CPA Taxation & Business Law 3

Question 1

Under federal tax law, the standard deduction for a single filer is adjusted annually for inflation. Which code section governs this adjustment?

Accepted Answer

IRC § 63

Answer

IRC Section 63 defines taxable income and contains the standard deduction provisions including inflation adjustments.

Question 2

A general partnership is formed when:

Accepted Answer

Two or more persons agree to carry on a business for profit as co-owners

Answer

Under the Uniform Partnership Act, a partnership is formed by the association of two or more persons to carry on as co-owners a business for profit, and no formal filing is required.

Question 3

Which of the following payments is deductible as a business expense under IRC § 162?

Accepted Answer

Ordinary and necessary expenses of operating a trade or business

Answer

IRC Section 162 allows deductions for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Question 4

Under the Statute of Frauds, which of the following contracts must be in writing to be enforceable?

Accepted Answer

A contract to sell real property

Answer

The Statute of Frauds requires contracts for the sale of real property to be evidenced by a writing signed by the party to be charged.

Question 5

The self-employment tax rate that applies to net self-employment income up to the Social Security wage base is:

Accepted Answer

15.3%

Answer

The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare, applied to net self-employment earnings up to the wage base (for the Social Security portion).

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA Taxation & Business Law 3