Test Bank for Fundamentals of

Test Bank for Fundamentals of Taxation for Individuals and Business Entities A Practical Approach, 2025 Edition By Gregory A. Carnes (All Chapters 1-18, 100% Original Verified, A+ Grade)

All Chapters Arranged Reverse: 18-1

This is the Original and Complete Test Bank for 2025 Edition, All other TB in the market are wrong /old Edition files. 1 / 4

18-1 Fundamentals of Taxation for Individuals and Business Entities, 2025 Test Bank Chapter 18: Business Entity Topics: CPA Exam Core - Taxation and Regulation 1) Which of the following is false in regard to computing a corporation's taxable income?

• Expenditures that are a violation of public policy are deductible if incurred in operating a

business.

• Business expenses are deductible if they are incurred in operating a business and are ordinary,

necessary, and reasonable.

• Municipal interest income is exempt from taxation.
• Prepaid revenue is generally included in income when received, even for accrual basis

taxpayers.

Answer: A

Explanation: Expenditures that are a violation of public policy are not deductible.

Diff: 1

Learning Objective: LO 18.1

AACSB / AICPA: Knowledge / Accounting Competencies

Bloom's: Knowledge

Section Reference: Sec. 18.1

Time on Task: 2 min

2) Which of the following is false in regard to the taxability of corporations?

• Corporations report their taxable income or loss on Form 1120.
• A six-month extension can be requested to file the return but not to pay the tax.
• For a calendar-year corporation, the due date is April 15, and the extended due date is

October 15.

• Corporations are subject to a progressive tax rate structure.

Answer: D

Explanation: Corporations are subject to a flat 21% tax rate as compared to the progressive tax rate structure for individuals.

Diff: 1

Learning Objective: LO 18.1

AACSB / AICPA: Knowledge / Accounting Competencies

© 2025 John Wiley & Sons, Inc. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise. 2 / 4

18-2

Bloom's: Knowledge

Section Reference: Sec. 18.1

Time on Task: 2 min

3) Which of the following forms is used by a corporation to report taxable income?

• Form 1120
• Form 1040
• Form 1065
• Form 990

Answer: A

Explanation: Corporations report their taxable income or loss on Form 1120.

Diff: 1

Learning Objective: LO 18.1

AACSB / AICPA: Knowledge / Accounting Competencies

Bloom's: Knowledge

Section Reference: Sec. 18.1

Time on Task: 2 min

4) What is the current income tax rate for corporations?

• Progressive tax rate from 0 - 21%
• Flat rate of 21%
• Flat rate of 35%
• Progressive tax rate from 0 - 35%

Answer: B

Explanation: Corporations are subject to a flat 21% tax rate as compared to the progressive tax rate structure for individuals.

Diff: 1

Learning Objective: LO 18.1

AACSB / AICPA: Knowledge / Accounting Competencies

Bloom's: Knowledge

Section Reference: Sec. 18.1

Time on Task: 2 min

5) Wellness Corporation has taxable income of $500,000. The corporation has no net operating loss carryforwards, tax credits, or special deductions. What is the corporation's tax liability?© 2025 John Wiley & Sons, Inc. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise. 3 / 4

18-3

A) $175,000

• $0

C) $50,000

D) $105,000

Answer: D

Explanation: $105,000 = $500,000 × 21%. Corporations are subject to a flat 21% tax rate as compared to the progressive tax rate structure for individuals.

Diff: 1

Learning Objective: LO 18.1

AACSB / AICPA: Knowledge / Accounting Competencies

Bloom's: Application

Section Reference: Sec. 18.1

Time on Task: 2 min

6) Genesis Corporation has taxable income of $4,000,000. The corporation has no net operating loss carryforwards, tax credits, or special deductions. What is the corporation's tax liability?

A) $1,400,000

B) $400,000

C) $840,000

D) $1,000,000

Answer: C

Explanation: $840,000 = $4,000,000 × 21%. Corporations are subject to a flat 21% tax rate as compared to the progressive tax rate structure for individuals.

Diff: 1

Learning Objective: LO 18.1

AACSB / AICPA: Knowledge / Accounting Competencies

Bloom's: Application

Section Reference: Sec. 18.1

Time on Task: 2 min

7) Wellness Corporation owns land that it has held for 15 years. Its basis in the land is $250,000 and the current FMV is $400,000. The corporation donates the land to a local charitable organization to build a job training center. Assuming there are no taxable income limitations, what is Wellness Corporation's charitable deduction?

A) $400,000

B) $250,000

© 2025 John Wiley & Sons, Inc. All rights reserved. Instructors who are authorized users of this course are permitted to download these materials and use them in connection with the course. Except as permitted herein or by law, no part of these materials should be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise.

• / 4