IFA Taxation & Compliance 3

Question 1

Under the passive activity rules of IRC Section 469, which type of income can passive activity losses offset without limitation?

Accepted Answer

Passive income only

Answer

Passive activity losses can only offset passive activity income; they cannot be used to offset active or portfolio income.

Question 2

A corporation pays a dividend to its domestic corporate shareholder. What is the dividends-received deduction (DRD) percentage if the shareholder owns 25% of the distributing corporation?

Accepted Answer

65%

Answer

When a corporate shareholder owns at least 20% but less than 80% of the distributing corporation, the DRD is 65% of the dividends received.

Question 3

Which method of accounting must be used by C corporations (other than qualified personal service corporations) with average annual gross receipts exceeding $27 million (indexed)?

Accepted Answer

Accrual method

Answer

C corporations with average annual gross receipts exceeding the threshold must use the accrual method of accounting under IRC Section 448.

Question 4

What is the maximum Section 179 expensing deduction for 2024 before phase-out begins?

Accepted Answer

$1,220,000

Answer

For 2024, the Section 179 deduction limit is $1,220,000, which begins to phase out when total property placed in service exceeds $3,050,000.

Question 5

A taxpayer sells a capital asset held for 14 months at a gain. Which tax rate applies to the net long-term capital gain for a taxpayer in the 32% ordinary income bracket?

Accepted Answer

15%

Answer

Taxpayers in ordinary income tax brackets above 15% but below the highest bracket pay 15% on net long-term capital gains; the 20% rate applies only in the top bracket.

(IFA) Institute of Financial Accountants Certification Practice Test

(IFA) Institute of Financial Accountants Certification Practice Test

IFA Taxation & Compliance 3