C and S corporation

Question 1

10 years Dep life

Answer 1

water transportation

Question 2

If the property is disposed off before the last year, the full year MACRS rate must be multiplied by _________

Answer 2

one-half for the half year convention

Question 3

C Corp

Answer 3

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

Question 4

C Corp, Capital Loss

Answer 4

Carried back 3 years
Carried forward 5 years

Question 5

C corp DRD

Answer 5

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

Question 6

Unrelated or unaffiliated domestic corp = 50% DRD ALWAYS

Answer 6

DRD is Lesser of:

50% of Dividends
or 50% of taxable income before DRD

Question 7

C corp - chosen method election

Answer 7

_USe accrual method if avg receipt is more than $30 mn for prior 3 years

• Tax shelters

Question 8

Advance rental payments are taxable __________

Answer 8

when received

Question 9

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

Answer 9

NOT INCLUDED

Question 10

The LIFO method can be used for tax purposes only if the _____________

Answer 10

LIFO method is used for financial statement purposes.

Question 11

C corp flat tax rate ______________

Answer 11

21%

Question 12

Capital gains can only be used offset capital losses and not the __________

Answer 12

ordinary income

Question 13

S ELECTION - Form 2553

Answer 13

By March 15 - becomes effective Jan 1 of that year

After March 15 - becomes effective in the following year

Question 14

Newly formed corp

Answer 14

2 month grace period to elect for S corp

Question 15

Calendar year - Form 1120S

Answer 15

unless a valid business purpose for a different taxable year (fiscal year) is established.

Question 16

No Corporate tax on S corp

Answer 16

This follows pass through same as partnership and doesn’t get double taxed like a C corporation

Question 17

Terminate S election (it takes 5 years to re-elect as S corp)

Answer 17

3 ways

1.SHareholders holding more than 50% of the stock (voting anf nonvoting) consent to a voluntary revocation

2. Corp fails to meet any of the qualifications for S status
   - Corporate or partnership owner
   - Foreign owner
   -More than 100
3. More than 25% of net receipts in prior 3 taxable years

Question 18

< or equal to 2%

> 2%

Answer 18

Deductible

Non-deductible

Question 19

Reinstate Debt basis first and ____________

Answer 19

then stock basis

Question 20

S corp

Answer 20

Only common stock can be issued and not the preferred stock

Question 21

S corp

Answer 21

Int expense is not a separately stated item, only interest income is

Question 22

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:

Answer 22

Percentage
Ownership Dividends-Received
Deduction

0% to < 20% 50%
20% to < 80% 65%
80% or more 100%

Question 23

Manufacturer cannot use

Answer 23

Cash basis of accounting