lemme sget auhhhhh R4?

Question 1

So youre a shareholder, you give property to the corporation in exchange for some common stock…when would you NOT recognize a gain or loss? Say you do have to recognize the loss or gain, how do you find it

Answer 1

There are basically two conditions:

1. the shareholder owns at least 80% of the stock immediately after they get that new stock
2. There is no boot

Just like the like kind exchange, lesser or realized or boot received.

Question 2

Like on a general basis, what is the basis of common stock that is received by the shareholder??

Answer 2

Amount of cash contributed if paid in cash
NBV of property contributed if property
Or the fair value if services are rendered in exchange

Those above PLUS any gain recognized by the shareholder.

Question 3

So for corporations…if they have bad debts…can they deduct those?

Answer 3

So in general for taxpayers and corporations, bad debts can be deductible to the extent that the bad debts were previosuly included in their income, which would mean they use the charge off method for tax purposes.

This is contrasted by cash basis tax payers who cannot deduct bad debts because the bad debts never were included in their income to begin with ya know? the only way they could is if it was like an uncollectable check

Question 4

So youre a corporation, how are charitable contributions treated?

Answer 4

they can deduct up to 10% of their taxable income BEFORE taking out charitable contirubtions, DRD, and Capital loss

Question 5

When would a life insurance premium not be allowed to be deducted

What is the treatment if the policy is over 50k

Answer 5

key man policies where the corporation is the beneficiary means no deduction….if the employee actually names a beneficiary, it is deductible

Remember: over 50k can be treated as income to the employee

Question 6

Identify the 3 levels of the DRD…each level is % reduction

Answer 6

50% DRD = less than 20% ownership…this means 50% of dividends are deducted from taxable income up to a limit of 50% of taxable income

65% DRD= 20% to <80% this means 65% of dividends are deducted from taxable income up to a limit of 65% of taxable income

100% DRD = affiliated companies where 80% or more of common ownership

Question 7

gimme some nondeductible trade or business expenses

Answer 7

bad debt for allowance method
50% of business meals
political shit
federal income taxes
penalties

Question 8

can you talk me through the accumulated earnings tax

Answer 8

its a tax on accumulated earnings which are beyond the businesses reasonable needs…

corps are allowed to accumulate up to 250,000…personal service corps are allowed up to 150,000

anything over is taxed at a flat 20% of the unreasonabe earnings

Question 9

define a personal holding company

Answer 9

has to meet both:
50% of the voting stock is owned by 5 or fewer individuals
at least 60% of the corps AOGI of personal holding income such as dividends, rent, royalties and taxable interest

PHC’s can be taxed a 20% penatly for not distributing funds

Question 10

what are the requirements to file a consolidated return

Answer 10

all the corps in the group have to: have been members of the group at some point of the year, and file a consent form

Affiliated group means 80% or more of voting stock of the corp is owned by the other ya know

Question 11

what are the advantages of filing a consolidated return

Answer 11

one corps capital losses can offset anothers capital gains..as do operaitng losses to operating gains

no tax on inercompany transactions

DRD is 100% baby

Question 12

what is the corporate tax treatment of capital gains and losses

Answer 12

Capital gains are taxed the same as ordinaty corporate income

Corporations cannot deduct capital losses from ordinary income BUT they can offset capital gains to their extent

Question 13

how far back and forward can a corporation send a capital loss

Answer 13

carried back 3 and forward 5 as a short term capital loss

Question 14

What is the general NOL carryfoward/back rules

Answer 14

NOLs from before 12/31/2017 can be carried back 2 and forward 20 (THINK: Hindsight is 2/20)
NOL’s after 2017 have an indefinite carryforward period but is limited to 80% of taxable income

Question 15

so during cash allocation there are certain ordering rules…can you tell me about those rules

Answer 15

First: Current E&P (think retained earnings)
Second: Accumulated E&P

Any distribution in excess of both current and accumulated E&P is treated like a nontaxable return of capital and reduces the shareholders basis in the stock

Question 16

give me examples of a constructive dividend

Answer 16

excessive salaries paid to sharholder employees

Excessive rent/royalties

Loans to shareholders where they dont intend to be repaid

Sale of assets below FMV

Question 17

what is the tax treatment to stock dividends

Answer 17

stock dividends usually arent taxable unless the shareholder is GIVEN THE CHOICE of receiving proprety or cash

Question 18

When would you take the full DRD as opposed to 50% or 65%??

Answer 18

if it creates a NOL bihhhh

Question 19

can I have an example of temporary and permanent difference

Answer 19

temporary: difference between book and tax depreciation because it will eventually reverse and even out

Perm: municipal bonds because its not recognized for tax and recog for book

Question 20

what kids of businesses are considered personal service corporations

Answer 20

accounting, law, consulting, engineering, archituecture and health shit

Question 21

If a corporation is completely liquidating, what what kind of gain do they shareholders recognize as part of the stuff they receive

Answer 21

capital gain or loss

Question 22

For DRD how long must an investor hold onto his stock before claiming the deduction

Answer 22

45 days

Question 23

So you inherit 1244 worthless stock, how much can you deduct as an ordinary loss? What if you were the original owner?

Answer 23

this deduction is only available to the original owner, but if you are the OG owner, you can deduct as an ordinary loss up to 50,000 (S) and 100,000 (MFJ)

Question 24

are losses on distribution to shareholders allowed

Answer 24

NO