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Reg 2015 > Corp Taxes > Flashcards

Corp Taxes Flashcards

1
Q

Foreign tax credit

A

Credit or deduction
Includes two computations for limits, less than ok compare below with for paid amts
1. For non business related interest earned
2. Other for source taxable income
1st after AMT, FCT, AET, PHC
LIM: us income tax (for source inc/ ww taxable income
Excess: 1b 10f

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2
Q

Consolidated returns exclusions NONO

A 
Tax exempt org
S Corp
Foreign sales Corp
Ins Corp
Real estate inv trusts
Regulated investment co
Dom international sales Corp
Sec 936 possessions tax credit
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3
Q

Affiliated groups

A

80% voting power AND
80% total value outstanding
Tax yr of parent
Election only reversed by consent of irs

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4
Q

Consolidation - separately reported
Operating losses of one group member may be used to offset operating profits of the other members included in the consolidated return

A 
Charitable cont
DRD
%depletion
NOL
Sect 1231
Cap g/l
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5
Q

Intercompany transactions

A 
Buyer assumes sales basis
Consolidated gain or loss:
Acquiring Corp claims depreciation
One member leaves
Disposition outside of the group
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6
Q

Brother - sister controlled group

A

80% owned by same 5 or fewer or
> 50% of voting power of all classes

INDIVIDUALS, trusts, estates

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7
Q

Constructive ownership

A

Family member € spouse

Or entity wit > 5% interest

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8
Q

Limit on control group benefits

A 
Only one:
Tax brackets
Sec 179 25k max
Amt exemption $base
Gem bus credit $25
AET 250 presumed deduction base
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9
Q

AMT

A 
- tax pref items
\+/- adjustments
\+ ACE
- AMT NOL
= AMTI
- AMT exemption
= AMTI BASE
x rate
- FT CRED
= TENTATIVE MIN TAX
- regular tax
= AMT
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10
Q

AMT TAX PREFERENCE ITEMS

A

Excess depreciation
Tax exempt bonds
Small business stock

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11
Q

Adjustments

A 
Accelerated depreciation
Real prop - SL 40 mid-mo
Personal prop - 150%
Section 1250 - SL
NO Installment sales
Long term contracts - % of completion 
Pollution control facilities - sec 168
Mining & exploring & (R&D, circulation 3 yrs) - capitalized and AMORT 10yr except for tax loss of abandonment
NOL - MODIFY NOL TO THE SAME EXTENT
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12
Q

ACE adjusted current earnings

A

When computing ACE (AMTI includes ACE + NOL adj)

+Organizational exp Amort and deducted are added
+ 70% DRD
+ life ins PROCEEDS
+ LIFO recapture = FIFO>LIFO

= ACE-AMTI x 75%
ACE > AMTI = add ACE ADJ
ACE

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13
Q

ACE NONCHANGES

A

LT CAP GAINS
DRD 80% or 100%
Debt discharge
Tax exempt interest 2009 & 2010

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14
Q

Corp AMT TAX RATES

A

20%

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15
Q

AMT NOL

A

Previous yr NOL

CURRENT YR - lim 90% of the AMTI

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16
Q

AMT EXEMPTION

A

Reduces AMTI to produce AMTI BASE

Exemption = 40k with TH of 150k
max= 150k
= .25 on the dollar above TH

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17
Q

AMT FCT

A

= FTC
Or
90% of gross Tent AMT B4 NOL orFTC

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18
Q

AMT MTC - Individual

A

Difference if tax favorable deferred items
= Recent yrs AMT wo ded and add carryover MTC

ONLY DEFERED ITEMS

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19
Q

AMT MTC - corporations

A 
Both deferred and exclusion items
Gross regular tax
- credits
- TMT
MTC max allowable, excess is carried over indefinitely 
Gross regular tax amt is reduced by:
Currently allowable:
Refundable credits
No refundable personal items
For tax 
Drug testing
Nonconv source fuel credits
General bus credit
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20
Q

Small Corp AMT exemption

A

5 mil avg income for first 3 yrs

7.5 mil avg beyond

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21
Q

Taxes due

A

Estimated On the 15th of
4, 6, 9, 12 mo

Difference = 15th of 3rd mo following yr end

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22
Q

Estimated tax payments

A

25% of the lesser of
100% of prior years tax
Or 100% of current yrs tax

Estimated based on annual, not seasonal
Large Corp makeup
Taxable income of > 1 mil during any one of 3 prev yrs

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23
Q

Penalty

A

Amt by which any required installment exceeds est tax paid
5% ( 3% ind)
Installment due date until underpayment is paid or if earlier the due date for filing the tax return F2220 submitted w/return

No est penalty if:
Tax liab is less than $500
Waived
Large Corp wd

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24
Q

Refund

A

Quick refund - only if overpayment is >500 and >10% Corp est tax liability
Form 4466 after close before tax due

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25
Q

AET

A

15% tax on ATI accumulated taxable income
No offsetting
Subsequent earnings distributions do not helping

No form determined by irs audit
No “carry back”

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26
Q

No AET ON ENTITIES

A 
S Corp
Tax exempt 
PHC
FPHC
PFIC
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27
Q

ATI :

AET = ATI - AEC

A 
TI addback
NOL
DRD
CharIty - subtract excess over 10%
Charity addback carryover
Fed tax - subtract 
Cap gains - subtract net, add fed taxes on gain
Capital losses - subtract excess, addback carryover 
Div paid deduction :
No preferential
Div of ordinary income
Consent and throwback
In liquidation up to E&P
28
Q

AEC

A

Increased amount of reasonable needs of the business during the year

  1. General credit = RETAINED CURRENT E&P less capital gains
  2. Min floor = 250 or 150 not less than 0
29
Q

Not reasonable needs

A

Funding plans to declare a dividend
Unrealistic business hazard protection
Investment prop unrelated to business activities
Loans to shareholder

30
Q

Sur Taxes

A

5% on 100k-335k
3% on 15mil-18.33mil
Flat 35%

31
Q

Method of estimating tax liability

A

100% of preceding yr - requires previous yr liability
If NOL only option is :
Annualized income method

NOTE LARGE CORP > 1 mil inc = 100% of current year!!! Not previous!

32
Q

Example AEC CALC

A

Prior yr : 250-AEP - DPD = MIN CRED BASE
Compare with reasonable needs
MCB > reasonable needs
The AEC = MCB

AEC - current yr (AEP-DPD) = if excess AEC, it rolls over

33
Q

Max ATI subject to AET if taken the min AEC

A

TI - fed inc tax - 250 =

34
Q

AET WHY

A

Corporations that avoid distribution to avoid SH tax

35
Q

Sec 351

A

No gain or loss on prop for controlling amount of Corp stock is not recognized - mandatory
Corp, includes BOOT, SH may have taxable event
(After formation, contributions,treasury stock)

DOES NOT INCLUDE SERVICES
NQ PREFERRED STOCK = BOOT

36
Q

BOOT

A 
SH
Gain of FMV (boot rec) 
1. FMV of property received 
2 FMV of property given up
Based on type of prop
Liabilities > basis are treated as rec gain
37
Q

SH basis in Corp

A

Adjusted basis
- boot
+ gain recognized to SH

38
Q

SH holding period

A

Stock holding period of stock + holding period of the property!

Sole proprietor ex:
capital assets not 1231
Contributed when incorporating
EACH SHARE HAS A SPLIT HOLDING PERIOD

39
Q

Corp property basis

A

Adjusted basis

+ gain recognized by SH

40
Q

Control %

41
Q

E&P LIMITS…

A

Amount that is taxable to SH AS A DIV

42
Q

E&P calc

A 
Add:
Exempt income 
Injury comp
Life proceeds
DRD
Cap & NOL carryover
Excess SL dep
Completed contract
Reductions:
Life ins premiums
Penalties 
Bonds expense
Excessive comp
Fed tax
Meals a
Prior installment sales
43
Q

Reporting dividend distribution

A

=>10$
W/h taxes
=> 600$ in liquidation

44
Q

Possible opt for rec gain on stock transactions CORP

A 
Dist in lieu of money
Disproportionate distribution
Distribution of pref stock
Dist of convertible perf stock
Pref stock with cap stock dist choice
45
Q

Stock rights

A

As a dist of stock

Basis = 0 if FMV

46
Q

Dist of stock holding period

A

Day after acquisition

47
Q

Basis of stock dividend

A

Day received

48
Q

Stock split

A

Not a distribution
Holding period rollover
Basis is split and allocated to new stock, inc value of per share

49
Q

Sale versus dividend treatment of redemption

A

Sale if - disproportionate
Received by an estate - loss recognition
Partial liquidation - loss recognition
Realize gain

50
Q

Stock reacquisition costs

A

Not deductible

Cost allocated to indebtedness - amortized over life of indebtedness ( financial advisory costs)

51
Q

Redemption

A

A sale or termination of SH equity
Not proportionate
Recvd by an estate (death)
Not a dividend

52
Q

Termination of SH interest

A
  • no interest except as a creditor
  • not acquire for 10 yrs
  • irs notified if interest acquired
53
Q

Substantially disproportionate distribution

A

Les than 50% of voting power &

Less than 80% of ea interest in voting stock & common stock

54
Q

Dividend equivalency

A

Reduction in voting power

55
Q

Estate

A

In order to be a sale:

Stock value > 35% of gross (admin, funeral,claims, taxes & unpaid mortgages)

56
Q

SH div and basis

A

Div € basis adj

57
Q

Corp liquidation

A

Recognize a loss,
> 50% SH = no loss
Pre contributed reduces the loss

58
Q

Partial liquidation

A 
Plan
Recognizes a gain, not loss
Prorata distributions do not preclude partial liquidation sale treatment
No return of stock required
Safe harbor
59
Q

Safe harbor

A

Corp ceases trade or business for 5 yrs

Corp continues to perform at least one active trade that it has prev conducted for 5 yrs

60
Q

Subsidiary liquidation

A

No gain or loss to parent

Basis is transferred

61
Q

Reorganizations

A

Change of investment
Gain = boot
New Corp 40% control going forward
Maintaining one line of business

62
Q

Reorganization boot

A

Lessor of gain realized or FMV
Securities FMV> face value given up
Character: gain = dividend (OI)to the extent of E&Pll
Liability € boot unless unrelated to business
No loss € distribution to creditor
Basis in stock /securities is exchanged, boot = tax cost

63
Q

Reorganization types

A

Merger - results in consolidation
Stock for stock - must control, no boot allowed
Stock for assets - _> 90% of all assets and 20% of assets exchanged for no voting stock, limits boot,
DIVISION -80% of ea type of stock, division of SH
RECAPITALIZATION - capital structure of Corp is modified by exchanges in stock btw SH and Corp
REINCORPOATION change of name form place
BANKRUPCY REORGANIZATION - court supervised

64
Q

Corp tax liability and payments

A

Failure to file penalty = 5% of the tax for each month up to a max of 25%

Failure to pay = 1/2% of tax ea month

Failure to file is rduced by failure to pay

65
Q

Liquidation fees

A

I fully deductible by corporation

Reg 2015 (6 decks)

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