CPA Taxation & Business Law 2

Question 1

A corporation has a net operating loss (NOL) for 2023. Under current federal tax law, what is the maximum percentage of taxable income the NOL carryforward can offset?

Accepted Answer

80%

Answer

Under the Tax Cuts and Jobs Act, NOL carryforwards are limited to 80% of taxable income in the carryforward year.

Question 2

Which of the following is NOT a characteristic of an S corporation under federal tax law?

Accepted Answer

It can have both common and preferred stock classes

Answer

S corporations are permitted only one class of stock; having both common and preferred stock classes would disqualify S corporation status.

Question 3

Under the Uniform Commercial Code (UCC), a firm offer made by a merchant is irrevocable for up to how long without consideration?

Accepted Answer

3 months

Answer

Under UCC Article 2, a merchant's firm offer in a signed writing is irrevocable for the stated period or, if no period is stated, for a reasonable time not exceeding three months.

Question 4

A taxpayer sells a capital asset held for 14 months at a gain. How is this gain classified?

Accepted Answer

Long-term capital gain

Answer

Assets held more than 12 months qualify as long-term capital assets, so a 14-month holding period produces a long-term capital gain.

Question 5

Which legal doctrine allows a court to disregard the corporate entity and hold shareholders personally liable?

Accepted Answer

Piercing the corporate veil

Answer

Piercing the corporate veil is the doctrine courts use to impose personal liability on shareholders when the corporate form is abused or used fraudulently.

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA Taxation & Business Law 2