Corporate Income

Question 1

Can corporations choose a fiscal year?

Answer 1

• Yes unless the corporation makes an “S” election or qualifies as a Personal Service Corporation
• Personal Service Corporations generally must use a calendar year end

Question 2

Is accrual accounting required for Personal Service Corporations and S Corporations?

Answer 2

-No

Question 3

Do passive loss limits apply to corporations?

Answer 3

• No except PSC’s and certain close corporations
• Closely held corporations can use passive losses to offset active corporate income but not portfolio income
• PSC’s cannot offset passive losses against either

Question 4

What is a closely held corporation?

Answer 4

-Corporation where at any time during last half of taxable year more than 50% of value of stock owned directly or indirectly by not more than 5 individuals

Question 5

What is the due date for corporate returns?

Answer 5

-15th day of 3rd month following end of tax year with six month extension available upon request

Question 6

What is Schedule M-1? M-2? M-3?

Answer 6

• M-1: Reconciliation of book income to taxable income
• M-2: Reconciliation of retained earnings
• M-3: More detailed version of Schedule M-1 required for corporations with more than $10 million in assets

Question 7

What are provisions for NOLs?

Answer 7

• Carryover period back 2 forward 20
• Carryovers from previous years not included in calculating current year NOL
• Multiple carryovers used in a FIFO order
• Charitable contributions not allowed in computing NOL