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Question bank

Part 2: Businesses Question Bank

Part-specific question-bank foundation with review standards, topic coverage targets, and reviewed seed questions.

Bank status

Part 2 questions must separate entity-level filing from owner-level tax treatment and show calculation logic where needed.

Target: 500 reviewed questions. Current reviewed seed questions: 3.

Status: Foundation Built. Last reviewed: May 30, 2026. Current IRS SEE cycle; students must verify current-year limits before testing.

Publication gate

  • Assign exam part, domain, topic, module, difficulty, skill, IRS concept reference, and last reviewed date.
  • Use one best answer only.
  • Make distractors plausible, not silly.
  • Avoid repeated answer patterns, giveaway wording, and copycat stems.
  • Do not copy competitor questions, official exam questions, or IRS sample questions.
  • Correct Answer: identify the correct choice.
  • Why this is correct: explain the rule and apply it to the facts.
  • Why the other answers are wrong: explain A, B, C, and D separately.
  • Rule tested: name the controlling tax or procedure concept.
  • Exam trap: explain the misleading fact or common mistake.

Business Entities and Tax Fundamentals

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Calculation setup.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Partnership Taxation

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Authority or form selection.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

S Corporation Taxation

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Timing and eligibility.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

C Corporation Taxation

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Calculation setup.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Business Income, Business Deductions, Accounting Methods, and Accounting Periods

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Authority or form selection.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Depreciation, Amortization, Section 179, and Cost Recovery

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Timing and eligibility.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Basis, Distributions, Loss Limitations, and Owner Tax Consequences

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Calculation setup.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Payroll, Employment Taxes, Worker Classification, and Information Reporting

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Authority or form selection.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Business Credits, Retirement Plans, Exempt Organizations, and Specialized Taxpayers

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Timing and eligibility.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Farm Taxation

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Calculation setup.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Estates, Trusts, and Fiduciary Income Taxation

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Authority or form selection.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

International Business Issues

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Timing and eligibility.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Comprehensive Business Taxation Integration and Final Review

Targets: 8 easy, 12 medium, 10 hard.

Skills: Rule recognition, Fact application, Wrong-answer elimination, Calculation setup.

References: Schedule C, Form 1065, Form 1120, Form 1120-S.

Reviewed seed questions

These are starter reviewed examples for the bank standard. More questions should be added only through the same review gate.

Business Entities and Tax Considerations

Two individuals operate a business together for profit and have not elected corporate tax treatment. Which federal return is generally associated with the business entity?

  1. Schedule C attached to only one owner's Form 1040
  2. Form 1065
  3. Form 1120
  4. Form 1041

Correct answer: B

Explanation: B is correct. A domestic partnership generally files Form 1065 as an information return, while partners report their distributive shares on their own returns.

Rule tested: Entity classification and partnership filing.

Exam trap: The trap is treating all small businesses as sole proprietorships.

Difficulty: Foundational. Source: Form 1065 instructions; Publication 541. Last reviewed: May 30, 2026.

Depreciation, Amortization, and Section 179

A business buys equipment in December but does not place it in service until January of the next year. What is the safest depreciation conclusion for the year of purchase?

  1. Depreciation begins in the year cash is paid.
  2. Depreciation begins when the asset is ordered.
  3. Depreciation generally begins when the asset is placed in service.
  4. Depreciation begins only when the asset is sold.

Correct answer: C

Explanation: C is correct. Depreciation generally begins when property is placed in service, meaning it is ready and available for its assigned use in the business.

Rule tested: Placed-in-service rule for depreciation.

Exam trap: The trap is using purchase date instead of placed-in-service date.

Difficulty: Exam Standard. Source: Publication 946. Last reviewed: May 30, 2026.

Basis, Distributions, and Loss Limitations

An S corporation shareholder has a loss allocation that exceeds the shareholder's stock and debt basis. What is the general treatment of the excess loss?

  1. It is currently deductible without limitation.
  2. It is suspended until sufficient basis exists, subject to other applicable limitations.
  3. It becomes a refundable credit.
  4. It is deducted by the corporation instead of the shareholder.

Correct answer: B

Explanation: B is correct. S corporation losses are limited by shareholder basis. Losses exceeding available stock and debt basis are generally suspended until basis is restored, subject to other limitations such as at-risk and passive activity rules.

Rule tested: S corporation shareholder basis limitation.

Exam trap: The trap is ignoring basis before deducting pass-through losses.

Difficulty: Difficult. Source: Form 1120-S instructions; shareholder basis guidance. Last reviewed: May 30, 2026.