Business Entities Flashcards
What tax form does a partnership file?
Form 1065
Who are the members in a qualified joint venture?
Spouses
Are you allowed to use qualified joint venture status if you organize a multi-member LLC?
No
Do partners receive a W-2?
No
When is Form 1065 due?
By the 15th day of the third month following fiscal year-end.
Who is a qualified farmer?
One who earns at least 2/3 of their income from farming activity in 2022 or 2023.
What are the requirements to be an S-Corp?
- Must be domestic
- Shareholders aren’t partnerships, corporations, or non-residents.
- No more than 100 shareholders
- Only one class of stock
- Not an ineligible corporation
What form is filed to elect S-Corp status?
Form 2553
When must a taxpayer adopt a calendar year? (If any apply)
- Keeps no books/records
- No annual accounting period
- Present year doesn’t qualify as fiscal year
- Otherwise required by IRC
What form is filed to request a change in accounting method?
Form 3115
What tax form does a C Corporation file?
Form 1120
When is Form 1120 due?
By the 15th day of the fourth month following fiscal year-end.
What tax form does an S Corporation file?
Form 1120-S
Do S Corporation owners receive a K-1?
Yes
What qualifies as a closely held corporation?
- Not a personal service corporation
- Any time during the last half of tax year, more than 50% of outstanding common stock was owned by 5 or fewer individuals.
When must a corporation pay its tax due in full?
No later than the 15th day of the third month following fiscal year-end.
What is the penalty for failure to file a timely corporate tax return?
5% per month, subject to a maximum of 25%
To be a qualified dividend, these 3 conditions must be met:
- Paid by a US Corporation
- Aren’t explicitly a non-qualified dividend
- Taxpayer meets holding period
What is the holding period for determining qualified dividends?
The taxpayer must hold the stock for more than 60 days during the 121 period that begins 60 days before the ex-dividend date.
When are estimated payments due for a corporation?
On the 15th day of the 4th, 6th, 9th, and 12th month of their tax year.
What are the two methods for calculating estimated quarterly tax payments for a corporation?
Use the smaller of
- 25% of estimated tax this year
- 25% of actual tax last year
When is Form 1120-S due?
By the 15th day of the third month following fiscal year-end.
Can section 179 depreciation be used by the corporation?
No, this is passed through to the individual shareholder
If a corporation owns less than 20% of another corporation, what percentage of dividends received are deductible?
50%
If a corporation owns 20% or more of another corporation, what percentage of dividends received are deductible?
65%
What are homeowner’s associations’ tax rates if they file on Form 1120-H?
- 30% if condominiums or residential
- 32% for timeshares
A loss incurred from an abandonment of a partnership is an ordinary loss when (both apply):
- The transaction isn’t a sale or exchange
- The partner has not received an actual or deemed distribution
If a corporation has always been an S-Corp, does the net passive income tax apply?
No
If the partnership interest cannot be determined by documents, it is determined by taking these three things into account:
- Partner’s relative contributions to partnership
- The interest of the partners in economic profits and losses
- The rights of the partners to distributions of capital upon liquidation
A partnership terminates when one of the following 2 events take place:
- All operations are discontinued
- At least 50% of total partnership interest is sold or exchanged within 12 months, including to another partner
A partner’s basis includes the partner’s share of a partnership liability only to the extent that the liability (any of the 3 apply):
- Creates or increases partner’s basis in any assets
- Gives rise to a current deduction
- Is a nondeductible, noncapital expense of the partnership
An S-Corp election can be revoked by any shareholder or group of shareholders who own more than:
50%
When must an election to be treated as a corporation take effect?
No more than 75 days from the date election is filed, nor longer than 12 months after the date it is filed
Which form does a company use to elect if it will be taxed as a partnership, corporation, or disregarded entity?
Form 8832
A partner generally must recognize gain on the distribution of property if the partner contributed appreciated property to the partnership during how long before the distribution?
7 years
How many shareholders must consent to revoke an S-Corp election?
More than 50%
What rate is accumulated earnings taxed at?
20%
What amount is considered “reasonable accumulated earnings” for most businesses? What is the amount for personal service businesses?
$250k and $150k
What items increase S-Corp cost basis?
All income, including tax-exempt income AND the excess of the deduction for depletion.
What items decrease S-Corp cost basis?
Property distributions, deductions, and nondeductible expenses
How is a distribution from an S-Corp that has no accumulated E&P treated?
- Tax free reduction of basis, then
- Gain on sale of stock if exceeds total basis
A qualified joint venture (QJV) is one where:
- The only owners are a husband and wife who file jointly
- Both spouses materially participate
- Both spouses elect not to be treated as a partnership
Which organizations are treated as tax-exempt without being required to file an application for exempt status?
- Churches
- Any organization having gross receipts not more than $5,000
If you have $29M or more of gross receipts, can you use the cash method of accounting?
No
What form must be filed to elect a change in accounting method?
Form 3115
Can expenses be deducted against hobby income?
No, but income must be reported
Where is hobby income reported?
Schedule 1
What tax form does a qualifying joint venture (QJV) file to report income & loss items?
Schedule C
Should limited partners include only the amount of guaranteed payments for services actually rendered on their behalf?
Yes
What is the monthly penalty for a partnership that files to file a timely return?
$235
When must all tax be paid by corporations who owe tax?
The 15th day of the 3rd month following fiscal year-end
A corporation is a personal service corporation if it meets all of the following:
- The principal activity was personal services in the testing period
- More than 20% of compensation paid to employee-owners
- Employee owners own more than 10% of stock at the end of the testing period
Can a personal service corporation be a closely held corporation?
No
A corporation is closely held if both of the following apply:
- Not a personal service corporation
- At any time during the last half of the year, 50% of the stock is owned by 5 or fewer individuals
What form is filed to request an extension of time to file for business tax returns?
Form 7004
How much of the dividend-paying corporation’s stock does a corporation need to own to receive a 65% dividends received deduction?
At least 20%
What is the maximum charitable contribution deduction for corporations?
10% of taxable income
An individual is deemed to own the stock owned directly by his or her:
Spouse, children, grandchildren, and parents
When must form 1120-S be filed by?
The 15th day of the 3rd month following fiscal year-end.
In order to become an S-Corporation, the corporation must submit Form 2553 signed by what % of shareholders?
100%
Can an S-Corporation have a C-Corporation or S-Corporation subsidiary?
Yes
In order to revoke an S-Corporation, what % of shareholders need to agree?
More than 50%
Does the excessive net passive income tax apply to an S-Corporation that has always been an S-Corporation?
No
An S-Corporation may owe tax in these (4) following instances: (LINN)
LIFO recapture
Investment credit recapture
Net passive income
Net recognized built-in gains
If capital IS a material income-producing factor, does partnership participation matter for who is considered a partner?
No
How are capital losses for corporations treated?
Carried back 3 years (3, 2, 1), and then forward 5 years as a short-term capital loss
When is form 1120-H required to be filed by?
The 15th day of the 4th month following fiscal year-end
