CTC Business Taxation & Entity Structures 5

Question 1

Under the corporate alternative minimum tax (CAMT) enacted by the Inflation Reduction Act of 2022, which corporations are subject to the 15% minimum tax?

Accepted Answer

Corporations with average adjusted financial statement income over $1 billion

Answer

The CAMT imposes a 15% minimum tax on applicable corporations whose average annual adjusted financial statement income (book income) exceeds $1 billion.

Question 2

When computing a partner's self-employment tax, which income from the partnership is generally included?

Accepted Answer

Guaranteed payments and distributive share of ordinary income for general partners

Answer

General partners must pay self-employment tax on their distributive share of ordinary partnership income plus any guaranteed payments received for services.

Question 3

A corporation's net operating loss (NOL) generated after December 31, 2017 can be carried back how many years?

Accepted Answer

0 years (no carryback allowed)

Answer

Under the TCJA, post-2017 NOLs can no longer be carried back (except for certain farming losses) but can be carried forward indefinitely, subject to the 80% taxable income limitation.

Question 4

What is the primary purpose of the accumulated earnings tax (AET) under IRC Sections 531-537?

Accepted Answer

To penalize corporations that accumulate earnings beyond reasonable business needs to avoid shareholder-level tax

Answer

The AET is a 20% penalty tax on undistributed corporate earnings accumulated beyond the reasonable needs of the business, designed to prevent shareholders from avoiding dividend taxation.

Question 5

In a liquidating distribution, how does a corporate shareholder treat the gain or loss received from a subsidiary under IRC Section 332?

Accepted Answer

The liquidation is generally tax-free to the parent corporation receiving the distribution

Answer

Under IRC Section 332, a parent corporation that owns at least 80% of a subsidiary generally recognizes no gain or loss on the complete liquidation of that subsidiary.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Business Taxation & Entity Structures 5