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REG > C & S Corps/Exempt Orgs > Flashcards

C & S Corps/Exempt Orgs Flashcards

1
Q

Corporate Formation: Corporation Tax Consequences

A

Generally - no gain or loss recognized

Basis = Greater of:

  • Adjusted basis of transferor
  • Debt assumed by corporation
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2
Q

Corporate Formation: Shareholder Tax Consequences

A

Generally - no gain or loss recognized if 80% control and no boot received

COD: NBV-Liabilities = Boot

Basis = NBV - Liab assumed

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3
Q

What happens when the debt exceeds an asset’s adjusted basis?

A

Gain is recognized by the shareholder and added to bring stock basis to zero.

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4
Q

When is income received in advance of GAAP accrual taxed?

A

When received (i.e. interest/rental/royalty income)

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5
Q

DPAD deduction

A

9% of the lesser of:

  • QPAI
  • Taxable Income
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6
Q

How are start-up costs treated for tax purposes?

A

$5,000 deductible immediately, and excess amortized over 180 months (beginning month business begins)

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7
Q

What expenses to org/start-up costs specifically exclude?

A
  • Costs of issuing and selling stock,
  • Commissions
  • Underwriter fees
  • Costs incurred in the transfer of assets to a corp.
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8
Q

Amortization rules

A

Goodwill, covenants not-to-compete, franchises, trademarks, and trade names must be amortized on a straight-line basis over a 15-year period

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9
Q

Life Insurance Premiums (tax treatment)

A

Corp = Beneficiary: Not tax deductible

Employee = Beneficiary: Tax deductible as employee benefit

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10
Q

Corporate capital gains deductions

A

NOT allowed - can only be used to offset capital gains

Carryover = 3back/5forward

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11
Q

Dividends Received Deduction

A

70% - 0-20% owned
80% - 20-80% owned
100% - 80%+ owned

Dividends are eliminated when corps are affiliated

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12
Q

Estimated tax payments: small corp.

A

100% of:

  • tax shown on CY return
  • tax shown on PY return
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13
Q

Estimated tax payments: large corp

A

100% of tax shown on CY return

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14
Q

AMT adjustments +/-

A

LID

Long-term contracts (amt=%ofcompletion)
Installment sale dealer (full accrual/installment)
Depreciation adjustments

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15
Q

AMT preferences +

A

PPP

Percentage depletion
Private activity
Pre ‘87 ACRS excess depreciation

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16
Q

Adjusted Current Earnings +/-

A

MOLDD

Muni interest income
Org. expense amortization
Life insurance proceeds on key employees
Difference between AMT/ACE depreciation
Dividends received deduction (
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17
Q

Accumulated Earnings Tax

A

Imposed on C CORPS with retained earnings > $250,000 if improperly retained.

Tax = 20%

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18
Q

Personal Holding Company Definition

A

> 50% owned by 5 or fewer people and having 60% of adjusted OGI consisting of:

Net rent
Interest that is taxable
Royalties
Dividends from an unrelated domestic corp

Taxed an additional 20%

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19
Q

AMT Exemption amount

A

$40,000 less 25% of AMTI in excess of $150,000

20
Q

Negative adjustments to E&P (reduce)

A
  • Federal Income Tax Expense
  • Nondeductible penalties, fines, political contr.
  • Officer life insurance premiums (corp. beneficiary)
  • Expenses for production of TE income
  • Nondeductible charitable contr.
  • Nondeductible capital losses
21
Q

Positive adjustments to E&P (increase)

A
  • Refunds of Fed IT paid
  • TE income
  • Refunds of items that were not subject to regular tax
  • NOL deductions
  • Life insurance proceeds where corp. is beneficiary
  • DRD used to calc regular taxable income
  • Carryovers of capital losses that impacted TI
  • Carryovers of charitable contri that impacted TI
  • Nontaxable cancellation of debt not used to reduce basis of property
22
Q

Positive OR Negative Adjustments to E&P

A
  • Losses/gains that have different effects on TI than E&P
  • Changes in the cash surrender value of certain life ins. policies
  • Excess depr. for E&P over that for regular IT
  • Differences in allowable deductions for org/start-up exp
  • Installment income method adjustments
  • Completed contract income versus %of completion adj.
  • Amortization of intangible drilling costs adj.
  • Section 179 expense for reg tax vs. ratable depr.
23
Q

Classification of corporate distributions

A
  1. Current/Accumulated E&P = DIVIDEND
  2. No E&P available = ROC (not taxed)
  3. No Basis = CAPITAL GAIN
24
Q

How are stock dividends treated?

A

Generally not taxable unless the shareholder has a choice of receiving cash or other property.

25
Q

Taxable amount of a dividend to the SHAREHOLDER

A 
Cash = Amt rec'd
Property = FMV of property
26
Q

Taxable amount of a dividend to the CORPORATION

A

Cash dividend does not create a taxable event for corp.

Appreciated property results in gain recognized as if property was sold. FMV - NBV = corp gain

27
Q

Corporate liquidation - sells and distr. cash to S/H

A

Corp gain/loss = SP - Basis

Shareholder gain/loss = Proceeds - Stock basis

28
Q

Corporate liquidation - distributes assets to S/H

A

Corp gain/loss = FMV - basis

Shareholder gain/loss = SP - Stock basis

29
Q

Tax free reorg - Type A

A

Mergers, Acquisitions/consolidations

30
Q

Tax free reorg - Type B

A

Acquisition of another corps stock - stock for stock

31
Q

Tax free reorg - Type C

A

Acquisition of another corps assets - stock for assets

32
Q

Tax free reorg - Type D

A

Dividing of corporation into separate operating coprs

33
Q

Tax free reorg - Type E

A

Recapitalizations

34
Q

Tax free reorg - Type F

A

Mere change in identity, form, or place of organization

35
Q

What type of filers are eligible as a S corp. S/H?

A

Individual, estate, certain types of trusts

36
Q

When must S Corp. election be made?

A

By march 15 to be valid that year (otherwise following yr)

37
Q

What are the effects of a S corp election on corp?

A
  • December 31 is req’d year end
  • No tax on corp
  • LIFO recapture tax
  • BIG tax
  • Tax on passive investment income
38
Q

What increases the AAA account?

A

separately and non-separately stated income and gains (except TE income and certain life insurance proceeds)

39
Q

What decreases the AAA account?

A

Corp. distributions, separately and non-separately stated expense items and losses, and nondeductible expenses that relate to income other than TE income.

40
Q

S corp distributions with NO corp E&P

A
  1. Extent of basis in stock = ROC

2. In excess of basis in stock = Capital Gain

41
Q

S corp distributions with corp E&P

A
  1. Extent of AAA = Reduced basis in stock
  2. Extent of C corp E&P = taxed as dividend
  3. Extent of basis of stock = ROC
  4. In excess of basis in stock = capital gain
42
Q

What is Unrelated Business Income (UBI)?

A
  1. Derived from an activity that constitutes a trade or bus.
  2. Regularly carried on
  3. Not substantially related to the orgs exempt purposes
43
Q

Taxation of UBI

A
  1. Must comply with corp estimated pmts rules
  2. Only taxed on amount in excess of $1,000
  3. There are types of income excluded
44
Q

What types of income are excluded from UBI?

A
  • Royalties/dividends/interest/annuities
  • Rents from real property
  • Gains/losses on sale&exchange of property
  • Income from research of a college or hospital
  • Income of labor unions
  • Activities limited to exempt orgs by state law (BINGO)
  • Value of securities loaned to a broker and the income rec’d by a lender
  • Income from exchange or rental of membership lists
45
Q

Who is not required to file 990?

A

CHRIST or

REG (16 decks)

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