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

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

Question 2

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

Accepted Answer

Form 1065

Answer

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

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

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

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

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

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

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).

(IRS) Internal Revenue Service Certified Practice Test

(IRS) Internal Revenue Service Certified Practice Test

IRS Business Taxation 3