Deck 14 Flashcards
Fringe benefits paid by an S corporation are deductible by the S corporation only for:
Non-shareholder employees and employee-shareholder’s owning 2% or less of the S corporation
S corporation status can be revoked if shareholders owning more than ______ of the total number of issued and outstanding shares consent
50%
Net business income for S corporation =
Gross receipts + income items (not including dividend income) - expenses
Unrealized “built-in” gain for an S corp. results when the following two conditions are met:
1) a C corporation elects S corporation status, and (2) the FMV of assets > adjusted basis
Losses for an S corporation are only deductible only to the extent of:
The shareholder’s basis
What is the tax rate for an S corporation that pays tax on built-in gains?
The highest corporate income tax rate which is 35%
Are stock dividends taxable?
Generally not taxable; unless shareholder has a choice of receiving cash or the property (FMV)
Proportional stock redemption is:
dividend income
Disproportional stock redemption is:
Capital gain/loss
Corporation sells assets and distributes cash to shareholders; equation for corp:
Sales price - basis = taxable gain/loss
Corporation distributes assets to shareholders; equation for corp:
FMV - basis = taxable gain/loss
Corp sells assets and distributes cash to shareholders; equation for shareholder:
Proceeds - stock basis = taxable gain/loss
Corp distributes assets to shareholder; equation for shareholder:
Sales price - stock basis = taxable gain/loss
Type A reorganization (Tax free for all reorganizations):
Mergers or consolidations
Type B reorganization:
acquisition by one corp. of another corp’s stock, stock for stock
Deductible fringe benefits for S corp.
Deductible for non-shareholder employees and those owning 2% or less of the S corp.
To qualify as an exempt organization, an applicant must not be:
A private foundation organized and operated exclusively to influence legislation.
Unrelated business income is:
1) Derived from an activity that constitutes a trade or business, 2) Is regularly carried on, and 3) Is not substantially related to the organization’s tax-exempt purpose.
What exempt organization must file annual information returns?
Private foundations
