Corporate

Question 1

Corporate Formation

Answer 1

1.	Gain Realized (no matter what entity):	 	
FMV
(NBV)
= Realized Gain
2.	Gain Recognized:
(None if 80% and no boot, gain if boot or (liabilities > NBV))
Calc:
NBV
(Liabilities assumed by corp)
If positive no gain on liabilities. If negative, add to boot received for total gain
\+ Boot Given
(Boot Received)
= Total Gain to Shareholder
3.	Shareholder Basis:
Old basis
\+ FMV Services
\+ Gain Recognized 
(Boot Received)
(Liabilities given)
\+ Boot Given
= Shareholder Basis
4.	Corporation Basis:
NBV
\+ Gain Recognized
= Corporation Basis

Question 2

Charity

Answer 2

• Limit is 10% AGI

* Forward 5 years

Question 3

Dividends Received Deduction

Answer 3

• % times lesser of Dividends or Taxable Income
• Calculation:
Taxable Income
(Charity limit 10%TI)
(Dividends Received Deduction)
= Taxable Income for Corporation
• Rules:
o 0-20% = 70%, 20-80% = 80%, 80-100% = 80 DRD
o Limit lesser of Dividends received or TI
o Exception: unless creates or increases a operating
loss.

Question 4

Business Casualty

Answer 4

•	Partially destroyed, lesser of:
o	Decline in value or
o	Adjusted basis
•	Completely destroyed:
o	Adjusted basis
•	No $100 or 10%

Question 5

Organization Expenses

Answer 5

• Up to $5,000
• Reduce by amount over $50,000
• Amortize over 180 days
• Not costs of selling stock, underwriters fees, etc.

Question 6

Corporate Distributions

Answer 6

• Both current & accumulated E&P (-) = Return of Capital (free to basis, then capital gain)
• Both current & accumulated E&P (+) = Taxable dividends (use current 1st)
• Current (+), accumulated (-) = dividend to extent current, remainder return of capital
• Current (-), Accumulated (+) = dividend to extent of net E&P

Question 7

Property Distribution

Answer 7

• Corporation recognizes a gain (not loss) like a sale
• Use greater of FMV or liability assumed to calculate gain
• Basis to shareholder = FMV
• Dividend to shareholder = FMV – Liability Assumed
• Creation of taxable income due to corporate gain
o 150 Prop Basis, 200 FMV, AEP 125, CEP 60, Corporation basis 500

Question 8

Section 1244 Stock

Answer 8

Must be original owner
Small Corporation
Stock Failed
$50/year loss + $3k in year of loss, and subsequent