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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
AET
15% tax on ATI accumulated taxable income No offsetting Subsequent earnings distributions do not helping No form determined by irs audit No "carry back"
26
No AET ON ENTITIES
``` S Corp Tax exempt PHC FPHC PFIC ```
27
ATI : | AET = ATI - AEC
``` 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
AEC
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
Not reasonable needs
Funding plans to declare a dividend Unrealistic business hazard protection Investment prop unrelated to business activities Loans to shareholder
30
Sur Taxes
5% on 100k-335k 3% on 15mil-18.33mil Flat 35%
31
Method of estimating tax liability
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
Example AEC CALC
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
Max ATI subject to AET if taken the min AEC
TI - fed inc tax - 250 =
34
AET WHY
Corporations that avoid distribution to avoid SH tax
35
Sec 351
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
BOOT
``` 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
SH basis in Corp
Adjusted basis - boot + gain recognized to SH
38
SH holding period
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
Corp property basis
Adjusted basis | + gain recognized by SH
40
Control %
Can = 80%
41
E&P LIMITS...
Amount that is taxable to SH AS A DIV
42
E&P calc
``` 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
Reporting dividend distribution
=>10$ W/h taxes => 600$ in liquidation
44
Possible opt for rec gain on stock transactions CORP
``` Dist in lieu of money Disproportionate distribution Distribution of pref stock Dist of convertible perf stock Pref stock with cap stock dist choice ```
45
Stock rights
As a dist of stock | Basis = 0 if FMV
46
Dist of stock holding period
Day after acquisition
47
Basis of stock dividend
Day received
48
Stock split
Not a distribution Holding period rollover Basis is split and allocated to new stock, inc value of per share
49
Sale versus dividend treatment of redemption
Sale if - disproportionate Received by an estate - loss recognition Partial liquidation - loss recognition Realize gain
50
Stock reacquisition costs
Not deductible | Cost allocated to indebtedness - amortized over life of indebtedness ( financial advisory costs)
51
Redemption
A sale or termination of SH equity Not proportionate Recvd by an estate (death) Not a dividend
52
Termination of SH interest
- no interest except as a creditor - not acquire for 10 yrs - irs notified if interest acquired
53
Substantially disproportionate distribution
Les than 50% of voting power & | Less than 80% of ea interest in voting stock & common stock
54
Dividend equivalency
Reduction in voting power
55
Estate
In order to be a sale: | Stock value > 35% of gross (admin, funeral,claims, taxes & unpaid mortgages)
56
SH div and basis
Div € basis adj
57
Corp liquidation
Recognize a loss, > 50% SH = no loss Pre contributed reduces the loss
58
Partial liquidation
``` Plan Recognizes a gain, not loss Prorata distributions do not preclude partial liquidation sale treatment No return of stock required Safe harbor ```
59
Safe harbor
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
Subsidiary liquidation
No gain or loss to parent | Basis is transferred
61
Reorganizations
Change of investment Gain = boot New Corp 40% control going forward Maintaining one line of business
62
Reorganization boot
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
Reorganization types
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
Corp tax liability and payments
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
Liquidation fees
I fully deductible by corporation

Reg 2015 (6 decks)

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