C and S corporation Flashcards
10 years Dep life
water transportation
If the property is disposed off before the last year, the full year MACRS rate must be multiplied by _________
one-half for the half year convention
C Corp
may not deduct expenses in excess of $1 million
bad debt is not deductible for cash basis taxpayer
Exception - Uncollectible check
if Average annual gross receipts are more than $30 million for the prioer 3 taxable years
C Corp, Capital Loss
Carried back 3 years
Carried forward 5 years
C corp DRD
DRD
0% to 19% - 50%
20-79% -65%
80% or more - 100%
Holding period - 46 days
The corporate shareholder must
own the investee stock for at least 46 days during the 91-day period beginning on the date
45 days before the ex-dividend date of the stock to qualify for the dividends-received deduction
Unrelated or unaffiliated domestic corp = 50% DRD ALWAYS
DRD is Lesser of:
50% of Dividends
or 50% of taxable income before DRD
C corp - chosen method election
_USe accrual method if avg receipt is more than $30 mn for prior 3 years
- Tax shelters
Advance rental payments are taxable __________
when received
Proceeds from insurance on the death of an officer where the corp is the owner and beneficiary are _______in the taxable income of a corp
NOT INCLUDED
The LIFO method can be used for tax purposes only if the _____________
LIFO method is used for financial statement purposes.
C corp flat tax rate ______________
21%
Capital gains can only be used offset capital losses and not the __________
ordinary income
S ELECTION - Form 2553
By March 15 - becomes effective Jan 1 of that year
After March 15 - becomes effective in the following year
Newly formed corp
2 month grace period to elect for S corp
Calendar year - Form 1120S
unless a valid business purpose for a different taxable year (fiscal year) is established.
No Corporate tax on S corp
This follows pass through same as partnership and doesn’t get double taxed like a C corporation
Terminate S election (it takes 5 years to re-elect as S corp)
3 ways
1.SHareholders holding more than 50% of the stock (voting anf nonvoting) consent to a voluntary revocation
- Corp fails to meet any of the qualifications for S status
- Corporate or partnership owner
- Foreign owner
-More than 100 - More than 25% of net receipts in prior 3 taxable years
< or equal to 2%
> 2%
Deductible
Non-deductible
Reinstate Debt basis first and ____________
then stock basis
S corp
Only common stock can be issued and not the preferred stock
S corp
Int expense is not a separately stated item, only interest income is
Domestic corporations are allowed a dividends-received deduction (DRD) based on qualified
dividend income. The purpose of this deduction is to prevent triple taxation of earnings
(as illustrated in the diagram below). The amount of the dividends-received deduction allowed
depends on the percentage of the investee corporation owned by the investor corporation.
The percentage allowed may be either 50, 65, or 100 percent. The corporate shareholder must
own the investee stock for at least 46 days during the 91-day period beginning on the date
45 days before the ex-dividend date of the stock to qualify for the dividends-received deduction.
Below is the percentage deductions based upon stock ownership:
Percentage
Ownership Dividends-Received
Deduction
0% to < 20% 50%
20% to < 80% 65%
80% or more 100%
Manufacturer cannot use
Cash basis of accounting
