Corporate Taxation

Question 1

Section IRC that covers property transfers to a corporation solely in exchange for stock, and which immediately after the exchange those persons transferring property control (80%) the corporation

Answer 1

Sec. 351

Question 2

Any domestic corp whose aggregate amount of money and adjusted basis of other property received for stock, as a contribution to capital, and as paid-in surplus, does not exceed $1,000,000

Answer 2

Small business stock

Question 3

Section of IRC that allows shareholders of Small business stock to deduct an ORDINARY loss on the sale or worthlessness of stock if meet requirements

Answer 3

Section 1244 stock

Question 4

Tax form that corp’s must file every year, even if have no taxable income
-Must be filed by 15th day of 3rd month following close of its taxable year

Answer 4

Form 1120 ( short form 1120-A if gross receipts, total income, and total ssets each <$500k)

Question 5

Taxable income computed with specified adjustments and increased by tax preferences

Answer 5

Alternative Minimum Tax

Question 6

Supplemental schedule that corporations must attach to their Form 1120 that reconciles book income to taxable income

Answer 6

Schedule M-1

Question 7

Supplemental tax schedule that corp’s must include on their Form 1120 that reconciles beginning to ending retained earnings PER BOOKS

Answer 7

Schedule M-2

Question 8

Supplemental tax schedule that corps with total assets >$10 M must include with their Form 1120 that is a more detailed version of the M-1

Answer 8

Schedule M-3

Question 9

Supplementary tax schedule that must be completed and attached to Form 1120 if the corporaiton (1) has total assets of at least $100 M and (2) has taken a tax position on its return and the coproration or a related party has either recorded a reservewith respect taht position or did not record reserve because the corp expects to litigage the position

Answer 9

Schedule UTP (Uncertain tax position)

Question 10

A parent-subsidiary chain of corporaitons in which at least 80% of the combined voting power and total value of all stock (except nonvoting preferred) are owned by includible corporations

Answer 10

Affiliated group

Question 11

A controlled group in which ownership constitutes 80% of combined voting power OR total value of stocks

Answer 11

Parent-subsidiary controlled group

Question 12

A controlled group in which 2 or more corporations in which 5 or fewer persons who are individuals, estates, or trusts own stock possessing

1. ) more than 50% of total combined voting power
   2) more than 50% of all shares of stock of each corp, only to extent that ownership is identical (i.e. if a SH owns 5% of X and 30% of Y, counted as owning 5% of controlled group)

Answer 12

Brother-sister combined group

Question 13

A controlled group in whcih the parent in a P-S controlled group is also a member of a brother-sister group of corps

Answer 13

Combined controlled group

Question 14

Similar to book income, but iscomputed by making adjustments to taxable income by adding back (ex. tax-exempt income, dividends received deduction, excess of MACRS over ADS) and subtracting out (federal income taxes, net capital loss, excess charitable contributions, expenses relating to tax exempt income, penalties)

Answer 14

Current earnings and profits (CEP)

Question 15

Represents the sum of prior years’ CEP, reduced by distributions and net operating loss of prior years

Answer 15

Accumulated earnings and profits (AEP)

Question 16

The repurchasing of a sh’s stock –will be treated as an exchange (ie. capital gain/loss) if certain requirements are met, and other wise treateda s a dividended

Answer 16

Stock redemption

Question 17

Any corporation (except banks, financial institutions, and similar corps) that meet both:

1) 5 or fewer individuals own more than 50% of the value of outstanding stock (directly or indirectly) during any time in last 1/2 of year AND
2. ) Corp receives at least 60% of its AGI as “PHC income”

Answer 17

Personal Holding Company (PHC)

Question 18

Hypothetical dividends that are treated as if they were paid on the last day of hte corp’s taxable year; SH’s increase their stock basis by amount

Answer 18

Consent dividends

Question 19

Corporaitons may be subject to this additional tax if they accumulate earnings beyond reasonable business needs in order to avoid a shareholder tax on dividend distributions
–does not apply to PHC

Answer 19

Accumulated earnings credit

Question 20

An S-corp’s account that measures the amount of earnings that may be distributed tax free

Answer 20

Accumulated Adjustments Account (AAA)

Question 21

When one corp divides into 2 or more separate corps

Answer 21

Spin-off/ split-off