Business Entities

Question 1

What tax form does a partnership file?

Answer 1

Form 1065

Question 2

Who are the members in a qualified joint venture?

Answer 2

Spouses

Question 3

Are you allowed to use qualified joint venture status if you organize a multi-member LLC?

Answer 3

No

Question 4

Do partners receive a W-2?

Answer 4

No

Question 5

When is Form 1065 due?

Answer 5

By the 15th day of the third month following fiscal year-end.

Question 6

Who is a qualified farmer?

Answer 6

One who earns at least 2/3 of their income from farming activity in 2022 or 2023.

Question 7

What are the requirements to be an S-Corp?

Answer 7

1. Must be domestic
2. Shareholders aren’t partnerships, corporations, or non-residents.
3. No more than 100 shareholders
4. Only one class of stock
5. Not an ineligible corporation

Question 8

What form is filed to elect S-Corp status?

Answer 8

Form 2553

Question 9

When must a taxpayer adopt a calendar year? (If any apply)

Answer 9

1. Keeps no books/records
2. No annual accounting period
3. Present year doesn’t qualify as fiscal year
4. Otherwise required by IRC

Question 10

What form is filed to request a change in accounting method?

Answer 10

Form 3115

Question 11

What tax form does a C Corporation file?

Answer 11

Form 1120

Question 12

When is Form 1120 due?

Answer 12

By the 15th day of the fourth month following fiscal year-end.

Question 13

What tax form does an S Corporation file?

Answer 13

Form 1120-S

Question 14

Do S Corporation owners receive a K-1?

Answer 14

Yes

Question 15

What qualifies as a closely held corporation?

Answer 15

1. Not a personal service corporation
2. Any time during the last half of tax year, more than 50% of outstanding common stock was owned by 5 or fewer individuals.

Question 16

When must a corporation pay its tax due in full?

Answer 16

No later than the 15th day of the third month following fiscal year-end.

Question 17

What is the penalty for failure to file a timely corporate tax return?

Answer 17

5% per month, subject to a maximum of 25%

Question 18

To be a qualified dividend, these 3 conditions must be met:

Answer 18

1. Paid by a US Corporation
2. Aren’t explicitly a non-qualified dividend
3. Taxpayer meets holding period

Question 19

What is the holding period for determining qualified dividends?

Answer 19

The taxpayer must hold the stock for more than 60 days during the 121 period that begins 60 days before the ex-dividend date.

Question 20

When are estimated payments due for a corporation?

Answer 20

On the 15th day of the 4th, 6th, 9th, and 12th month of their tax year.

Question 21

What are the two methods for calculating estimated quarterly tax payments for a corporation?

Answer 21

Use the smaller of

1. 25% of estimated tax this year
2. 25% of actual tax last year

Question 22

When is Form 1120-S due?

Answer 22

By the 15th day of the third month following fiscal year-end.

Question 23

Can section 179 depreciation be used by the corporation?

Answer 23

No, this is passed through to the individual shareholder

Question 24

If a corporation owns less than 20% of another corporation, what percentage of dividends received are deductible?

Answer 24

50%

Question 25

If a corporation owns 20% or more of another corporation, what percentage of dividends received are deductible?

Answer 25

65%

Question 26

What are homeowner's associations' tax rates if they file on Form 1120-H?

Answer 26

1. 30% if condominiums or residential 2. 32% for timeshares

Question 27

A loss incurred from an abandonment of a partnership is an ordinary loss when (both apply):

Answer 27

1. The transaction isn't a sale or exchange 2. The partner has not received an actual or deemed distribution

Question 28

If a corporation has always been an S-Corp, does the net passive income tax apply?

Answer 28

No

Question 29

If the partnership interest cannot be determined by documents, it is determined by taking these three things into account:

Answer 29

1. Partner's relative contributions to partnership 2. The interest of the partners in economic profits and losses 3. The rights of the partners to distributions of capital upon liquidation

Question 30

A partnership terminates when one of the following 2 events take place:

Answer 30

1. All operations are discontinued 2. At least 50% of total partnership interest is sold or exchanged within 12 months, including to another partner

Question 31

A partner's basis includes the partner's share of a partnership liability only to the extent that the liability (any of the 3 apply):

Answer 31

1. Creates or increases partner's basis in any assets 2. Gives rise to a current deduction 3. Is a nondeductible, noncapital expense of the partnership

Question 32

An S-Corp election can be revoked by any shareholder or group of shareholders who own more than:

Answer 32

50%

Question 33

When must an election to be treated as a corporation take effect?

Answer 33

No more than 75 days from the date election is filed, nor longer than 12 months after the date it is filed

Question 34

Which form does a company use to elect if it will be taxed as a partnership, corporation, or disregarded entity?

Answer 34

Form 8832

Question 35

A partner generally must recognize gain on the distribution of property if the partner contributed appreciated property to the partnership during how long before the distribution?

Answer 35

7 years

Question 36

How many shareholders must consent to revoke an S-Corp election?

Answer 36

More than 50%

Question 37

What rate is accumulated earnings taxed at?

Answer 37

20%

Question 38

What amount is considered "reasonable accumulated earnings" for most businesses? What is the amount for personal service businesses?

Answer 38

$250k and $150k

Question 39

What items increase S-Corp cost basis?

Answer 39

All income, including tax-exempt income AND the excess of the deduction for depletion.

Question 40

What items decrease S-Corp cost basis?

Answer 40

Property distributions, deductions, and nondeductible expenses

Question 41

How is a distribution from an S-Corp that has no accumulated E&P treated?

Answer 41

1. Tax free reduction of basis, then 2. Gain on sale of stock if exceeds total basis

Question 42

A qualified joint venture (QJV) is one where:

Answer 42

1. The only owners are a husband and wife who file jointly 2. Both spouses materially participate 3. Both spouses elect not to be treated as a partnership

Question 43

Which organizations are treated as tax-exempt without being required to file an application for exempt status?

Answer 43

1. Churches 2. Any organization having gross receipts not more than $5,000

Question 44

If you have $29M or more of gross receipts, can you use the cash method of accounting?

Answer 44

No

Question 45

What form must be filed to elect a change in accounting method?

Answer 45

Form 3115

Question 46

Can expenses be deducted against hobby income?

Answer 46

No, but income must be reported

Question 47

Where is hobby income reported?

Answer 47

Schedule 1

Question 48

What tax form does a qualifying joint venture (QJV) file to report income & loss items?

Answer 48

Schedule C

Question 49

Should limited partners include only the amount of guaranteed payments for services actually rendered on their behalf?

Answer 49

Yes

Question 50

What is the monthly penalty for a partnership that files to file a timely return?

Answer 50

$235

Question 51

When must all tax be paid by corporations who owe tax?

Answer 51

The 15th day of the 3rd month following fiscal year-end

Question 52

A corporation is a personal service corporation if it meets all of the following:

Answer 52

1. The principal activity was personal services in the testing period 2. More than 20% of compensation paid to employee-owners 3. Employee owners own more than 10% of stock at the end of the testing period

Question 53

Can a personal service corporation be a closely held corporation?

Answer 53

No

Question 54

A corporation is closely held if both of the following apply:

Answer 54

1. Not a personal service corporation 2. At any time during the last half of the year, 50% of the stock is owned by 5 or fewer individuals

Question 55

What form is filed to request an extension of time to file for business tax returns?

Answer 55

Form 7004

Question 56

How much of the dividend-paying corporation's stock does a corporation need to own to receive a 65% dividends received deduction?

Answer 56

At least 20%

Question 57

What is the maximum charitable contribution deduction for corporations?

Answer 57

10% of taxable income

Question 58

An individual is deemed to own the stock owned directly by his or her:

Answer 58

Spouse, children, grandchildren, and parents

Question 59

When must form 1120-S be filed by?

Answer 59

The 15th day of the 3rd month following fiscal year-end.

Question 60

In order to become an S-Corporation, the corporation must submit Form 2553 signed by what % of shareholders?

Answer 60

100%

Question 61

Can an S-Corporation have a C-Corporation or S-Corporation subsidiary?

Answer 61

Yes

Question 62

In order to revoke an S-Corporation, what % of shareholders need to agree?

Answer 62

More than 50%

Question 63

Does the excessive net passive income tax apply to an S-Corporation that has always been an S-Corporation?

Answer 63

No

Question 64

An S-Corporation may owe tax in these (4) following instances: (LINN)

Answer 64

LIFO recapture Investment credit recapture Net passive income Net recognized built-in gains

Question 65

If capital IS a material income-producing factor, does partnership participation matter for who is considered a partner?

Answer 65

No

Question 66

How are capital losses for corporations treated?

Answer 66

Carried back 3 years (3, 2, 1), and then forward 5 years as a short-term capital loss

Question 67

When is form 1120-H required to be filed by?

Answer 67

The 15th day of the 4th month following fiscal year-end