Taxation & Compliance Flashcards

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

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

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

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

Answer: Comparable uncontrolled price (CUP) method

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

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?

Answer: 50%

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).

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

Answer: Section 121

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.

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

Answer: Excluded from employee's gross income and deductible by employer

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.

A taxpayer has net operating loss (NOL) carryforwards generated after 2017. What is the maximum percentage of taxable income the NOL deduction can offset in any given year?

Answer: 80%

Under TCJA, post-2017 NOLs can only offset up to 80% of taxable income in any carryforward year, but they can be carried forward indefinitely.

Which of the following fringe benefits is excludable from an employee's gross income as a 'no-additional-cost service'?

Answer: Standby airline flight for an airline employee

A no-additional-cost service is a service provided to an employee that the employer provides to customers in the ordinary course of business at no substantial additional cost, such as an unused airline seat.