Flow-Through Entity Taxation and Multi-jurisdictional Tax Issues Flashcards
T or F, foreign income taxes paid by a domestic corporation may be claimed as a deduction or a credit, at the option of the corporation.
T
how are the following sourced:
sale of inventory
compensation for personal services
where title passes
where service is performed
when is a foreign corporation considered a controlled foreign corporation (CFC)?
when more than 50% of its stock is owned by a US shareholder on any day of the year
transfer pricing issues exist when a US-based TP shares costs, transfers, sells, purchases, leases, enters into a contract with an affiliate that either…
*hint: 2 things
is not subject to US income tax
OR
does not file a consolidated return with the US-based TP
what factor allows a state to impose an income tax on net income of a company?
physical presence (Nexus) within the state
which states can tax a company’s nonoperating income?
only the company’s home state
what is the apportionment % based on?
property, payroll, and sales.
*remember that operating income is apportioned between states
what is a controlled taxpayer?
any one of two or more taxpayers owned or controlled directly or INDIRECTLY by the same interest
if there is a mid-year change of ownership in an S corp, how is income allocated between the shareholders?
on a per share, per day basis
T or F, the value of fringe benefits such as health insurance is includable in the gross income of S corp. shareholders who own more than 2% of the S corp’s stock (unless the S corp does not deduct the cost of such benefits).
T
when is an S corp subject to the “built-in gains” tax?
only when the S corp was previously a C corp
FMV at election - adj basis at election = built-in gain when asset is sold
can an S corp be a shareholder in a C corp?
yes, but a C corp cannot be a shareholder in an S corp
is Section 179 expense a separately stated or non-separately stated item? How about interest income and LT capital G/L?
separately stated (aka not included in the calculation of ordinary income)
what is the tax rate for the built-in gains tax?
21%
do capital contributions by shareholders increase the accumulated adjustments account (AAA)?
NO
what would cause an S corp to be terminated?
passive investment income greater than 25% of gross receipts for 3 consecutive years
does a guarantee of corporate debt create a debt basis?
NO, only direct loans to the corporation create debt basis
when would a partnership actually be terminated for income tax purposes?
when the partnership’s business and financial operations are discontinued and/or only one partner remains
can a partnership elect to have a tax year other than the generally required tax year?
yes, but only if the deferral period for the tax year elected does not exceed 3 MONTHS
if an LLC does not elect to be treated as a corporation, how will it be treated for tax purposes?
a partnership
the base erosion and anti-abuse tax (BEAT) may apply to corporations with…
avg annual gross receipts of 500 million or more for the 3 preceding tax years
what type of situation increases a corp’s foreign-derived intangible income?
sales to non-US persons of property for use outside the US
income that is considered fixed, determinable, annual, or period (FDAP) is subject to what?
US withholding tax requirements
who/what is a 100% DRD for foreign source dividends available to?
only to corporate shareholders who own at least 10% of the foreign corp
when will a foreign person be treated as a US resident?
if present in US for at least 31 days in current year and at least 183 days for a 3 year period
*current year days + (immediate preceding year days x 1/3) + (second preceding year days x 1/6)
income earned by a US branch of a foreign corporation must file which form?
Form 1120F
how are LLCs taxed?
as a partnership, corp, or sole proprietorship
*two or more owners = partnership is the default, corp status can be elected
which elections are made by the partnership rather than an individual partner?
method of accounting, method of depreciation and Section 179
what is a single member LLC considered?
a disregarded entity and taxed as a sole proprietorship (income and deductions reported on schedule C of form 1040)
*unless owner elects corp status
