Deck 15 Flashcards
Organizations that are not required to file form 990:
$50,000 or less gross receipts and CHRIST (churches, high schools - religious, religious orders, internal support auxiliaries, societies - missionary related, tax exempt)
Transfer pricing issues exist when a U.S.-based taxpayer shares costs with an affiliate that either:
(i) is not subject to the U.S. income tax or (ii) does not file a consolidated income tax return with the U.S.-based taxpayer.
Advance Pricing Agreement (APA) program:
Binding contract between the IRS and the taxpayer, IRS does not seek a transfer pricing adjustment for a covered transaction if the taxpayer files its return for a covered year
Transfer pricing issues exist when a U.S.-based taxpayer shares costs with an affiliate that either:
(i) is not subject to the U.S. income tax or (ii) does not file a consolidated income tax return with the U.S.-based taxpayer
Factors that affect income taxes and cash flows:
Asset abandonment, asset sale, and asset trade-in
Asset Trade-in (gain or loss recognized?)
No gain or loss recognized for tax purposes
Realized gain for corporation =
FMV of property - basis of property
Recognized gain =
the amount of boot received; if no boot then no gain
Shareholder’s tax basis =
NBV of property + cash contributed - liability assumed
Failure-to-pay penalty:
The penalty is half a percent for each month or fraction of a month up to a maximum of 25%
Is tax exempt interest subtracted or added back to book income?
Subtracted
Is excess depreciation subtracted or added back to book income?
Subtracted
What amount of a distribution it tax-free?
Distribution is tax-free to the extent of the Accumulated Adjustments account balance
The statute of limitations for collection of an assessment generally extends to:
10 years after the assessment date
Passive activity losses are fully deductible only in the year of:
Disposal
Foreign income taxes paid by a domestic corporation may be claimed either as a:
Deduction or a credit, at the option of the corporation
Basis for like-kind exchanges =
basis of old property - any boot received
Wash sale
Occurs when a taxpayer sells stock at a loss and invests in substantially identical stock within 30 days before or after the sale. Losses are not deductible for wash sales
Capital assets
All property except: property normally included in inventory, depreciable property and real estate used in business, Accounts receivable and notes receivable from sales or services, copyrights, and treasury stock
An investment in a capital asset results in what?
The income being capital
