Chapter 3 Flashcards
For a corporation, when is no gain or loss recognized?
- Formation -issuance of stock
- Reacquisition - purchase of treasury stock
- Resale - Sale of treasury stock
When a formation of a corporation occurs, what is the basis of the property for the corp?
Greater of NBV or debt assumed
When a formation of a corporation occurs, when is no gain or loss recognized for the shareholder?
if it gets 80% of control AND boot is not involved
When a formation of a corporation occurs, what is the basis of C/S for the Shareholder?
- Cash = amount contributed
- Property = NBV - Adj Basis - any debt
- Services - FMV (taxable)
What is the Trade of Business Deduction?
Made in America stuff gets a 9% of lesser of Qualified Production Activities Income or Taxable Income
Qualified Production Activities Income = Domestic gross receipts - COGS - other directly allocable exp or loss - proper share of other deductions
Whats the ceiling for executive compensation?
1,000,000
What can be expensed in current tax year besides whats paid in current year?
Bonus accrual - exp paid by 3/15
What is the limit of charitable contributions for a corporation?
10% of AGI. Can be accrued
How do you treat org expenditures and start up costs? Which cost are included?
5,000 expense and any excess is amortized over 15 years.
Legal, accounting and fees paid to state
What is the cap loss carry forward/backward?
3 back/ 5 forward
What is the NOL’s carry forward/backward?
2 back/ 20 forward
What is the dividend received deduction? Who doesn’t it apply too? What it limited too?
0 to 19% ownership received 70% deduction
20 to 79% ownership received 80% deduction
80 to 100% ownership received 100% deductions
doesnt apply to personal
- personal sev corp
- personal hold comp
- personally taxed at Scorp
Limited 2 TI b4 deduction
What are the estimated min pmts of corp tax?
- Small corp = lesser of 100% CY tax or 100% LY tax
- Large Corp (TI 1 million or more in any 3 preceding yrs) = 100% CY tax
When do corporate returns consolidate?
80% or more
What is AMT for a corporation taxed at?
At a flat 20%
How do you calculate AMT exemption amount for a corporation?
Min Taxable Income - Allowable = Excess
Excess x 25% is whats disallowed
exemption - disallowed = exemption allowed
What is the carryback/carryforward for Min Tax Credit (MTC)
Carry forward forever. Never back
How do you calculate accumulated earnings tax?
Beg E&P - Corp Needs = Beg Excess
250,000(reg corp) or 150,000 - Beg Excess = Remaining Credit
TI - All Charity - All Cap Losses - Taxes - Dividends Paid = Accum Taxable Income - Remaining Credit = Current Accum Taxable Income x 20% = Accum Earnings Tax
What is a Personal Holding Company?
- 50% owned by 5 or fewer individuals OR
- 60% of adj ord gross income consist of NIRD
Net rent (if less than 50% of ord gross inc)
Interest that is taxable
Royalties (but not mineral, oil, gas, copyright)
Dividends from an unrelated domestic corp
How do you calculate Accumulated E&P as of the end of the year?
Accum E&P as of the beg of the year
+/- Current E&P
-Distibutions
How do you classify distributions with E&P less than current accum, no E&P and no basis?
- E&P less than current accum = dividend income
- No E&P = Return of capital (not taxed, reduced basis)
- No basis = Cap Gain Distribution
How do you match cash dividend to source?
Current E&P - Allocated on a prorata basis
Accum E&P - Applied in order beg with earliest dist
Are stock dividends taxable?
No unless the shareholder has a choice of receiving cash or other property (FMV if taxable)
What if corporation redemes its stock proportionally or disproportionately?
Proportional = taxable div income (for shareholder = ord inc) Disproportional = sale subject to taxable cap gains
