Practice Test Geeks(IRS) Internal Revenue Service Certified Practice Test
← All IRS Flashcard Decks

Business Taxation Flashcards

7 cards from real IRS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Business Taxation flashcards as text

  1. Under the at-risk rules, a partner can only deduct losses up to the amount the partner has at risk. Which of the following increases a partner's at-risk amount?

    Answer: Cash contributions to the partnership

    Cash contributions increase a partner's at-risk amount, while certain nonrecourse liabilities and distributions decrease or do not increase it.

  2. What form does a partnership use to report its income, deductions, and credits to the IRS?

    Answer: Form 1065

    Partnerships file Form 1065 (U.S. Return of Partnership Income) as an information return, with each partner receiving a Schedule K-1.

  3. A business owner drives 12,000 business miles and 3,000 personal miles in their vehicle. Using the standard mileage rate, which miles are deductible?

    Answer: Only the 12,000 business miles

    Only the 12,000 business miles are deductible using the standard mileage rate; personal use miles are never deductible.

  4. Which of the following entities is subject to the accumulated earnings tax?

    Answer: C corporations that accumulate earnings beyond reasonable business needs

    The accumulated earnings tax applies to C corporations that retain earnings in excess of reasonable business needs to avoid shareholder-level dividend taxation.

  5. A calendar-year C corporation must file its annual tax return by which deadline (without extension)?

    Answer: April 15 (3½ months after year-end)

    C corporations with a December 31 year-end must file Form 1120 by April 15 (the 15th day of the 4th month after the tax year ends).

  6. What is the purpose of a Schedule K-1 issued by an S corporation?

    Answer: To report each shareholder's pro-rata share of income, deductions, and credits

    Schedule K-1 (Form 1120-S) is provided to each shareholder and reports their allocable share of the S corporation's income, losses, deductions, and credits.

  7. Under IRC §1231, when a business sells depreciable property used in a trade or business held more than one year at a gain, how is the gain generally treated?

    Answer: As long-term capital gain (subject to depreciation recapture rules)

    Section 1231 gains are generally treated as long-term capital gains, but depreciation recapture under §1245 or §1250 may convert some or all of the gain to ordinary income.