CTC Federal Taxation Principles & Compliance 3

Question 1

Which method of accounting must a C corporation with average annual gross receipts exceeding $29 million (2024 threshold) generally use?

Accepted Answer

Accrual method

Answer

C corporations (other than S corporations, partnerships without C corp partners, and certain farming businesses) with average gross receipts exceeding the threshold must use the accrual method.

Question 2

A sole proprietor contributes property with a FMV of $50,000 and adjusted basis of $30,000 to a newly formed partnership in exchange for a 40% interest. What is the partnership's basis in the contributed property?

Accepted Answer

$30,000 (carryover basis from contributing partner)

Answer

Under IRC Section 723, a partnership takes a carryover basis in property contributed by a partner equal to the contributing partner's adjusted basis.

Question 3

What is the maximum annual HSA contribution limit for self-only HDHP coverage in 2024?

Accepted Answer

$4,150

Answer

For 2024, the HSA contribution limit for self-only HDHP coverage is $4,150, with an additional $1,000 catch-up contribution allowed for those age 55 and older.

Question 4

Under the constructive receipt doctrine, a cash-basis taxpayer must include income in gross income when:

Accepted Answer

The income is credited to the taxpayer's account or made available without substantial restrictions

Answer

Constructive receipt occurs when income is credited, set apart, or otherwise made available to a cash-basis taxpayer without substantial restrictions or limitations.

Question 5

A taxpayer receives an early distribution from a traditional IRA at age 50. In addition to regular income tax, what penalty applies?

Accepted Answer

10% additional tax on the taxable amount

Answer

Early distributions from traditional IRAs before age 59½ are subject to a 10% additional tax unless a statutory exception applies.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Federal Taxation Principles & Compliance 3