Chapter 2 - C Corporation Flashcards
What is the equation to get to total corporate tax liability for a C-corp?
When are contributions to form a C corporation a tax free exchange?
They are tax free when you contribute cash or property and the taxpayers who contributed gain 80% or more of the stock.
How is property valued when it is contributed to a C-corporation formation?
It is valued at carryover basis aka basis in the books
When are contributions to form a C corporation taxable?
If the shareholders who contributed don’t receive 80% or more of the stock then it is taxable income at the FMV of stock.
How are services valued when they are contributed for the formation of a C corporation?
They are valued as taxable income at the FMV of stock
How is cash or other property received by the shareholder treated on their return?
It is treated as boot and a gain is recognized up to the amount of cash or FMV of other property received
What is the equation to figure out shareholder’s basis in stock?
What is the equation of figure out a corporation’s basis in property it receives during formation?
What is the tax rate for ST gains/losses and LT gains/losses?
21% for ALL capital gains
How are capital losses deducted for a C corporation?
They are deducted to the extent of capital gains.
Any excess capital loss is carried back 3 years and then forward 5 years against capital gains. All carrybacks and carryforwards are considered short term.
What are the all events test and economic performance test for deductions?
All events test: Can accrue an expense once the existence of a liability is established and the amount can be accurately determined.
Economic performance test: Can accrue when property and services have been provided. Can be deducted when accrued if they are paid within 2.5 months of the tax year end.
How are organizational expenses for a c-corp deducted?
Up to $5,000 can be deducted and is reduced by the amount of expenses that exceed $50,000.
Costs not currently deducted are amortized over 180 months (15 years)
How are start-up costs deducted?
Can deduct up to $5,000 and is reduced by the amount that exceeds $50,000.
Any amount not deducted is amortized over 180 months (15 years)
How much compensation expense can a C corporation take for its executives?
Up to 1 million for certain “covered” employees like executives
How are employee achievement awards deducted?
Up to $400 for non qualified plan and $1,600 for qualified plans.
Must be tangible personal property
How much of the dividends received deduction can you take if you have ownership of <20%, >= 20% but <80%, or >= 80%?
What are the combinations to determine if the taxable portion of a dividend?
CEP = current earnings and profits
AEP = accumulated earnings and profits
How are gains and losses treated for non-liquidating and liquidating distributions?
