Corporate Tax VC Flashcards

Question

Taxable portion of dividends? Current E&P + - + - Accum E&P - + + - Dividend Taxed

Answer 1

Div Taxed + net ++ 0

Answer 2

FMV prop - basis = gain added to current EP FMV of property is dividend to shareholder

Answer 3

Treated like normal distribution Capital gain Can't deduct loss dividend income up to E/P (Ordinary)

Answer 4

Ordinary gain (capital if stock) Ordinary loss Cap gain/Cap loss.....treat like you're selling stock

Answer 5

Cap gains 50000 (100000 MFJ) Ordinary Losses. Remaining losses treated as capital loss $3000/yr limit

Answer 6

$1mill original purchaser individual or partnerhship

Answer 7

- Private activity muni bond interest - Installment sales of inventory...recognize revenue when earned (accrual) - Longterm construction contracts. Use percentage of completion - Excess depreciation on personal property (not real estate) USE 150% declining bal. instead of the normal 200% declining bal

Answer 8

75% * Seventy percent DRD-- add back. 75% * Life Insurance proceeds 75% * Municipal Bond Interest

Answer 9

Exemption = $40000 - 25%(AMTI before exempt - 150000) the most you can get is 40000

Answer 10

80% corporations S-corp can't file with C-corp

Answer 11

$25 max $12+$25= $37

Answer 12

Annualize income (estimated based on what you've already done) and figure tax on it Multiply annualized tax by (months in short period/12)

Answer 13

NO. The accrual company cant' take the expense without the matching income from the other company. Wait until next year to show transaction

Answer 14

Ins. proceeds - basis 150000

Answer 15

38000-3000= 35000 Shareholder basis = 38000 Corp will recognize gain on land. So shareholder will take FMV of land as basis. Assuming liability doesn't affect basis in property received.

Answer 16

recognize lesser of "gain realized" or "boot received" gain realized (tot trx) 100000 received - 35000 gave = 65000 OR boot received 40000 (yes b/c lower) ``` gain realized 100000-35000= 65000 (yes b/c lower) OR boot received 70000 ``` basis + gain recognized - liabilities transferred = shareholder basis 1) 35000+40000=75000 2) 35000+65000=100000 (all gain recognized)

Answer 17

For Alt Min Tax ----- MID MONTH | All RE bought in a month is treated as being bought in the middle of the month

Answer 18

No...not if qualifications met as full redemption Treat as capital gain 250-150 = 100000 capgain

Answer 19

NO. S-Corp is pass thru

Answer 20

paying an actual dividend or as a result of a consent dividend, which is a hypothetical dividend the corporation pays taxes on but does not actually distribute to shareholders. Since the purpose of the PHC tax is to prevent taxpayers from being able to pay tax on investment income at a lower corporate rate than if taxed individually, it does not apply to interest income on municipal bonds, which is tax exempt. The PHC tax is a self-assessed penalty tax and does not require an IRS assessment.

Answer 21

Intercompany profits eliminated Property retains its basis. Gain is reported when it's finally sold to a third party

Answer 22

F = name change A= statutory merger or consolidation B = uses voting stock to gain at least 80% voting power & 80% of each nonvoting stock C = uses voting stock to gain substantially all of target co's assets F=recapitalization to change the capital structure of a single corporation D=transfer of assets to gain controlling interest E= bankruptcy

Answer 23

Corp has to pay preferred SH first, so they'll pay for divs (up to the co's E&P 20000). Common shareholders will have capital gains

Answer 24

20% owned ----> 80% DRD. NOT 70% which goes to LESS than 20% 80% owned -----> 100% DRD 50% owned ---> 80% DRD

Answer 25

ONLY 1 Adj Basis of property will be value of shares received even if FMV of property is less than basis give basis 30000 fmv 20000 shareholder basis in stock 30000 If you sell your stock FMV 20000, you'll recognize that 10000 loss It is the corporation who will take the lower of SH basis or FMV for its basis in the property (unless you both elect otherwise) corporation basis in property 20000 If corp sells property immediately, they'll have no gain Only 1 party gets the loss.

Answer 26

50000*.15= 7500 13000*.25= 3250 tax 10750

Answer 27

mfg co. gets 250000 allowance for working capital personal service corp gets 150000 All get to reduce by income tax owed Accum Earnings tax on undistributed income above these limits is 20%. Assessed by IRS AUDIT 400000-250000-100000= 50000 Min. accum earnings credit 350000 Max income subject to tax = 50000 In this case, AET 50000*20% = 10000

Answer 28

average annual gross RECEIPTS (not assets) have exceeded $5million for the last 3 years Service biz with gross receipts over $10million must use accrual

Answer 29

A corporation with total assets (NOT RECEIPTS) of $10 million or more is required to file a schedule M-3 Yes, can elect Note. ASSETS used for M-1/M-3. Gross receipts used to determine cash or accrual

Answer 30

is substantially disproportionate; involves redemption of all of the shareholders’ stock, provided other shareholders are not related; is from a non-corporate shareholder in partial liquidation; or is a redemption of stock to pay death taxes under section 303

Answer 31

since Ace had a $10,000 increase in rents receivable, rental income must be $10,000 more than the $50,000 in rents received, or $60,000. Plus 5000 deposit === 65000

Answer 32

Shareholders owning more than 50% can't take a loss on redemption...why? because they had the power to create a loss

Answer 33

Distribute it to their shareholders. If Raisin Corp receives related party stock valued at 700000 and nonrelated party stock valued at 50000 in exchange for 600000(raisin basis) of raisin assets, what will make raisin have to recognize gain? They keep the unrelated stock instead of distributing it to shareholders. They'll have to report FMV gain of 50000 because it's boot.

Answer 34

Shareholder's ownership must no greater than 80% of what it was before the redemption.

Answer 35

80% * 25% = 20% For exchange to be tax free, ownership after redemption must be no greater than 80% of previous ownership = 20%. So it can be 20% or less After redemption ownership Y (100-34)/(400-100) = 22% S (100-24)/(400-100)= 25% D(100-42)/(400-100)= 19% Only Day will qualify for tax free redemption

Answer 36

SL 56000*1/7 (because 7 year property) Tax DDB doubles SL 56000*1/7*2=16000 halfyear says only take half a years depreciation in the first and last year. For year 1, tax depreciation is 8000

Answer 37

Real property -- mid month because usually larger amount of money Personal property -- half year

Answer 38

NO GAIN OR LOSS Including the stock owned by Hubert’s wife, which is considered to be indirectly owned by Hubert, Hanson owns 60% of Calico. Although the sale of half of his interest, which has a basis of $150,000 (i.e., 50% × $300,000), for $100,000 results in a loss of $50,000. However, when a shareholder directly or indirectly owns more than 50% at the time of the redemption, losses are disallowed.

Answer 39

If Little keeps the boot (exchange consideration that's not Big Stock), they will recognize gain. If they distribute boot to Little shareholders, they will not recognize gain.

Answer 40

When a corporation receives property in a Section 351 exchange, it assumes a carryover basis from the shareholder. If the shareholder recognizes gain, the corporation adds that gain to its basis in the property. B receives $20,000 of cash as part of the transaction, which means that it is classified as boot. When a shareholder receives boot, he or she must recognize gain to the extent of boot received. Thus, B recognizes $20,000 of gain. X Corp. assumes a carryover basis of $40,000 and adds the $20,000 gain recognized by B to its basis. X Corp’s tax basis in the land is $60,000.

Answer 41

Trust and C Corp Pass throughs -- No. But the individual can use entity losses for their own NOL

Answer 42

any gain recognized by the transferor

Answer 43

DPAD only. This would include the DPAD, which is deductible for tax purposes but is not an expense for financial reporting purposes. Tax credits reduce total tax liability but are not a reduction of taxable income.

Answer 44

60% of adjusted gross ordinary income A “personal holding company” is defined as a corporation where at least 60% of its adjusted ordinary income is personal holding company income and more than 50% of its outstanding stock is owned by or for no more than 5 individuals.

Answer 45

103000. IRC §1244 allows losses from the sale of small, domestic corporate stock, that was sold directly to individual shareholders, to be deducted as ordinary losses up to $50,000, or $100,000 on a joint return. The remaining loss will be treated as a capital loss subject to the $3,000 per year limit.

Answer 46

NO! Only return of capital is subtracted from basis. Corporations pay tax on their income. Shareholders do not get a pass thru amount that increases basis as they do in s-corp and partnership