Financial Analysis & Planning Flashcards

An S corporation shareholder can deduct the corporation's losses only up to the shareholder's:

Answer: Stock basis plus debt basis in loans made directly to the corporation

S corporation losses are limited to the shareholder's basis in stock plus any direct shareholder loans to the corporation.

The internal rate of return (IRR) of a project is MOST accurately described as:

Answer: The discount rate at which NPV equals zero

IRR is the discount rate that makes the net present value of all cash flows from a project equal to zero.

Which of the following is NOT included in a taxpayer's gross income under IRC Section 61?

Answer: Gifts received from a family member

IRC Section 102 excludes gifts, bequests, devises, and inheritances from gross income, even if received from a family member.

A CTC practitioner helping a client with retirement planning should know that required minimum distributions (RMDs) from traditional IRAs must begin by:

Answer: April 1 of the year following the year the owner turns 73 (under SECURE 2.0)

SECURE 2.0 raised the RMD starting age to 73 for individuals born between 1951 and 1959, with the required beginning date being April 1 of the following year.

In break-even analysis, the contribution margin per unit is calculated as:

Answer: Selling price per unit minus variable cost per unit

Contribution margin per unit represents the amount each unit sold contributes toward covering fixed costs and then generating profit.

Which type of bond interest is generally exempt from federal income tax?

Answer: Municipal bond interest

Under IRC Section 103, interest on state and local (municipal) bonds is generally excluded from federal gross income.

A company with a high accounts payable turnover ratio is most likely:

Answer: Paying its suppliers quickly

High accounts payable turnover means the company is paying off its suppliers rapidly relative to purchases, indicating quick payment cycles.