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Corporate Tax > Class 1-4 Notes > Flashcards

Class 1-4 Notes Flashcards

0
Q

3 factors for income recognition

A

1 economic benefit
2 recognized
3 realized

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1
Q

Results of tax court cases provide…

A

Legal precedent

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2
Q

Realized: when cash is obtained…

A

Earnings process is complete

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3
Q

Circular 230

A

Code of conduct for corporations to submit taxes to IRS

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4
Q

Location of where businesses are incorporated, significance?

A

Must adhere to state statutes and taxes where incorporated

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5
Q

Partnership, what kind of entity is it? Where is its income recognized?

A

Flow through entity

Income recognized on individual return

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6
Q

Removal of an existing partner, how does this effect the partnership?

A

It dissolves the partnership

and a legal document is required to form a new partnership

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7
Q

How are capital assets used in an ordinary trade or business taxed?

What are examples of capital assets?

A

Taxed as ordinary income

Ex. Inventory, A/R, Property, Plant, Equipment

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8
Q

Capitalizing

A

Put money into a business

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9
Q

When you decrease all of a company’s retained earnings, what account can you take money out of?

A

Can take money from additional paid in capital

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10
Q

What 2 tax forms does an LLC have a choice of filing

A

Form 1040 Schedule C

Form 1120 (filed by corporations)

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11
Q

S-Corporation

A

Tax election to be a flow through corporation

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12
Q

What is the big advantage of an LLC filing as a corporation?

A

Shareholder employee can receive a paycheck

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13
Q

Can you get a paycheck as a sole proprietorship?

A

No

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14
Q

Form 11205, is for what kind of entities?

A

Flow throw entities

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15
Q

What is the business structure of most CPA firms?

A

Mostly LLPs

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16
Q

How does an S-Corporation file?

What does its business structure look like?

A

Files like a corporation

Looks like a partnership

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17
Q

Where do S-Corporations and partnerships file deductions

A

On individual returns

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18
Q

3 differences each between Book GAAP and Tax IRC

A

Book GAAP: 1 Accrual, 2 meals and entertainment = 100% expense,
3 straight line depreciation (depends on election)

Tax IRC: 1 Accrual or Cash with limitations, 2 meals and
Entertainment = 50% expense, MACRS depreciation

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19
Q

Accountants record events in terms of transactions with what goal?

A

Trying to deduct as much as possible while stating revenue

accurately

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20
Q

The purpose of dealing with reconciling records is to…

A

Minimize taxes

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21
Q

Closely held

A

Private company

Can be family owned business

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22
Q

Corporations: charitable contribution limit

What is the limit on a charitable carry forward

A

Corporations limited to 10% ATI

Charitable carry forward has a 5 year limit

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23
Q

Controlled groups

A

One or more subsidiaries under ownership

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24
Q

Brother sister

A

Common owners in controlled group

Shareholders of both companies

25
Q

How are personal service corporations taxed?

Examples of personal service organizations?

A

Flat rate of 35% no matter the amount

Ex. Health, law, accounting, actuaries

26
Q

How often must corporations make estimated payments?

A

Must make estimated quarterly payments

27
Q

Nonliquidating distribution

A

Company still exists after distribution is paid

28
Q

If 2 or more people are working together it is automatically characterized as…

A

A partnership

29
Q

Section 351

A

Defers gain on noncash items in exchange for stock

30
Q

If you avoid section 351

A

You can tax a capital loss

But you must pay higher taxes later because stock basis
Is 0

31
Q

When can corporations use cash accounting instead of accrual when preparing taxes?

A

When they have under $5 million in income

32
Q

Cash sales equation

A

Cash sales = accrual sales - current A/R + A/R from prior year

33
Q

Cash Expenses equation

A

Cash expense = expenses - current A/P + A/P from prior year

34
Q

How do corporations treat net capital gains?

A

Taxed at ordinary income rates

35
Q

Corporations: Net capital losses, what can’t they be used for?

A

Can’t be used against ordinary income gains

36
Q

Organization expenditures include 2 things?

What is their amortization period?

A

Legal fees, lisences

Amortized over 180 months

37
Q

How long can a NOL go forward?

A

20 years

38
Q

Sequencing

A

Order of calculation

39
Q

In a closely held corporation, when a shareholder owns over 50%, what kind of tax treatment will they get?

A

They will never get capital gains treatment

40
Q

Section 267

A

Losses of an over 50% shareholder are disallowed from sale

Between related parties

41
Q

Accumulated

A

Retained earnings from prior years

42
Q

What account is any dividend deducted from?

A

Retained earnings

43
Q

Right of first refusal

A

Current investors of company see if they want more shares

44
Q

Section 318

A

Attribution rules

45
Q

Treatment of stock dividends 2 examples covered in class

A

1 if cash is an option in dividend it is taxable

2 if cash is not an option in the dividend, you must recalculate the
Stock’s basis

46
Q

When is the best time to pay tax?

A

When there is the wherewithal to pay

47
Q

How are capital gains and losses treated for corporations? 4

A

1 Capital gains are treated as ordinary income
2 don’t get $3,000 deduction on capital losses
3 can carry capital losses back 3 years (go back and amend past returns) and forward 20 years
4 can’t use capital losses to offset ordinary gains

48
Q

Recapture depreciation

A

Potential to be treated as gain by corporation

49
Q

How is the timeframe of an NOL carryover different from a capital loss?

A

NOL can be carried back 2 years and forward 20 years

Can skip going back

50
Q

Organizational deduction examples?, what is madatory?

A

Legal and professional fees

Mandatory to capitalize and amortize over 180 months

51
Q

How long is a startup deduction amortized over?

A

60 months

52
Q

Corporations don’t use FMV on charitable contribution of…

A

Capital gains

53
Q

How much of a dividends received deduction does an 80% owner of a company get?

A

100% dividends received deduction

54
Q

Corporations don’t get a dividends received dedication if…

A

They hold the company for less than 45 days of when the dividend
Is received

55
Q

Domicile

A

Cut out of paying US taxes

56
Q

Production activities deduction, what are its limitations?2

A

Expenses related to US production activities (manufacturing)

Limited to 50% wages of production activity

57
Q

Getting a distribution from the paid in capital account, how is the distribution treated?

A

No longer a dividend but a return of capital

58
Q

Nonliquidating payout

A

Everything distributed but paid in capital and capital of common
Stock

59
Q

Taxes are considered what kind of expense?

A

Operating expenses

60
Q

When a transferor transfers both assets and services, how is the stock treated?

A

All stock counts towards ownership,

but portion allocated to services is considered income

61
Q

Par value

A

Allocate value of stock between common stock and additional

Paid in capital

Corporate Tax (23 decks)

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