IRS Business Taxation 3

Question 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?

Accepted Answer

Cash contributions to the partnership

Answer

The partner's share of nonrecourse liabilities secured by real property

Answer

The partner's share of partnership liabilities for which no partner bears economic risk of loss

Answer

Distributions received from the partnership

Question 2

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

Accepted Answer

Form 1065

Answer

Form 1120

Answer

Form 1120-S

Answer

Schedule C of Form 1040

Question 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?

Accepted Answer

Only the 12,000 business miles

Answer

All 15,000 miles

Answer

Only the 3,000 personal miles

Answer

The miles must be prorated based on total vehicle cost

Question 4

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

Accepted Answer

C corporations that accumulate earnings beyond reasonable business needs

Answer

S corporations

Answer

Partnerships

Answer

Sole proprietorships

Question 5

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

Accepted Answer

April 15 (3½ months after year-end)

Answer

March 15

Answer

April 15

Answer

March 15 (2½ months after year-end)

Question 6

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

Accepted Answer

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

Answer

To report the corporation's total tax liability

Answer

To calculate the corporation's estimated tax payments

Answer

To report employee wages paid by the S corporation

Question 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?

Accepted Answer

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

Answer

As ordinary income

Answer

As short-term capital gain

Answer

As a tax-free exchange