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. A sole proprietor reports business income and expenses on which schedule attached to Form 1040?

    Answer: Schedule C

    Sole proprietors report business profit or loss on Schedule C (Profit or Loss from Business), which is attached to their individual Form 1040.

  2. What is the maximum Section 199A qualified business income (QBI) deduction percentage for eligible taxpayers?

    Answer: 20% of QBI

    Eligible taxpayers may deduct up to 20% of their qualified business income from pass-through entities under IRC §199A, subject to limitations.

  3. A corporation's tax year ends June 30. When must it file its Form 1120 (without extension)?

    Answer: September 15

    A corporation with a June 30 fiscal year-end must file Form 1120 by the 15th day of the 3rd month after the year-end closes, which is September 15.

  4. Under the passive activity rules, which type of income CAN offset passive activity losses?

    Answer: Passive activity income from other activities

    Passive activity losses can only offset passive activity income; they cannot offset active income (wages, self-employment) or portfolio income (dividends, interest).

  5. Which business entity provides limited liability to all owners AND avoids double taxation without making an S corporation election?

    Answer: Limited liability company (LLC) taxed as a partnership

    A multi-member LLC taxed as a partnership provides all members with limited liability protection while income passes through to members, avoiding entity-level tax.

  6. What is the self-employment tax rate applied to net self-employment income up to the Social Security wage base?

    Answer: 15.3%

    The self-employment tax rate is 15.3% (12.4% for Social Security + 2.9% for Medicare) on net self-employment income up to the Social Security wage base.

  7. A C corporation donates appreciated stock (basis $5,000, FMV $15,000) to a qualified charity. What is the maximum deduction?

    Answer: $15,000 but limited to 10% of taxable income

    C corporations may generally deduct the fair market value of appreciated capital gain property donated to charity, but the deduction is limited to 10% of corporate taxable income.