M - 1 - C Corporations Flashcards
How is the dividends received deduction calculated?
DRD percentages:
0 to 20% ownership -
What are temporary differences between book and tax?
These are the differences where GAAP rules differ from tax rules. So if you get a payment in advance, that would create a deferred liability in GAAP, but we would recognize those in tax. Think of early rental payments, any payments in advance, those are differences between book and tax.
What are permante differences between book and tax?
These are things that will not reverse, interest income from municipal and state bonds, life insurance proceeds when corp is beneficiary, etc.
For invidulas, Qualified personal service corporations, and taxpayers with annual gross receipts that do not exceed 30 million for the prior three year period (2024), do they use cash or accrual?
Cash basis
Tax shelters, farming corporations, C corporations, all have to use what type of accounting if their business has greater than 30 million in average gross receipts for the past three years?
Accrual
Can C corps deduct executive compensation? What is the limit?
They can deduct up to 1,000,000 to covered employees which include the five highest officers.
Can bonuses be taken as a deduction for c corps?
Yes, as long as they are paid within 2.5 months after year end.
What are the limitations on business interest expense? How long can you carryforward the disallowed interest?
If they business made more than 30 million in gross receipts in the prior three years, business interest income, 30% of adjusted taxable income, and floor plan financing.
You can carryforward it indefinitely.
For charitable contributions what is the limitation?
10% of AGI, disallowed amounts are carryforward 5 years, if accrual must be paid within 3.5 months after year end.
10% is calculated before charitable contribution deduction, drd, and any capital loss carryback.
What is the loss for property that is partially destroyed?
The decline in the FMV, or the adjusted basis before the casualty. Then take the lower minus insurance reimbursement.
What is the loss for property that is fully destroyed?
NBV minus any insurance adjustments.
How much can you deduct for business gifts? Business meal?
Up to $25 per gift. 50% deductible to corporation for meals.
If the corporation is the beneficiary of the life insurance policy is that deductible, can they deduct that?
NO, only if employee is beneficary.
Can you deduct sexual harassments cases?
Only if NDA was not signed.
The DRD is the lesser of which two numbers? What is the exception?
50% (65 or 100%) dividends received or;
50% (65% or 100%) of taxable income computed without regard to the DRD, any NOL carryforward, or any capital loss carryback.
The taxable income limitation does not apply if taking the full DRD results in a net operating loss. So if the greater of the two numbers would result in a NOL, then you would want to take that number.
