Tax Consulting Business Tax Planning 2

Question 1

What is a 'qualified opportunity zone' investment and what tax benefit does it provide?

Accepted Answer

An investment allowing deferral and potential exclusion of capital gains

Answer

Qualified Opportunity Zone investments allow taxpayers to defer and potentially reduce capital gains by investing in designated economically distressed communities.

Question 2

Under the qualified business income (QBI) deduction, eligible pass-through business owners may deduct up to what percentage of their qualified business income?

Accepted Answer

20%

Answer

The QBI deduction under IRC Section 199A allows eligible taxpayers to deduct up to 20% of their qualified business income from pass-through entities.

Question 3

Which type of retirement plan allows self-employed individuals to contribute both as employee and employer, maximizing contribution limits?

Accepted Answer

Solo 401(k)

Answer

A Solo 401(k) allows self-employed individuals to contribute as both employee (up to the elective deferral limit) and employer (profit-sharing contributions), resulting in higher total contribution limits.

Question 4

What is the primary tax advantage of using a Health Savings Account (HSA) for a self-employed tax consultant?

Accepted Answer

Triple tax advantage: deductible contributions, tax-free growth, and tax-free qualified withdrawals

Answer

HSAs offer a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.

Question 5

When a business converts from a C Corporation to an S Corporation, what built-in gains tax applies?

Accepted Answer

Tax on appreciation that existed at conversion date if sold within the recognition period

Answer

The built-in gains tax applies to appreciation that existed on the date of S Corp election if the appreciated assets are disposed of within the 5-year recognition period.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting Business Tax Planning 2