Corporations

Question 1

Transfer of property into Corp for ownership

Answer 1

• Usually not taxable, if they have immediate control over corp after (80% or more)
• For the realized gain, add up FMV of stock rcvd + cash + liabs assumed by corp
• If you receive cash or nonstock property, then recognize gain on the cash plus FMV of other prop (if liabs assumed is greater than adjusted basis of prop given up, then recog gain on diff also).
• Basis in stock received is same as shareholders adjusted basis at time of transfer minus liabs assumed.

-If not for control, then recog any gain as if shareholder sold prop to corp, and the basis is the FMV of stock received

Question 2

Corp flat tax rate

Answer 2

21%

Question 3

Corp distributions

Answer 3

• Cannot generate deficit in E&P
• Cannot add to a deficit in E&P
• E&P is reduced by the amount of money distributed
• If prop is distributed use the FMV of the prop plus any liabs assumed by the shareholder (and the basis to the shareholder is the FMV)

Question 4

Corp charitable contributions

Answer 4

• For Noncash contribs 10% of taxable income
• For cash contribs usually 10% of taxable income, but for 2020 & 2021 it’s 25%
• Don’t include the charitable ded, divs received ded, 249 ded or cap loss carryback in the taxable inc amount
• Do include NOL carryback in taxable inc amount
• Noncash FMV of contribs:
  
  • Inventory = lower of cost or FMV
  • Stock if LT then FMV, if ST then cost
  • Prop = lesser of (a) the basis + 1/2 of gain from FMV or (b) 2 times the basis

Question 5

Corp dividend received deduction

Answer 5

• If ownership is between up to 19%, the deduction is 50% of divs received.
• If ownership is between 20-79%, the deduction is 65% of divs received.
• If ownership is 80% or more, the deduction is 100% of divs received.
• If after the div recvd ded is applied there is positve NI still, then the DRD is limited to the applicable % of the NI before the DRD.
• If there would be an NOL regardless, then the full DRD is allowed.

Question 6

Distribution of property out of Corp to shareholder

Answer 6

-Corp recogs gain on prop distribution if the FMV is more than the adjusted basis.
-The FMV is determined as the greater of:
-the actual FMV
or
-the liabs assumed by the shareholder

• Corp doesn’t recog losses.
• Shareholder reports dividend income on the FMV of prop received (to the extent of E&P) and their basis in the prop is the FMV.

Question 7

Personal Holding Company (PHC)

Answer 7

• 50% owned by 5 or less people in the last half the tax year
• 60% of income from passive sources

Question 8

Corp tax due date

Answer 8

• Calendar year end = April 15th or extended to Oct 15th
• Fiscal year June 30th = Sept 15th or extended to April 15th (special rules they get 7 months instead of 3.5)
• All other fiscal year end = 3.5 months from year end, then extension is 6 months from then.

Question 9

Accumulated earning tax

Answer 9

-20%

-For PHC, calc as:
(AE&P - ‘needed amount of E&P’ - 150,000) x 20%

-For NON-PHC, calc as:
(AE&P - ‘needed amount of E&P’ - 250,000) x 20%