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
