Gross Income & Deductions of C Corp

Question 1

Holding period for corporation to qualify for DRD?

Answer 1

Must hold corporate stock for 46 days out of 91 day period beginning 45 days before ex-dividend date.

Question 2

Common Sources of Income for Corporation?

Answer 2

(1) Gross Receipts/Sales
(2) Dividends and Taxable Interest
(3) Rents and Royalties
(4) Capital gain from investments
(5) Net G/L from selling business assets
(6) Life insurance above premium (unless key employee)
(7) Cancellation of Debt
(8) Bond Repurchase income
(9) Sinking Fund Income
(10) Unrestrained Claims to income (prepaids)
(11) Refunds (to extent of tax benefit)

Question 3

Requirements to receive DRD on dividends from foreign corporation?

Answer 3

Must own at least 10% of foreign corporation
(2) FoCo is subject to US tax
(3) FoCo has income effectively connected to T/B in US
(4) FoCo is not a foreign personal holding company

Question 4

Who does the limit on compensation deduction apply to?

Answer 4

CEO, CFO, and three other highest paid employees of publicly traded corporations.

Question 5

Are parachute payments are partially deductible?

Answer 5

No, not deductible at all

Question 6

Are tax free benefits subject to $1,000,000 limit?

Answer 6

No, not subject.

Question 7

Are income from pension plans subject to $1,000,000 limit?

Answer 7

No, not subject.

Question 8

Is compensation paid before going public subject to $1,000,000 limit?

Answer 8

No, not subject.

Question 9

Is deduction allowed for premiums on life insurance policy covering key employee?

Answer 9

No, but proceeds generally not taxable.

Question 10

How are R&D costs recovered?

Answer 10

Amortized over 5 years.

Question 11

What items are added back (or not included) to taxable income before determining the 10% of TI limit for charitable deductions?

Answer 11

Charitable contributions
Dividends received deduction
Capital loss carryovers