Corporate Tax Flashcards
if you put equipment into a corp worth 20k, you have basis of 6k, and it has a liability of 12k, how much gain do you recognize?
you recognize the amount of liability over your basis that you’re relieved of. So you had a 12k liability with basis of 6k, so your gain is 6k.
what basis does a corp take in land contributed by an owner?
it takes the owner’s basis plus any gain the owner recognized on the transaction.
If an owner contributes land with 40k of basis but the corp gives him 10k in cash, the corp’s basis in the property is 50k
for corporations, how long is goodwill amortized?
amortized over 15 years
how are premiums paid on a key-person life insurance policy treated on an M-1?
they reduce book income but not taxable income
how are corporate NOLs treated?
you can carry them back two years and ahead 20 years
for a corp, are life insurance premiums paid for its executives as part of their taxable compensation deductible to the corp?
yes, they are fully deductible
is interest expense on a loan used to purchase municipal bonds deductible?
since the loan is used to purchase bonds that generate tax-exempt income, the interest expense is NOT deductible
is interest on municipal arbitrage bonds and interest on US treasury notes taxable to a corp?
yes- both are taxable.
how long do you have to own a stock to qualify for dividends received deduction?
45 days
is a dividend received deduction allowed on a REIT investment?
no
what amount of a net capital loss can a corp deduct in one year?
none- capital losses are only used to offset capital gains. they can be carried back 3 years and forward 5
is interest on funds borrowed for working capital deductible?
yes.
which of these are qualified organizational expenses for a corporate startup:
- legal fees
- state incorporation fees
- commissions paid to broker on sale of stock
only the state incorporation fees and the legal fees. the broker fees aren’t deductible at all.
for a corp, how long can you carry forward excess charitable contributions?
up to five years
for dividends rec deduction questions, when the income is a net loss:
make sure to deduct it from the income amount before applying the DRD.
-20k in net income with 200k of 25% owned dividends = a DRD of 80% against 180k - NOT 200k
difference in startup costs for a corp and organization costs for a corp?
nothing really- they are separate and each have the 5k rule but they are different. organization costs and startup costs are NOT lumped together
dividends received deduction limits:
0-20%: deduct 70%
21-80%: deduct 80%
81-100%: deduct 100%
how does the corporate AMT small corp exemption work?
In the first year of a corp’s existence it is automatically exempt from AMT.
Year 2’s test is the gross receipts from year one.
If year one’s gross receipts exceed 5million, then the corp is NOT exempt from AMT in year 2.
Once the small corp test is failed, the corp is NOT exempt for all future tax years.
The general test is 7,500,000- the above 5million test is for NEW corps.
what is the AMT exemption regarding 40k?
the exemption is 40k minus 25% of the AMT income exceeding 150k.
If you have 200k of AMT income then 50k applies to the exemption. That would be 40k - (50k x .25) which equals 27,500
what is the federal acc earnings tax credit and how does it work?
it gives corps 250k to lower its income subject to the acc earnings tax, plus any dividends or fed income taxes paid.
If your corp had 400k in taxable income and it paid 100k in tax, you then subtract the credit of 250k from the remaining 300k- this leaves you with 50k that is subject to the acc earnings tax
when would a corp want to distribute land instead of cash?
if the land is appreciated then the corp would have to pay tax on the appreciation.
the amount of dividend income is the same either way to the shareholder
how do noncorporate shareholders treat gains on a redemption of stock that qualifies as a partial liquidation?
entirely as a capital gain
what is a B reorg?
stock for stock, and only the voting stock of the acquiring firm is permitted
what is a type a reorg?
a statutory merger- target ceases to exist, but target shareholders now own stock in acquiring corp
what is a type c reorg?
acquisition of “substantially all” of the assets of the target solely in exchange for voting stock of the acquiring corp
accrual based corps can deduct all or part of charitable contributions paid after the year end of its tax year if the contribution is paid within the first ____ months after the end of the tax year
2 and 1/2 months.
if the board approved 300k to be donated on jan 31st of the next year, the corp can deduct the maximum amount this year.
are S corps eligible to be in an affiliated group?
NO
