypothetical tax they would have paid at home, with the employer absorbing any excess foreign taxes.

Question 5

Which tax concept allows a corporation to deduct interest on debt used to acquire another company, making leveraged buyouts tax-efficient?

Accepted Answer

Interest expense deductibility

Answer

Interest paid on acquisition debt is generally deductible under IRC §163, reducing taxable income and making debt-financed acquisitions more tax-efficient than equity-financed ones.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Tax Planning & Strategy 3