C corps Flashcards
Gross income of a corporation includes all income, unless specifically excluded. Excluded from a corporation’s gross income are:
Excluded from a corporation’s gross income are capital contributions and any gain or loss realized by a corporation on the sale or exchange of its own stock
What type of life insurance proceeds are not included in income?
Life insurance policy paid by reason of death of the insured are excluded by the beneficiary.
When is prepaid rent recognized?
Both cash- and accrual-basis taxpayers must include in gross income amounts actually or constructively received if the taxpayer has an unrestricted claim to the amounts.
Excess charitable contributions may be carried over for how many years? And total deductions for Charitable Contributions of a corporation may not exceed what amount of the TI?
Excess charitable contributions may be carried over to each of the succeeding 5 years, subject to certain limitations. The total deductions for charitable contributions of a corporation may not exceed 10% of the taxable income computed before special deductions.
What do you add back for the 10% limitations of charitable contribution calculation?
10% limit is based on taxable income as reported before considering: •the charitable contribution itself, •DRD •any CL carryback (but not carryforward), and •any NOL carryback (but not carryforward).
Can charitable contributions be carried forward or back? and if so, for how many years?
A corporation may carry unused charitable contributions forward for 5 years. Current contributions are deducted before carryovers. Carryovers are applied on a FIFO basis. Carrybacks of excess charitable contributions are not permitted.
Golden parachute payments are:
not deductible.
is federal income tax deductible?
No, federal income tax is not deductible.
When calculating charitable contributions limit, is the carryover contribution included when calculating the 10% limit?
No, contribution carryover are not included.
If there is a current year contribution and a carry over contribution, which should be used up first?
The current year charitable contribution should be used first.
In calculating NOL is DRD allowed?
yes in calculating NOL, DRD is allowed.
What kind of costs cannot be amortized for tax purposes?
Stock issuance costs cannot be amortized.
A deduction for business gifts is allowable only to the extent of:
A deduction for business gifts is allowable only to the extent of $25 per donee per year.
The costs of organizing a corporation in 2015
May be amortized over a period of not less than 180 months, even if these costs are capitalized on the company’s books.
Examples of organizational expenditures include;
Expenses to obtain the corporate charter Fees paid to the state of incorporation Expenses of temporary directors.
Bonuses paid within what time period would be considered to be paid in prior year?
If paid within 2 1/2 months of the new period will be considered if made last period.
How many days should a corporation hold stock to be able to qualify for DRD?
The distributee corporation must own the distributing corporation’s stock for more than 45 days (90 days for dividends more than a year in arrears received on preferred stock) to qualify for the dividends-received deduction.
A contribution to a local political candidate is deductible or not?
No, not deductible.
What are the percentages for a DRD?
A corporation may deduct 70% of dividends received from a domestic taxable corporation of which it owns less than 20% of the stock, 80% of dividends received if the stock is 20% or more owned, and 100% of dividends received if the stock is 80% or more owned.
What costs are expenses as incurred?
Generally, rules for deductions from corporate gross income for ordinary and necessary business expenses duplicate the rules for individuals. Miscellaneous ordinary and necessary business expenses are also deductible. Examples include costs of office supplies, advertising, and bank fees.
What method must be used for bad debts?
The corporation must use the direct charge-off method or the nonaccrual-experience method.
For a domestic corporation to deduct a percentage of the dividends it receives from a foreign corporation, certain tests must be met.
The IRC lists requirements that must be met for the dividends of a foreign corporation to qualify for the dividends-received deduction. These requirements include that the foreign corporation (1) not be a foreign personal holding company, (2) be subject to federal income taxation, (3) be 10% or more owned by the domestic corporation, and (4) have income from effectively connected business sources within the United States.
how are casualty losses treated in corporations vs. individual? What would be the deductible loss?
Casualty losses are deductible. The $100-per-loss and 10%-of-AGI floors apply to personal, not business, losses. When business property is completely destroyed, the amount deductible is the property’s adjusted basis immediately before the loss.
Research and experimental expenditures must be?
Research and experimental expenditures must be capitalized, unless election is made to deduct them in the year paid or incurred. If capitalized, they might be depreciable. If not (i.e., no determinable life), they may be amortized over not less than 60 months.
How many years is NOL carried back and forward?
NOL is carried back 2 years back and 20 years forward.
How is NOL calculated? what is not allowed?
Sec. 172(c) defines a net operating loss as the excess of deductions over gross income, with certain modifications. One of the modifications is that a deduction for a net operating loss carryover is not allowed in computing a current NOL. Furthermore, a deduction for charitable contributions is not allowed because it is limited to 10% of taxable income
Explain the difference on Capital losses between corporations and individuals?
Excess capital losses may be offset against ordinary income to a limited extent by individual taxpayers, but corporations may offset capital losses only with capital gains. Carryovers do retain their identity as long or short term for individuals but not for corporations. A corporation treats the carryover as a short-term capital loss in the carryover year. Individuals can carry excess losses forward indefinitely, while corporations may carry them forward for only 5 years. Also, excess capital losses are not carried back by individuals but are carried back 3 years by corporations.
To reconcile income per books with income per tax, the following adjustments are made to net income (loss) per books:
Net income (loss) per books + Federal income tax + Excess of capital losses over capital gains + Income subject to tax not recorded on books + Expenses recorded on books not deducted on the tax return [including contributions in excess of 10% taxable income limitation, book depreciation expense in excess of allowable tax depreciation, disallowed travel and entertainment costs (50% of meals and entertainment expenses are nondeductible), life insurance premiums on key personnel when the corporation is the beneficiary, political contributions, and interest expense to carry tax-free interest instruments (e.g., municipal bonds)] – Income recorded on books not subject to tax (including prepaid rent or interest previously received and recorded for tax purposes but not earned until the current year, life insurance proceeds received on the death of key personnel, and tax-exempt interest) – Deductions on this return not charged against book income (e.g., depreciation) = Taxable income
When figuring a current-year net capital loss, capital losses carried from other years are:
not included.
Net 1231 gains are treated as what? Net 1231 losses are treated as what?
LTCG Ordinary
For tax purpose how is goodwill amortized?
The capitalized costs of certain Sec. 197 intangibles, including goodwill, may be amortized over a 15-year period beginning on the date of acquisition.
