IFA Taxation & Compliance 4

Question 1

Under the constructive receipt doctrine, when is income recognized by a cash-basis taxpayer?

Accepted Answer

When it is made available without restriction, regardless of actual receipt

Answer

Under constructive receipt, income is taxable when it is credited to a taxpayer's account or otherwise made available without substantial limitation or restriction.

Question 2

Which transfer pricing method is generally considered the most reliable under IRC Section 482 and OECD guidelines for tangible property transactions?

Accepted Answer

Comparable uncontrolled price (CUP) method

Answer

The comparable uncontrolled price (CUP) method is the most reliable when comparable uncontrolled transactions exist, as it directly compares prices charged in similar transactions.

Question 3

A partnership has a technical termination under the old rules when more than what percentage of total partnership interests are sold or exchanged within a 12-month period?

Accepted Answer

50%

Answer

Under pre-2018 law, a partnership terminated for tax purposes when more than 50% of partnership capital and profits interests were sold or exchanged within 12 months (TCJA eliminated this rule after 2017).

Question 4

Which IRC section allows taxpayers to exclude up to $250,000 ($500,000 MFJ) of gain from the sale of a principal residence?

Accepted Answer

Section 121

Answer

IRC Section 121 provides an exclusion of up to $250,000 ($500,000 for married filing jointly) on gain from selling a principal residence, provided ownership and use tests are met.

Question 5

What is the tax treatment of employer-provided health insurance premiums paid on behalf of employees?

Accepted Answer

Excluded from employee's gross income and deductible by employer

Answer

Employer-paid health insurance premiums are excluded from the employee's gross income under IRC Section 106 and are deductible as a business expense by the employer.

(IFA) Institute of Financial Accountants Certification Practice Test

(IFA) Institute of Financial Accountants Certification Practice Test

IFA Taxation & Compliance 4