CTA Business Taxation 1 — Questions and Answers
Question 1: Which tax form does a C corporation use to file its federal income tax return?
- Form 1120S
- Form 1065
- Form 1120 (Correct answer)
- Form 1041
Correct answer: Form 1120
C corporations file their federal income tax return using Form 1120.
Question 2: What is the current flat federal corporate income tax rate under the Tax Cuts and Jobs Act?
- 25%
- 28%
- 21% (Correct answer)
- 35%
Correct answer: 21%
The Tax Cuts and Jobs Act of 2017 established a flat 21% federal corporate income tax rate.
Question 3: A partnership files which informational return with the IRS?
- Form 1120
- Form 1065 (Correct answer)
- Form 990
- Form 1041
Correct answer: Form 1065
Partnerships file Form 1065, an informational return that reports income, deductions, and each partner's distributive share.
Question 4: Which of the following is a key characteristic of an S corporation?
- Subject to double taxation
- Can have an unlimited number of shareholders
- Income passes through to shareholders' personal returns (Correct answer)
- Can have both US and foreign shareholders
Correct answer: Income passes through to shareholders' personal returns
S corporations are pass-through entities where income and losses flow through to shareholders' individual tax returns.
Question 5: Under the qualified business income (QBI) deduction, eligible pass-through businesses may deduct up to what percentage of QBI?
- 10%
- 15%
- 20% (Correct answer)
- 25%
Correct answer: 20%
IRC Section 199A allows eligible taxpayers a deduction of up to 20% of qualified business income from pass-through entities.
Question 6: Which depreciation method allows businesses to immediately expense the full cost of qualifying assets in the year of acquisition?
- MACRS straight-line
- Bonus depreciation (Section 168(k)) (Correct answer)
- Units of production
- Sum-of-the-years-digits
Correct answer: Bonus depreciation (Section 168(k))
Section 168(k) bonus depreciation allows immediate expensing of the full cost of qualifying property in the placed-in-service year.
CTA Business Taxation 1
Which tax form does a C corporation use to file its federal income tax return?