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EA Part 2 > Business Entities > Flashcards

Business Entities Flashcards

1
Q

What tax form does a partnership file?

A

Form 1065

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2
Q

Who are the members in a qualified joint venture?

A

Spouses

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3
Q

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

A

No

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4
Q

Do partners receive a W-2?

A

No

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5
Q

When is Form 1065 due?

A

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

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6
Q

Who is a qualified farmer?

A

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

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7
Q

What are the requirements to be an S-Corp?

A
  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
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8
Q

What form is filed to elect S-Corp status?

A

Form 2553

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9
Q

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

A
  1. Keeps no books/records
  2. No annual accounting period
  3. Present year doesn’t qualify as fiscal year
  4. Otherwise required by IRC
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10
Q

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

A

Form 3115

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11
Q

What tax form does a C Corporation file?

A

Form 1120

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12
Q

When is Form 1120 due?

A

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

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13
Q

What tax form does an S Corporation file?

A

Form 1120-S

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14
Q

Do S Corporation owners receive a K-1?

A

Yes

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15
Q

What qualifies as a closely held corporation?

A
  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.
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16
Q

When must a corporation pay its tax due in full?

A

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

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17
Q

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

A

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

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18
Q

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

A
  1. Paid by a US Corporation
  2. Aren’t explicitly a non-qualified dividend
  3. Taxpayer meets holding period
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19
Q

What is the holding period for determining qualified dividends?

A

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

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20
Q

When are estimated payments due for a corporation?

A

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

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21
Q

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

A

Use the smaller of

  1. 25% of estimated tax this year
  2. 25% of actual tax last year
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22
Q

When is Form 1120-S due?

A

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

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23
Q

Can section 179 depreciation be used by the corporation?

A

No, this is passed through to the individual shareholder

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24
Q

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

A

50%

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25
Q

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

A

65%

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26
Q

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

A
  1. 30% if condominiums or residential
  2. 32% for timeshares
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27
Q

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

A
  1. The transaction isn’t a sale or exchange
  2. The partner has not received an actual or deemed distribution
28
Q

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

A

No

29
Q

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

A
  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
30
Q

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

A
  1. All operations are discontinued
  2. At least 50% of total partnership interest is sold or exchanged within 12 months, including to another partner
31
Q

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):

A
  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
32
Q

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

A

50%

33
Q

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

A

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

34
Q

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

A

Form 8832

35
Q

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?

A

7 years

36
Q

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

A

More than 50%

37
Q

What rate is accumulated earnings taxed at?

A

20%

38
Q

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

A

$250k and $150k

39
Q

What items increase S-Corp cost basis?

A

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

40
Q

What items decrease S-Corp cost basis?

A

Property distributions, deductions, and nondeductible expenses

41
Q

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

A
  1. Tax free reduction of basis, then
  2. Gain on sale of stock if exceeds total basis
42
Q

A qualified joint venture (QJV) is one where:

A
  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
43
Q

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

A
  1. Churches
  2. Any organization having gross receipts not more than $5,000
44
Q

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

A

No

45
Q

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

A

Form 3115

46
Q

Can expenses be deducted against hobby income?

A

No, but income must be reported

47
Q

Where is hobby income reported?

A

Schedule 1

48
Q

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

A

Schedule C

49
Q

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

A

Yes

50
Q

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

A

$235

51
Q

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

A

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

52
Q

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

A
  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
53
Q

Can a personal service corporation be a closely held corporation?

A

No

54
Q

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

A
  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
55
Q

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

A

Form 7004

56
Q

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

A

At least 20%

57
Q

What is the maximum charitable contribution deduction for corporations?

A

10% of taxable income

58
Q

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

A

Spouse, children, grandchildren, and parents

59
Q

When must form 1120-S be filed by?

A

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

60
Q

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

A

100%

61
Q

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

A

Yes

62
Q

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

A

More than 50%

63
Q

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

A

No

64
Q

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

A

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

65
Q

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

A

No

EA Part 2 (3 decks)

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