FCCA FCCA Taxation and Compliance 2

Question 1

Which IRS form is used by partnerships in the US to report income, deductions, and credits to the federal government?

Accepted Answer

Form 1065

Answer

Partnerships file Form 1065 (US Return of Partnership Income) as an information return, with each partner's share reported on Schedule K-1.

Question 2

Under IRC Section 179, businesses can immediately expense the cost of qualifying property rather than depreciating it over time. What type of provision is this?

Accepted Answer

Accelerated depreciation / expensing election

Answer

IRC Section 179 allows businesses to elect to immediately deduct (expense) the full cost of qualifying business property in the year it is placed in service, rather than depreciating it over time.

Question 3

In which scenario would a US company face an alternative minimum tax (AMT) issue for individuals or corporations?

Accepted Answer

When the taxpayer uses many deductions and credits that reduce regular tax below the AMT threshold

Answer

AMT is designed to ensure that high-income individuals and corporations that benefit from numerous deductions pay a minimum level of tax.

Question 4

For US tax purposes, how long must an asset generally be held to qualify for long-term capital gains treatment?

Accepted Answer

More than 1 year

Answer

An asset must be held for more than one year to qualify for the preferential long-term capital gains tax rates under US federal tax law.

Question 5

What is FATCA, and what is its primary compliance requirement for foreign financial institutions?

Accepted Answer

A US law requiring foreign financial institutions to report US account holders to the IRS

Answer

FATCA (Foreign Account Tax Compliance Act) requires foreign financial institutions to identify and report information about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial interest.

FCCA - Fellow of the Association of Chartered Certified Accountants Practice Test

FCCA - Fellow of the Association of Chartered Certified Accountants Practice Test

FCCA FCCA Taxation and Compliance 2