09/02/2022 C Corporations (Form 1120)

Question 1

Corporations CANNOT take a deduction for dividends received from the following entities.
RCCCA

Answer 1

Real estate investment trust (REIT).
Corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year.
Corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Ex-dividend means the holder has no rights to the dividend.
Corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 360 days.
Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

Question 2

RECEIVED DIVIDENDS, A corporation can deduct, within certain limits

Answer 2

50% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend.

If the corporation owns 20% or more of the distributing corporation’s stock, it can, subject to certain limits, deduct 65% of the dividends received.

80% and more ownership- 100% of the dividends received

When collected by one domestic corporation from another

Question 3

An individual is treated as owning the stock owned, directly or indirectly, by or for the individual’s family. Family includes only

Answer 3

Brother and Sisters (including half sisters/brothers)
Spouse
Ancestors
Lineal descendants

Question 4

To be in control of a corporation, the transferors must own, immediately after the exchange, at least

Answer 4

80% of the total combined voting power of all classes of stock entitled to vote
And at least 80% of the total number of shares of all other classes of stock of the corporation

Question 5

A corporation cannot deduct noncash charitable contributions that exceed:

Answer 5

10% of its taxable income for the tax year (25% of its taxable income for cash contributions in 2021)

Question 6

For charitable contributions limit- Figure the taxable income without the following:
CC
DRD
DAUS
CLC

Answer 6

Charitable contribution
Dividend-receved deduction
Deduction allowed under section 249
Capital loss carryback to the year

Question 7

An affiliated group is

Answer 7

one or more chains of includible corporations connected through stock ownership with a common parent corporation.

Question 8

In a liquidating distribution a corporation must recognize

Answer 8

recognize gain or loss on the distribution of its assets in the complete liquidation of its stock

Question 9

Penalties that are NOT deductibles by a Corporation

Answer 9

incurred for violations of law

Question 10

Section 351 provides for the nonrecognition of gain or loss upon the transfer of property to a corporation when certain conditions are met.

Answer 10

(1) property is transferred in exchange for stock and

(3) the transferors are in control of the corporation after the exchange.

Question 11

Section 357(a) provides that when the acquiring corporation assumes a liability in a Section 351 exchange

Answer 11

the transfer does not result in boot for gain purposes but it does reduce the basis in the property received.

However, if the liability assumed is more than the adjusted basis of the property transferred the excess results in a recognized gain.

Question 12

Rules for figuring the NOL on a Corporation

Answer 12

Cannot increase its current year NOL by carryovers from other years.

Deduction for dividends received without regard to the aggregate limits (based on taxable income) that normally apply.

Can figure the deduction for dividends paid on certain preferred stock of public utilities without limiting it to its taxable income for the year.

Capital loss carryovers may not be used in a year with a net operating loss.

Charitable contributions deduction is NOT allowed in the current year because charitable contributions are limited to a percentage of net income.

Question 13

1099-DIV Filling due date

Answer 13

To IRS by February 28 (March 31 if filing electronically)

to shareholders by January 31

Question 14

1099-PATR is for

Answer 14

Patronage dividends

Question 15

According to IRC Section 263A, examples of indirect costs required to be capitalized to the extent they are properly allocable to property produced are:

Answer 15

bidding costs
capitalizable service costs (including capitalizable mixed service costs)
cost recovery allowances (however, remember depletion is only allocated to inventory produced and sold during the year)
engineering and design
employee benefit expenses
handling costs
indirect labor costs
indirect material costs
insurance
interest (see special rules under § 263A(f))
licensing and franchise costs
officers’ compensation
pension and other related costs
purchasing costs
quality control
rent
repairs and maintenance
spoilage
storage costs
taxes
tools and equipment
utilities

Question 16

The Accumulated Earnings Tax (AET) is computed under Sec 531 as equal to

Answer 16

20 percent of the accumulated taxable income

[The credit] shall in no case be less than the amount by which $250,000 ($150,000 for a personal service corporation

Question 17

Estension of Time to File (corp)

Answer 17

6 months

EXCEPTION: This extension is 7-months if the fiscal year ends in June.

Question 18

Time to File (corp)

Answer 18

15th day of the 4th month

EXCEPTION: A corporation with a fiscal tax year ending June 30 must file by the 15th day of the 3rd month after the end of its tax year.

Question 19

controlled group of corporations

Answer 19

Members of a controlled group are entitled to only one accumulated earnings tax credit.

A parent corporation and its 80% owned subsidiary make up a controlled group.

All members of a controlled group need not use the parent’s tax year.

Members of a controlled group must use Schedule O to report the apportionment of taxable income, income tax, and certain tax benefits between the members of the group.

Question 20

Uniform Capitalization Rules of Code Sec. 263A: Capitalize:

Answer 20

Direct cost and part of the indirect cost for production or relase activities. Necessary to prepare the item for its intended use. storage, cost of shipping materias to factory (COGS)

Question 21

Donations:
If it would have yieldes a long term capital gain:

Answer 21

May deduce FMV

Question 22

Donations:
Inventory donated

Answer 22

The inventory would create regular ordinary income if sold.
The lower of cost or fair value is used for the inventory.

Question 23

To be Related person, an individual must own

Answer 23

directly or indirectly, more than 50% of the value of the outstanding stock of the corporation

Question 24

Provisions of consolidated tax returns include:

Answer 24

Intercompany dividends are eliminated, therefore, intercompany dividends are not taxable.

Any gain or loss on intercompany transactions is deferred until the item is sold outside of the group (like in consolidated financial statements).

Losses of one company may be used to offset the gains of another.

Question 25

The related party rules apply to the sale of property between an individual and a corporation where more than

Answer 25

50% of the stock is owned directly or indirectly by that individual. Under these rules, the loss not allowable as a deduction

Question 26

For dividends from companies that are between 20% to 80% ownership, the deduction cannot exceed the lower

Answer 26

of 65% of taxable income or 65% of dividends received.

Question 27

For dividends from companies that are less than 20% ownership, the deduction cannot be more than the lower

Answer 27

of 50% of taxable income or 50% of dividends received.

Question 28

When one party owns over 50 percent of a corporation, they are viewed as related parties and losses on sales between them

Answer 28

cannot be deducted until the property is eventually sold to an outside party. In contrast, gains continue to be taxable until the ownership level hits 80 percent

Question 29

A corporation that does not file its tax return by the due date, including extensions, may be penalized for

Answer 29

5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax.