Tax Planning & Compliance Flashcards

A peer-to-peer lending platform operates as a marketplace connecting borrowers and lenders. For sales tax / digital services tax purposes, the platform's transaction facilitation fee is most likely subject to:

Answer: State-level sales tax in states that have extended sales tax to marketplace facilitators

Following South Dakota v. Wayfair (2018), most states have enacted marketplace facilitator laws that may impose sales tax obligations on platform fees depending on the state's treatment of financial services.

A fintech company grants an employee NSO (Non-Qualified Stock Option) with an exercise price below fair market value at grant. Under IRC Section 409A, this discount results in:

Answer: A 20% excise tax plus interest on deferred compensation, imposed on the employee

Discounted NSOs are treated as deferred compensation under Section 409A, subjecting the employee to a 20% excise tax, income tax, and interest on the discounted amount.

A cryptocurrency mining company deducts the cost of ASICs (mining hardware) in the year of purchase using Section 179. The maximum Section 179 deduction limit for 2024 is approximately:

Answer: $1,160,000

The Section 179 deduction limit is inflation-adjusted annually; for 2024 it is $1,220,000 (approximately $1,160,000 range depending on inflation adjustments announced by the IRS).

A US fintech company has nexus in 5 states and must apportion income for state tax purposes. Most states use which primary factor under the Multistate Tax Compact's single-sales-factor formula?

Answer: Sales (receipts) factor only, with no weight on property or payroll

The majority of states have moved to a single-sales-factor apportionment formula that uses only the sales (receipts) factor to determine state taxable income.

A fintech company makes a political contribution to a PAC and attempts to deduct it as a business expense. Under IRC Section 162(e), political contributions are:

Answer: Non-deductible; no deduction is allowed for contributions to political campaigns or committees

IRC Section 162(e) disallows deductions for contributions or payments to political campaigns, parties, or political action committees.

Under the Economic Nexus standard post-Wayfair, a fintech SaaS company selling digital subscriptions to small businesses in Texas must collect Texas sales tax if it exceeds:

Answer: $100,000 in sales or 100 transactions in Texas in the prior 12 months

Texas adopted an economic nexus threshold of $500,000 in total revenue from Texas sales; however, the general Wayfair-inspired threshold many states use is $100,000 in sales or 200 transactions.

A fintech company's CFO wants to use a Qualified Opportunity Zone (QOZ) fund to defer capital gains from selling appreciated company stock. To qualify for maximum tax benefits, the gains must be invested in a QOZ fund within:

Answer: 180 days of the sale

Taxpayers must invest eligible capital gains into a Qualified Opportunity Fund within 180 days of the sale or exchange to defer and potentially reduce the gain under IRC Section 1400Z-2.