Entity Taxation Flashcards
Capital loss - corporations
Corporations cannot deduct any capital losses in excess of capital gains.
Carried back 3 years and forward 5 years. - 2021 to current
Carried back 5 years and forward indefinitely. 2018 - 2020
Tax exempt organization qualification
At least 1/3 of support must come from governmental units and general public.
Dividends-Received Deduction - %
Ownership % DRD
0-20%.(Unrelated) 50%
20-80%. 65%
80-100%.(Consolidated). 100%
Lesser of:
Dividends received, or
Taxable income
Dividends-Received Deduction
To prevent triple taxation.
Must own investee stock for at least 46 days during 91 day period.
Entities not eligible for DRD:
Personal service corps
Personal holding companies
(Personally taxed) S Corps
Foreign Tax Credit
FTC Limitation = US Tax Liability x
Foreign source taxable income / Total taxable income.
Credits can be carried back one year and forward up to 10 years.
Nexus
Connection between taxpayer & state to justify the government imposing taxes.
Constitutional basis
Physical presence
Economic nexus
Public fairness & tax competition
Completely & compliance challenges
Legal & legislative development
Apportionment vs Allocation
Apportionment is based on a formula (property, payroll, & sales)
Allocation is assigning income or expenses.
S Corp Ownership
US citizen/resident Individuals, certain trusts (grantor, voting, QSST, ESBT), 501(c)(3) charities, or estates.
No corp, partnership, or nonresident aliens.
S Corp Separately stated items
Interest income
Dividend income
LT cap gains
Charitable contributions
Rental real estate income
Section 179 deductions
Personal Holding Company
Corporation owned more than 50% by 5 or fewer individuals for the last half of the year.
At least 60% of adjusted ordinary income is from investments in stocks and securities.
Additional 20% tax imposed of net income not distributed
Constructively:
Sibling/parent/child/grandchild
C Corp Charitable Contributions
Max is 10% of taxable income
Business Interest Expense
Limitation: avg annual gross receipts of $30 million or more for prior 3 years.
Disallowed business interest expense can be carried forward indefinitely.
Deduction: sum of business interest income + 30% ATI (taxable income excluding interest income/expenses) + floor plan financing interest expense
C Corp tax rate
21%
C Corp tax credits
GBC limited to net income tax less 25% of net tax liability above 25k. Unused carried back 1 yr and forward 20 yrs.
R&D credit-20% of increase in qualified research expenses above base amount
AAA
Increase by income excluding tax exempt
Decrease by losses, nondeductible expenses and distributions
Losses can make negative, distributions cannot
Accumulated Earnings Tax
Additional accum earnings over limit is taxed at 20%.
Regular C Corp - $250k accum earnings.
Personal service corps - $150k accum earnings.
