IRS Business Taxation 4

Question 1

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

Accepted Answer

Schedule C

Answer

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

Question 2

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

Accepted Answer

20% of QBI

Answer

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

Question 3

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

Accepted Answer

September 15

Answer

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.

Question 4

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

Accepted Answer

Passive activity income from other activities

Answer

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

Question 5

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

Accepted Answer

Limited liability company (LLC) taxed as a partnership

Answer

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.

(IRS) Internal Revenue Service Certified Practice Test

(IRS) Internal Revenue Service Certified Practice Test

IRS Business Taxation 4