Entities Flashcards
Corporation NOL rules
Before 2018: back 2, forward 20
2018-2020: back 5, forward indef.
After 2020: not back, forward indef.
NOL limitation for Corps starting in 2018
can only offset 80% of taxable income
Corporations capitol loss rule
Can only offset capital losses to extent of capital gains - excess can go back three and forward five
Formation of a corp
No gain or loss recognized
Corps basis in property contributed for formation of C Corp
greater of the shareholders basis in the property or the debt assumed - shareholders adjusted basis in property
Shareholders Basis in stock in formation of C Corp
total cash contributed plus adjusted basis of property transferred (reduced by any debt) plus the FMV of any services provided plus any gain recognized
Distributions from corporations
treated as dividends to extent of current EP and accum. EP - excess is capital gain (dividend amount is cash received or FMV)
Distribution of appreciated property
Corp recognizes a gain as if property has been sold (FMV of property - adjusted basis)
Stock redemption for c corp
when a corp buys back stock from shareholders - if it qualifies for sales or exchange treatment, then gain or loss is rec by shareholder. If NOT, treated as dividend to extent of EP
Corporate Liquidation - Corp sells assets and dist cash to shareholders (Corp side)
recognizes gain or loss on sale of assets
Corporate Liquidation - Corp sells assets and dist cash to shareholders (shareholder side)
recognize gain or loss (proceeds - stock basis)
Corporate Liquidation - Corp distributes assets to shareholders (corp side)
recognize gain or loss as if sold at FMV (FMV - basis)
Corporate Liquidation - Corp distributes assets to shareholders (shareholder side)
recognize gain or loss of FMV - stock basis
Any corp with greater than $500 tax liability owe in 4 estimated taxes - equal in 25% of annual required payment in lowest of:
100% of current year liability or 100% of tax liability from prior year
Property Contributions to S Corps
nontaxable if it is a contribution of property, solely in exchange for stock, and after the transfer shareholder has control of corp of 80%
three taxes imposed on S corp if previously taxed as C Corp
LIFO recapture tax, built in gains tax, and tax on passive investment income
limiations on pass through of losses
tax basis, at risk, passive activity loss, and excess business loss
nonliquidating property dist for S Corps
uses the FMV of property at date of distribution - S Corp recognizes a gain not a loss and is flowed through to individuals.. S Corp AAA is reduced by the FMV of property distributed
liquidation of S corp (same as C corp)
corp recognizes gain or loss as if sold at FMV
distributions from an S corp in complete liquidation for shareholders
treated as payments in exchange to stock -
Who can qualify as 503C organ in relation to sports
cannot provide athletic facilites or athletic equipment
rents from property when personal services is also provided - like motel or hotel
excluded from UBI income
three requirements of simple trust
- distribute all income to beneficiaries annually
- cannot make distributions form trust principal (corpus)
- cannot make distributions to charitable organizations
Shareholder of an S corp contributed equipment - find gain amount
generally nontaxable, but if liabilities assumed are greater than basis of property contributed - difference is a gain that must be recognized
S corp recognizes a gain on appreciated property that was distributed to its shareholder
FMV - adjusted basis = gain … gain is flowed through to S Corp shareholders and allocated based on their stock ownership %
what increases AAA for an S corp
what decreases AAA for an S corp
formation of partnership
partners contribution to formation for partnership interest - no gain or loss is recognized
best entity type for property contributions
partnerships or sole prop
best entity type for business losses
any of the flow through entities, to stay away from double tax
best entity type for compensation of owners
C or S corp
best entity for nonliquidating distributions to owners
partnership - esp for appreciated property
best entity for liquidating distributions to owners
partnerships if appreciated property - or corporations if it is depreciated property
going from flow through to C corp
easy, just change on return
going from C corp to S corp
make s election and meet requirements
C corp to partnership or sole prop.
liquidate C corp and recognize gain or loss between FMV and adjusted basis….shareholder recognize capital gain or loss on difference between FMV and basis in stock
trust accounting income
book income of the trust, used to determine amount required to be distributed to beneficiaries each year
goes to trust corpus (principal)
capital gains and losses and casualty gains and losses are allcoated to corpus
goes to accounting income (TAI)
most income and expense items - operating, taxable and tax exempt interest, dividends, rents, royalties, etc
how are trust admin expenses allocated
between principal and corpus - ex trustee fees
trust taxable income before distribution deduction
trust taxable income (includes cap gains) - deductible trust expenses = adjusted total income - expemption amount = answer
simple trust exemption
300
complex trust exemption
100
nondeductible trust admin expenses
total admin expenses x (nontaxable income / trust accounting income)
distributable net income for trust
trust taxable income + exemption - cap gains + capital losses + tax exempt interest - expenses allocated to tax exempt interest = DII
if disposing of a partnership, in the year of disposal you can use what to offset any kind of income
passive activity loss carryovers
how much can a married individual deduct for 1244 section loss
100,000 against ordinary income + the 3,000 capital loss portion
rule for liquidating distributions for C corps
gain is recognized for the fair market - adjusted basis
shareholders basis in property recieved in liquidating distribution
FMV (difference in FMV and basis of stock surrendered = capital gain or loss)
shareholder contributing property in exchange for stock in corp
amount realized - adjusted basis = realized gain ** but limited to what you recieve in boot
