Additional CORP tax Flashcards
Interest income from municipal bonds must be added back to book income for an M-1. What else is added back related to municipal bonds?
Interest expense incurred to carry the bonds.
What amounts should you compare in determining the DRD?
Make sure you compare Taxable Income x DRD% to Dividend Received x DRD%. Must take lesser. Except for creating loss.
What items do PHC (Personal holding company) subtract from taxable income before distributions to determine undistributed PHC income?
Federal Income Taxes
&
Net LTCG less related federeal income taxes
Which type of corporation(s)are the Accumulated Earnings Tax imposed on?
Regular C corporations whose accumulated (retained) earnings are in excess of 250,000. (150k for PSC)
What is the calculation for a shareholder’s basis in a non-taxable exchange (Cash/Property and 80%)?
Asset NBV
+ Cash Contributed
-Liability
= Stock Basis
What is the calculation for a shareholder’s basis in a taxable exchange (Not Cash/Property and 80%)?
FMV
- Liability
= Stock Basis
The detailed alternate computation to Shareholder basis is?
Adjusted basis of transferred property (including cash) \+ FMV of services rendered \+ Gain recognized by shareholder - Cash received - Liabilities assumed by Corp - FMV of nonmoney boot received = Basis
Besides the normal reasons, when can a corporation’s tax year be reopened when the Statute of Limitations has passed?
When an item is ruled deductible in a subsequent year after having been taken in a closed year. Done to avoid hardship on taxpayer.
What are the type of income considered for the additional tax for PHC’s?
Net Rent (If less than 50% of ordinary gross income)
Interest that is taxable (Don’t include nontaxable)
Royalties (but not mineral, oil, gas, or copyright)
Dividends from an unrelated domestic corporation (70% ones)
In a non-liquidating distribution, what should a shareholder include as dividend income for property?
the FMV
NOT ADJUSTED BASIS
IGNORE ANY E&P STUFF
There going to keep showing the basis and E&P to throw me off
Are a corp’s penalty for underpayment of estimated taxes deductible?
NOPE!
Wouldn’t be a penalty if it was.
When paying a dividend (non-liquidating distribution), what is the calculation to find the taxable amount for a corporation?
FMV of Property
- NBV
=Corp. Gain
*As if you outright sold it
What happens if a corp recognizes a gain when paying a dividend?
It creates or Adds E&P.
Even if there isn’t any beforehand.
Leads to Shareholder being taxed dividend income
What are the different type of reorganizations?
Type A: Mergers/Consolidations
Type B: Once corp aquires another corp’s stock . (Stock for Stock)
Type C: One corp aquires another corp’s assets. (Stock for Assets
Type D: One Corp divides into several operating corp’s.
Type E: Recapitalizations
Type F: A mere change in identity, form, or place of organization.
To be tax-free, the aquiring corporation must continue the business of the old entity or use a significant portion of it’s assets and it must have 80% control immediately following reorganization.
When computing a corp’s income tax expense for estimated tax purposes, what should include?
Everything (Credits, deductions, AMT, etc.)
You need the TAX LIABILITY from prior years.
In a liquidating distribution, what is calculation for gain/loss for a corp when the corp sells assets and distributes cash?
Sale Price
- Basis
= Taxable Gain/Loss
In a liquidating distribution, what is calculation for gain/loss for a shareholder when the corp sells assets and distributes cash?
Proceeds
- Stock Basis
= Taxable Gain/Loss (Usually capital in nature)
In a liquidating distribution, what is calculation for gain/loss for a corp when the corp distributes assets and not cash?
FMV
- Basis
= Taxable Gain/Loss
In a liquidating distribution, what is calculation for gain/loss for a shareholder when the corp distributes assets and not cash?
Sale Price
- Stock Basis
= Taxable Gain/Loss (Usually capital in nature)
What is the accumulated earnings tax calculation?
Taxable Income (Before DRD, NOL, Charity Deduction, Cap. Loss carryover) - ALL CHARITY - ALL CAPITAL LOSSES - TAXES - DIVIDENDS PAID = Accumulated Taxable Income - Remaining Credit = Current Accum. Taxable Inc. x 20% Accumulated Earnings Tax
How is shareholder gain determined when he receives boot?
Must take the lesser of realized gain or boot received.
Amount Realized (FMV, Cash)
- Adjusted Basis
= Realized gain
Who can use NOL?
Only taxable entities (Individuals, estates and trusts, corporations)
Not pass-throughs or nont-for-profits and the like.
Who CANNOT file consolidated returns?
S-corp Foreign corp REITs Some insurance companies Most exempt organizations
What happens to shareholder’s stock basis when a common stock dividend is issued?
Basis per stock decreases. Total stock basis is unchanged.
