Taxation & Compliance Flashcards

A US citizen working abroad may qualify for the foreign earned income exclusion. What is the maximum exclusion amount for 2024?

Answer: $126,500

For 2024, the foreign earned income exclusion under IRC Section 911 is $126,500, indexed annually for inflation.

Which compliance concept requires that a tax return preparer who knows of an error on a prior year's return advise the client of the error, but does not require the preparer to inform the IRS?

Answer: Circular 230 Section 10.21 error notification duty

Circular 230 Section 10.21 requires practitioners to promptly advise clients of noncompliance errors and their consequences, but it does not impose a duty to inform the IRS on the practitioner's behalf.

In a like-kind exchange, 'boot' received by the taxpayer causes gain recognition up to what amount?

Answer: The lesser of realized gain or boot received

In a Section 1031 exchange, the taxpayer recognizes gain equal to the lesser of the realized gain or the fair market value of boot received.

Under the at-risk rules of IRC Section 465, which of the following amounts is generally NOT included in the taxpayer's at-risk basis for a business activity?

Answer: Non-recourse financing not secured by real property

Non-recourse liabilities (except qualified real property non-recourse financing) are excluded from at-risk amounts because the taxpayer has no personal economic exposure.

A taxpayer receives an insurance settlement of $150,000 for a fire loss on business property with an adjusted basis of $90,000. If the taxpayer reinvests $160,000 in replacement property within the required period, what is the recognized gain?

Answer: $0

Under IRC Section 1033 involuntary conversion rules, if the amount reinvested in replacement property equals or exceeds the insurance proceeds, no gain is recognized.

Which payroll tax form must employers file quarterly to report wages paid, federal income tax withheld, and Social Security and Medicare taxes?

Answer: Form 941

Form 941 (Employer's Quarterly Federal Tax Return) is filed each quarter to report wages, tips, federal income tax withheld, and employer/employee Social Security and Medicare taxes.

A self-employed taxpayer may deduct 100% of health insurance premiums paid for themselves and their family. Where is this deduction taken?

Answer: As an above-the-line adjustment to income on Schedule 1

Self-employed individuals deduct health insurance premiums as an above-the-line adjustment to gross income on Schedule 1, not as a Schedule C business expense or itemized deduction.