Certified Public Accountant Taxation — Individual & Corporate 2

Question 1

What is the holding period required for long-term capital gains treatment on the sale of a capital asset?

Accepted Answer

More than 12 months

Answer

A capital asset must be held for more than 12 months to qualify for long-term capital gains treatment and its preferential tax rates.

Question 2

Which of the following is NOT a requirement for a business to be classified as an S corporation for tax purposes?

Accepted Answer

Have at least two classes of shareholders

Answer

S corporations must have only one class of stock; having two classes of shareholders (which implies a second class of stock) would disqualify a company from S corporation status.

Question 3

What is the primary advantage of a Roth IRA compared to a traditional IRA?

Accepted Answer

Qualified distributions in retirement are tax-free

Answer

Roth IRA contributions are made with after-tax dollars, so qualified withdrawals in retirement are completely tax-free, including all earnings.

Question 4

Under the federal tax code, which method of accounting must a C corporation with average annual gross receipts over $30 million generally use?

Accepted Answer

Accrual method

Answer

C corporations (other than farming businesses and qualified personal service corporations) with average annual gross receipts over $30 million (2024 threshold) must use the accrual method.

Question 5

What is the 'wash sale' rule under IRC Section 1091?

Accepted Answer

A loss on a security sale is disallowed if substantially identical securities are purchased within 30 days before or after the sale

Answer

The wash sale rule disallows a capital loss deduction if the taxpayer buys substantially identical securities within the 30-day window before or after the sale creating the loss.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Taxation — Individual & Corporate 2