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INTUIT ACADEMY TAX LEVEL 1 EXAM
QUESTIONS WITH ANSWERS.
Individual taxpayers with income from a partnership and
owners of S corporations should report their income in Part II
of Schedule E.
True
Understanding Part II of Schedule E
If you are a partner in a business entity or own an S corporation,
you should receive a Schedule K-1. You should also receive a
copy of the partner's or shareholder's instructions for Schedule K-
1.
You can use Schedule K-1 and the related instructions to know
where to report your share of the partnership's items in the return.
The taxpayer reports income or loss of income in Part II of
Schedule E.
How to File a Partnership Income Tax Return
The partnership files a tax return on Form 1065(opens in a new
tab). No tax is calculated from or paid on Form 1065. It simply
reports this information to the IRS.
A partnership itself does not pay income tax, instead, the
partners will pay the tax. However, the partnership files a tax
return on Form 1065.
When incurring a loss, apply rules like basis rules, at-risk
rules, passive activity rules and excess business loss rules
to your loss on Schedule E. These rules are applied in order
, Page | 2
and can reduce the loss you are allowed to deduct on the
individual tax return.
Schedule K-1 is used to report income / loss items for
partnerships and S corporation.
True
Schedule K-1 income is considered earned income for
_________________.
General partners
Suppose you run a partnership company with your friend,
and you contribute $50,000 in cash and $30,000 in
equipment. Your share of income for the year is $10,000.
Assuming you have made no withdrawals, what will be your
total basis?
$90,000
Sejal contributes $50,000 in cash and $120,000 in equipment
to a partnership. Sejal's share of income is $15,000 for the
current year.
(Note: 50,000 + 120,000 +15,000 = 185,000)
Assuming Sejal made no withdrawals, what is Sejal's total
basis?
$185,000
Richard and Stelle run a grocery. They suffer loss of $5,000
in the first year. In the second year, there is a profit of $5,000.
Please note that the loss from the first year was limited due
to basis limitations.
What was the taxable income for the partners in the second
year?
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Nil
Which activities below are examples of common passive
activity?
Limited partnership
Leasing equipment
Home rentals
Who are likely to get a Schedule K-1?
S corporation shareholders
Trust or estate beneficiaries
Investors in limited partnerships (LPs) or master limited
partnerships (MLPs)
Partners in limited liability companies (LLCs), limited liability
partnerships (LLPs)
Schedule K-1 provides information used to report the income
and losses to a business entities partners or shareholders.
True
Which is the form used by general partnerships, limited
partnerships (LP), limited liability partnerships (LLPs), and
certain limited liability companies (LLCs) to file Schedule K-
1?
Form 1065
Suppose a business earns $100,000 of taxable income and
there are four equal partners. What is the amount on which
each partner will receive a K-1?
$25,000
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What is form 1099-SA
You must report Form 1099-SA(opens in a new tab) information if
you need to report distributions from:
Health savings account (HSA)
Archer Medical Savings Account (MSA)
Medicare Advantage Medical Savings Account (MA MSA)
Rollovers and Transfers
In case there is a rollover from one Archer MSA to another Archer
MSA or from one HSA to another HSA, taxpayers must report the
receipt.
However, taxpayers need not report trustee-to-trustee transfer.
For reporting purposes, contributions and rollovers do not include
transfers.
When taxpayers use the funds from a Health Savings
Account (HSA), or a medical savings account (MSA), the
institution that administers the account must report all
distributions on Form 1099-SA.
Only certain individuals are eligible to contribute to an HSA
or MSA.
None of the money received from these plans is taxable if it
is spent on "qualified" medical expenses.
Is Social Security taxable?
For most Americans, social security is taxable. That is, a majority
of those who receive Social Security benefits pay income tax on
up to half or even 85% of that money because their combined
income from Social Security and other sources pushes them
above the very low thresholds for taxes to kick in.
INTUIT ACADEMY TAX LEVEL 1 EXAM
QUESTIONS WITH ANSWERS.
Individual taxpayers with income from a partnership and
owners of S corporations should report their income in Part II
of Schedule E.
True
Understanding Part II of Schedule E
If you are a partner in a business entity or own an S corporation,
you should receive a Schedule K-1. You should also receive a
copy of the partner's or shareholder's instructions for Schedule K-
1.
You can use Schedule K-1 and the related instructions to know
where to report your share of the partnership's items in the return.
The taxpayer reports income or loss of income in Part II of
Schedule E.
How to File a Partnership Income Tax Return
The partnership files a tax return on Form 1065(opens in a new
tab). No tax is calculated from or paid on Form 1065. It simply
reports this information to the IRS.
A partnership itself does not pay income tax, instead, the
partners will pay the tax. However, the partnership files a tax
return on Form 1065.
When incurring a loss, apply rules like basis rules, at-risk
rules, passive activity rules and excess business loss rules
to your loss on Schedule E. These rules are applied in order
, Page | 2
and can reduce the loss you are allowed to deduct on the
individual tax return.
Schedule K-1 is used to report income / loss items for
partnerships and S corporation.
True
Schedule K-1 income is considered earned income for
_________________.
General partners
Suppose you run a partnership company with your friend,
and you contribute $50,000 in cash and $30,000 in
equipment. Your share of income for the year is $10,000.
Assuming you have made no withdrawals, what will be your
total basis?
$90,000
Sejal contributes $50,000 in cash and $120,000 in equipment
to a partnership. Sejal's share of income is $15,000 for the
current year.
(Note: 50,000 + 120,000 +15,000 = 185,000)
Assuming Sejal made no withdrawals, what is Sejal's total
basis?
$185,000
Richard and Stelle run a grocery. They suffer loss of $5,000
in the first year. In the second year, there is a profit of $5,000.
Please note that the loss from the first year was limited due
to basis limitations.
What was the taxable income for the partners in the second
year?
, Page | 3
Nil
Which activities below are examples of common passive
activity?
Limited partnership
Leasing equipment
Home rentals
Who are likely to get a Schedule K-1?
S corporation shareholders
Trust or estate beneficiaries
Investors in limited partnerships (LPs) or master limited
partnerships (MLPs)
Partners in limited liability companies (LLCs), limited liability
partnerships (LLPs)
Schedule K-1 provides information used to report the income
and losses to a business entities partners or shareholders.
True
Which is the form used by general partnerships, limited
partnerships (LP), limited liability partnerships (LLPs), and
certain limited liability companies (LLCs) to file Schedule K-
1?
Form 1065
Suppose a business earns $100,000 of taxable income and
there are four equal partners. What is the amount on which
each partner will receive a K-1?
$25,000
, Page | 4
What is form 1099-SA
You must report Form 1099-SA(opens in a new tab) information if
you need to report distributions from:
Health savings account (HSA)
Archer Medical Savings Account (MSA)
Medicare Advantage Medical Savings Account (MA MSA)
Rollovers and Transfers
In case there is a rollover from one Archer MSA to another Archer
MSA or from one HSA to another HSA, taxpayers must report the
receipt.
However, taxpayers need not report trustee-to-trustee transfer.
For reporting purposes, contributions and rollovers do not include
transfers.
When taxpayers use the funds from a Health Savings
Account (HSA), or a medical savings account (MSA), the
institution that administers the account must report all
distributions on Form 1099-SA.
Only certain individuals are eligible to contribute to an HSA
or MSA.
None of the money received from these plans is taxable if it
is spent on "qualified" medical expenses.
Is Social Security taxable?
For most Americans, social security is taxable. That is, a majority
of those who receive Social Security benefits pay income tax on
up to half or even 85% of that money because their combined
income from Social Security and other sources pushes them
above the very low thresholds for taxes to kick in.
