Entities (R3) Flashcards
charitable contributions rule for corps
max deduction is up to 10% of taxable income
insurance premiums paid by a corporation
not deductible if corp is the beneficiary (directly or indirectly)
organizational and start up costs
can elect to deduct up to $5000. then do organization costs - 5000 deduction = remaining. divide remaining by 180 months and add that on top of 5000 deduction for the year. - costs associated with distributing own stock is not included - “commission paid to underwriters - ignore!”
dividend received deduction (on qualified dividends) for corporations
0-20% owner = 50%
20-80 = 65
80+ = 100
temporary book to tax differences
depreciation, gain or loss on sale of assets, bad debt expense, or business interest expense
permanent differences examples
-interest income and life insurance proceeds on key employees are both nontaxable
-DRD is only for tax purposes
-fines, penalties, political contributions and entertainment exp are all nondeductible
-federal taxes are not deductible for tax purposes, but state taxes are.
estimated payments of C corps
lesser of 100% of: current year or preceding year
general business credit for C corps
credit cannot exceed net income tax less 25% of net regular tax liability over 25000
accumulated earnings tax for c corp
20%
personal holding companies
50% owned by 5 or fewer people and has 60% ordinary gross income from: net rent, interest, royalties, and dividends
when calculating basis for a partnership, how is interest treated
tax exempt interest income: is not taxable
US treasury interest: is included
how are cash distributions treated
not included in calculating a partners AGI, but it is on the K-1 to use in basis calculation (decreases basis)
guarenteed payments
partner recognizes it as income, and the partnership deducts that amount when determining ordinary business income
S Corp requirements
-must be individuals, estates, or trusts
-cannot be a resident alien (must be US)
-qualified retirement and 501c can be
-corporations and partnerships cannot (single member llc are treated as individual)
depreciation - separately stated or not for S Corps
MACRS regular is a part of ordinary business income, so it is not separately stated, but section 179 is separately stated.
C Corps - how much business interest to deduct
limited to: business interest income + 30% of ATI + floor plan financing interest expense
how to treat guarenteed payments
deducted to get to ordinary business income - make sure to include partners health insurance premiums also if listed
seperatley stated items for partnerships (not included in calculating ordinary income)
charitable contributions,
DRD taxable income limitation for C corps
DRD equals the lesser of:
-50 or 65% of dividends received or
-50 or 65% of taxable income computed ignoring the DRD, or NOLs
who cant take the DRD
personal service corporations, personal holding companies, or S corps
DRD for affiliated corporations
80 percent or more ownership that file a consolidated return are allowed 100% DRD
what DRD is allowed for small business investment corporations (SBICs)
100%
general formula for corporations
Gross Income - Deductions = A, - Charitable Contributions = B, - DRD= taxable income or loss
how to calculate what is deductible for charitable contributions
= taxable income + if DRD was taken x 10%
rules for paying estimated taxes for regular C corps
lesser of: 100% of current year tax or 100% of prior year tax
rules for paying estimated taxes for large corporations
must pay 100% of tax shown in the current year
general business credit for corps
just a combination of multiple credits, limited to:, can be carried back one year and forward 20 years
research and development tax credit
20% of the increase in qualified research over a defined base amount
foreign tax credit
find qualified foreign taxes paid, then find
how to treat penalties paid for late payment for partnership tax basis
a nondeductible expense but does decrease tax basis
how to treat life insurance premiums paid on lives of partners for partnership tax basis
a nondeductible expense but does decrease tax basis
how to treat municipal bond interest when calculating for partners K-1
not included in the taxable interest income because it is nontaxable - but do include it in the nontaxable income section
what is included in guaranteed payments to partners on the 1065
guaranteed payment amount given and partners health insurance premiums
how to treat retirement plan contributions
contributions for employees are included in ordinary business income on the 1065; contributions for partners are included on Sch K of the partnership income as seperatley stated items
