Corporate Tax Computations

Question 1

Fill in the Blank.

THE accumulated earnings tax _____ .

Answer 1

• Can apply to any corporation (not subject to the personal holding company tax)
• Applies only to corporations, NOT to partnerships
• Is 20% of the accumulated taxable income

Question 2

WHAT is the minimum Accumulated Earnings Credit in 2018?

Answer 2

$250,000

i.e. this is considered the “minimum credit base”

Note: The minimum credit base is $150,000 for certain service corporations

Question 3

WHAT are examples of credit(s) that cannot be claimed by a corporation?

Answer 3

• Earned Income Credit
• Child and Dependent Care Credit
• Elderly and Disabled Credit

Note: ALL are considered “personal credits” NOT permitted for corporations

Question 4

WHEN is the first installment payment of estimated tax due by for a corporation?

Answer 4

BY the 15th day of the forth month of the corporation’s tax year

NOTE: This is if they anticipate a tax bill of $500 or more (Installments of fiscal-year corporations are due on the 15th day of the fourth, sixth, ninth, and twelfth months)

Question 5

WHAT would be considered a “excluded” corporation for a affiliated group?

Answer 5

• Foreign corporations (which include FSCs)

i. e. Foreign corporations are excluded from the definition of includible corporations by Sec. 1504(b).

Question 6

WHAT percentage of total voting power and total value of stock must a corporation own of another in order to file a consolidated return?

Answer 6

80%

• They must own at least 80% of total voting power and Value of Stock

Question 7

HOW are Dividends Paid treated among-st entities that file a consolidated tax return?

Answer 7

THEY are eliminated

Question 8

WHAT is considered a “Personal Holding Company?”

Answer 8

A corporation that is more than 50% owned by five or fewer shareholders anytime during;

• The (LAST HALF) of the tax year and that has at least 60% of its income as personal holding company income

Question 9

True or False.

Deductions are more valuable than credits.

Answer 9

FALSE.

Credits are MORE valuable than deductions because they reduce the tax on a dollar-for-dollar basis

Question 10

WHAT type of corporation is “expressly exempt” from the Accumulated Earnings Tax?

Answer 10

Personal Holding Companies (PHCs)

Question 11

IN what years’ may a corporation utilize their unused Foreign Tax Credit?

Answer 11

By carrying it back 1 preceding year and then forward to the following 10 taxable years

Question 12

WHAT is the tax rate used to compute the personal holding company tax for 2018?

Answer 12

20%

i.e. Under Sec. 541, the personal holding company tax for 2018 is equal to 20% of the undistributed personal holding company income

Question 13

WHAT is the rule for including Rent as personal holding company income?

Answer 13

IT is excluded if it;

(1) Constitutes more than 50% of the corporation’s adjusted ordinary gross income and
(2) there is only a limited amount of other personal holding company income

NOTE: Personal Holding Company Income is generally passive income

Question 14

In what scenario will the Accumulated Taxable Income be (ATI) equal to zero?

Answer 14

WHEN undistributed (current and accumulated) earnings and profits do not exceed $150,000

i.e. No accumulated earnings tax will be imposed