Corp. Income Taxes: Other Tax Areas Flashcards
like-kind exchange
An item is exchanged for the same or a similar item.
new basis and G/L associated w/like-kind exchange
Each party to the exchange will retain the basis of the items received and no G/L recognized.
Ex) Andrew’s new basis is the basis in the item he gave up.
like-kind exchange and boot
When there is a like-kind exchange and boot, the taxable gain is the lesser of the boor received or the gain.
Schedule M-1
- found on Corp. Tax Return (Form 1120).
2. Used for book-tax rec.
items adjusted in Schedule M-1
Non-taxable or non-deductible items reported for F/R but not IT purposes, such as life insurance proceeds, state and local bond interest, and penalties/fines.
Schedule M-3
for corps. w/ more than $10 million in assets.
Can federal income taxes be deducted in arriving a taxable income?
No.
Can net losses be deducted in arriving a taxable income?
Yes.
Can capital losses be deducted in arriving a taxable income?
No.
Is equipment a capital asset for tax purposes?
No, Equipment is a Section 1245 asset and is not a capital asset.
When one company holds 80 percent or more of the stock of another company, how are gains on transfers reported for tax purposes?
They are deferred until eventually realized in a sale to an outside party.
NOL carryback/carryforward
carryback: 2 yrs.
carryforward: 20 yrs.
In determining AMT, how are tax benefits and preferences handled?
They are removed as adjustments, preference items, or part of ACE adjustment.
adjustments
items fully moved into TI
Includes installment sales method.
ACE adjustment
items only partially moved into TI
Includes municipal bond interest.
purpose of PHC tax
The personal holding company tax is designed to encourage adequate dividend payments to be made by companies, with only a few owners, that generate a significant amount of passive income (such as dividends and interest).
authoritative guidelines for PHC tax (both must apply):
- Five or fewer individuals owning 50 percent or more of the stock during the last half of the year.
- Passive income making us 60+% of total ordinary income.
Are the rules on charitable contributions for the PHC tax more or less restrictive than or normal companies?
Less restrictive.
For Year Two, what should estimated tax payments be?
100% of the current yr’s tax liability.
Under uniform capitalization rules, what costs should be included in inventory?
- All costs incurred in acquiring inventory for resale.
2. Includes costs such as labeling, storage, and handling. Shipping is a selling cost.
When one party owns over 50 percent of a corporation…
- they are viewed as related parties and losses on sales between them cannot be deducted until the property is eventually sold to an outside party.
- In contrast, gains continue to be taxable until the ownership level hits 80 percent.
How is income generated from both a U.S. company and a wholly owned foreign subsidiary handled?
- The U.S. company is taxed in the U.S. on the income it makes from both the U.S. company and subsidiary.
- The company will receive a tax credit equal to the amount paid to the foreign subsidiary (foreign sub NI * foreign tax rate).
- Tax liability = 1. - 2.
For financial accounting, a consolidated F/S is done when one company owns…
Over 50% of another company.
For tax accounting, a consolidated tax return is done when one company owns…
80% of another company.
Schedule M-2
Analyzes the changes in unappropriated retained earnings from the first day of the year to the last.
