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Yaeger REG > Mod 38: Corporate Taxation > Flashcards

Mod 38: Corporate Taxation Flashcards

1
Q

Transfers to a Controlled Corporation (Sec. 351):

Property includes everything but…

A

Services

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2
Q

Control means ownership of…2

A

1 80% of total combined voting power

2 80% each class of nonvoting stock

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3
Q

Transfers to a Controlled Corporation (Sec. 351):

Boot 3 examples

A

1 cash

2 short term notes

3 securities

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4
Q

Transfers to a Controlled Corporation (Sec. 351):

Receipt of boot will cause…2

A

1 Recognition of gain

2 but not loss

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5
Q

Transfers to a Controlled Corporation (Sec. 351):

Shareholder recognizes gain if liabilities assumed by corporation…

A

exceed basis of property transferred by shareholder

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6
Q

Transfers to a Controlled Corporation (Sec. 351):

Shareholder’s basis for stock calculation (3 components)

A

Adjusted basis of property transferred
+ recognized gain
- boot received
= shareholders basis for stock

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7
Q

Transfers to a Controlled Corporation (Sec. 351):

Assumption of liability is always treated as…

A

Boot for determining stack basis

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8
Q

Transfers to a Controlled Corporation (Sec. 351):

Corporation’s basis for property calculation

A

Corporation s basis for property =
Transferor’s adjusted basis
+ gain recognized to transferor

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9
Q

What forms do a C corp and S corp file?

A

C-corp = form 1120

S-corp = form 1120S

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10
Q

Aumptioj of liability by corporation is not recognized as a gain but is…

A

Added to basis of the stock

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11
Q

If you don’t get control (80%) when property is transferred…

A

Gain or loss is recognized

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12
Q

If you transfer property that is less than 80%, basis of property transferred to corporation will…

A

Be FMV

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13
Q

If you transfer property that is 80% or more of transfer to corporation, basis of property will…

A

Equal original basis

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14
Q

If you receive stock for services rendered, you will have taxable income equal to…(equation for taxable income)

A

Taxable income = (FMV of shares at date of distribution) x (# of shares)

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15
Q

Stock received for services rendered, amount included in taxable income will be…

A

Basis of stock

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16
Q

What does AMTI stand for?

A

Alternative minimum taxable income

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17
Q

NOL are a deduction and expense on…

A

Current year corporate return

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18
Q

If large corporation, you can’t base estimated payments on…

2) you must base estimated payments on…

A

Last year’s tax

2) 100% of current year’s tax

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19
Q

Penalties are…

Interest on penalties are…

A

Penalties are not deductible

Interest on penalties are deductible

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20
Q

If corporation’s taxable income is $1 million or more in any of the 3 prior years, they must make estimated payments equal to…

A

100% of current year’s tax liability

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21
Q

Only compute AMT for…2

A

1 C-corp

2 don’t compute AMT for S-corp

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22
Q

AMT:

Preference items added back 2

A

1 tax-exempt interest (except 2009, 2010)

2 excess ACRS depr. Before 1987

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23
Q

AMT:

Adjustments 3

A

1 Real estate MACRS depreciation

2 must use percentage completion method

3 personal property after 1986

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24
Q

AMT:

Adjustment of Real estate MACRS depreciation for property placed into service…

A

After 1986 but before 1999

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25
Q

AMT:

Adjustment of Real estate MACRS depreciation for property placed into service after 1986 and before 1999, must use…

A

1 depreciation over 40 years instead of 27.5 years

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26
Q

AMT:

Adjustment of Real estate MACRS depreciation for property placed into service after 1986 and before 1999. There is no adjustment if…

A

Placed into service after 1999

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27
Q

AMT:

Personal property after 1986 (regular tax uses 200% declining balance) must recompute to use…

A

150% declining balance

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28
Q

What does ACE stand for?

A

Adjusted current earnings

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29
Q

AMT:

Adjusted Current Earnings (ACE), 3 items added

A

1 tax exempt interest of bonds

2 tax exempt life insurance death benefits

3 70% dividend received deduction

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30
Q

AMT:

Adjusted Current Earnings (ACE), municipal bonds/tax exempt interest, what are 2 exceptions?

A

2009 and 2010 interest is not added back

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31
Q

AMT:

2 Other ACE item added

A

1 capitalized organizational expenditures and

2 start up costs

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32
Q

Small corporation exemption from Corp. AMT tax:

Corporation is exempt from corporate AMT in…

A

First tax year

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33
Q

Small corporation exemption from Corp. AMT tax:

Small corp is exempt in second year, if first year’s gross receipts don’t exceed…

A

$5 million

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34
Q

Small corporation exemption from Corp. AMT tax:

Small corp is exempt in third year, if 1st and 2nd year’s gross receipts don’t exceed…

A

$7.5 million

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35
Q

Small corporation exemption from Corp. AMT tax:

Small corp is exempt in 4th year, if 1st, 2nd and 3rd year’s gross receipts don’t exceed…

A

$7.5 million

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36
Q

Adjustment for accelerated depreciation taken on 2013 5-yr. property is the excess of…

A

200% MACRS depreciation over 150% depreciation

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37
Q

Use of percentage completion method of accounting for LT contracts is…

A

An adjustment

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38
Q

If a corporation buys and resells treasury stock it is…

A

Not taxed

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39
Q

Any event where a corporation is transferring its own stock is…

A

Not a taxable event

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40
Q

If you don’t amortize organization expenditures in first year, they…

A

can’t be amortized and remain capitalized

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41
Q

Don’t calculate amortization for organizational expenditures until…

A

Month you begin business

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42
Q

Stock issue cost is not…

A

Not an organization cost

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43
Q

You calculate limited 10% taxable income for charitable contributions before what 3 items?

A

1 contribution deduction

2 dividend received deduction

3) NOL carryback

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44
Q

You calculate limited 10% taxable income for charitable contributions before NOL carryback but after…

A

Carryover

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45
Q

What does DRD stand for?

A

Dividend received deduction

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46
Q

Contributions exceeding 10% limit can be carried forward…

A

5 consecutive years

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47
Q

If you own 80%, what percent of dividends received can you exclude?

A

100% dividends received

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48
Q

If you own 20%-79.99%, what percent of dividends received can you exclude?

A

80% dividends received

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49
Q

If you own less than 20%, what percent of dividends received can you exclude?

A

70% of dividends received

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50
Q

For dividends received deduction to apply, the dividends must be from…

A

Domestic unaffiliated corporation

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51
Q

If dividend received deduction doesn’t create a loss, when there is an operating loss, the reduction would be…

A

80% of taxable income before DRD

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52
Q

Losses are disallowed between corporation and…

A

Related party

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53
Q

Corporation’s capital loss carryback =

A

3 yrs

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54
Q

Corporation’s capital loss carry forward =

A

5 years

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55
Q

Capital loss is always carried back as…

A

Short term

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56
Q

Business bad debt can be deducted against ordinary income if…2

A

1 corporation is on accrual basis

2 debt is uncollectible

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57
Q

Corporate casualty losses are treated the same for individual except there is no…

A

No $100 floor

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58
Q

Corporate casualty losses are treated the same for individual except if property is completely destroyed, the amount of the loss is…

A

The property’s adjusted basis

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59
Q

Corporate casualty losses:

partial loss is measured the same as…

A

For individual’s Nonbusiness loss

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60
Q

Corporate casualty losses:

partial loss is measured the same as for an individual’s Nonbusiness loss which is…2

A

1 Lesser of decrease in FMV or

2 property’s adjusted basis

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61
Q

NOL is carried back how many years? Carried forward?

A

Carried back 2 years

Carried forward 20 years

62
Q

Must carry NOL back if you…

A

Can carry it back

63
Q

When a company with an NOL makes no special election to waive NOL carryback, it means…

A

They will use the carryback

64
Q

3 expenses that can be deducted on form 1120?

A

1 MACRS depreciation

2 sec. 179 depreciation

3 amortization of organization costs

65
Q

R+D costs can be treated 3 ways

A

1 currently expensed in year paid or incurred

2 amortized over 60 months

3 capitalized + depreciated over determinable life

66
Q

R+D costs can be amortized over 60 months or…

A

More if life not determinable

67
Q

If corporation takes out life insurance policy on key person, if the beneficiary is the corporation then…

A

Corporation can’t deduct the premiums

68
Q

If corporation takes out life insurance policy on key person, if the beneficiary is not the corporation then…

A

Corporation can deduct the premiums

69
Q

Estate franchise tax occurs if you pay…

A

Estate corporate tax

70
Q

If you pay estate franchise tax on federal return you can…

A

Deduct amounts for state franchise tax

71
Q

On schedule M-1, you reconcile book income with taxable income before…2

A

1 NOL deduction and

2 dividend received deduction

72
Q

To file schedule M-1, the corporation must have…

A

Less than $10 million in total assets

73
Q

Provision for state income tax is deductible on…2

A

1 Book income and taxable income

2 so don’t add or subtract

74
Q

Interest expense on bank loan to purchase US Treasury Bonds is considered…

A

Investment interest expense

75
Q

Interest expense on bank loan to purchase US Treasury Bonds is considered investment interest expense, it is…

A

Deductible on books and from taxable income

76
Q

Corporation’s can deduct investment income expense…

A

Whether they have investment income or not

77
Q

2 items that are deductible on the books, but not deductible on the tax return?

A

1 federal income tax

2 net long term capital loss

78
Q

Life insurance proceeds from death of corporate officer are…

A

Not deductible on federal tax return

79
Q

When determining net income per books, items not deductible on federal tax return are…

A

Added back in determining net income per books

80
Q

Schedule M-2, related to…

A

Balance of retained earnings available for books

81
Q

Transfers to a Controlled Corporation (Sec. 351):

No gain or loss is recognized if property is transferred to corporation…

2) and immediately after exchange those persons transferring property…

A

solely in exchange for stock

2) control corporation

82
Q

Affiliated group 2

A

1 parent owns at least 80% of combined voting power

2 total value of all stock owned by includible corporation

83
Q

2 other names for dividends

A

1 current distributions

2 nonliquidating distributions

84
Q

Total liquidation, what occurs?2

A

1 sub sells stock back to parent company and

2 is totally liquidated

85
Q

When a corporation distributes appreciated property to shareholder, order of 3 ways the distribution is treated?

A

1 dividend income

2 return of basis

3 capital gain

86
Q

If liability is assumed by stockholder it…

A

Reduces the amount of distribution

87
Q

No loss can be recognized on…

A

Nonliquidating distribution to shareholders

88
Q

If liability distribution by corporation exceeds basis of property, it is…

A

Recognized as gain to corporation

89
Q

Net accumulated earnings are negative, a distribution of cash is…2

A

1 A return of basis

2 doesn’t effect acc. E+P

90
Q

It FMV of property distributed exceeds basis, that becomes…

A

Current E+P

91
Q

In a complete liquidation, if the stockholder assumes debt, the debt is… Show equation

A

FMV property distr. - FMV

92
Q

Basis of property to stockholder is always its FMV ignoring the…

A

Liability

93
Q

In a total liquidation a corporation can recognize…

A

A gain as well as a loss

94
Q

When current E+P isn’t positive, you should…

A

Net them

95
Q

When net of Acc. E+P and current E+P are negative, the distribution is…

A

Reduction in stock basis

96
Q

Stock redemption 2 conditions

A

1 all stock is redeemed

2 redemption from individual shareholder

97
Q

When Stock redemption is from individual shareholder, it is a…

A

Partial liquidation

98
Q

Stock redemption:

A distribution is a stock redemption when used to…

A

Pay death taxes

99
Q

Stock redemption:

When all stock is redeemed or redemption is from individual shareholder it is treated as…

A

Capital gain or loss

100
Q

Interest on borrowings used to repurchase stock are…

A

Deductible

101
Q

Legal and account fees in connection with repurchase of stock are…

A

Not deductible

102
Q

In liquidation of subsidiary, subsidiary is selling its stock…

A

Back to parent company

103
Q

No gain or loss is recognized to parent corporation under sec, 332 on receipt of property in complete liquidation of…

A

80% or more owned subsidiary

104
Q

No gain or loss is recognized to a subsidiary corporation on the distribution of property to its parent if…

A

Sec. 332 applies to parent corporation

105
Q

Company is considered a personal holding company if…

A

Over 60% of income is portfolio or passive income

106
Q

What does PHC stand for?

A

Personal holding company

107
Q

Personal holding companies are subject to…

A

Penalty tax on undistributed PHC income

108
Q

2 tests for personal holding company

A

1 stockholder test

2 income test

109
Q

Consent dividends reduce…

A

Adjusted taxable income

110
Q

Tax exempt interest earned is not considered income for personal holding company because it is…

A

Non taxable

111
Q

One requirement for personal holding company is that 5 or fewer stockholder’s own…

A

Over 50% of company

112
Q

Investment company

A

All of its business is to buy and sell investments

113
Q

What does AET stand for?

A

Accumulated earnings tax

114
Q

Accumulated earnings tax (AET) is assessed by…

A

IRS (not self assessed)

115
Q

Accumulated earnings credit for manufacturing company?

Personal service corporation?

A

1 manufacturing company = $250,000

2 personal service corporation = $150,000

116
Q

Acc. Earnings credit is a lifetime minimum credit

A

Once used up you don’t get it again

117
Q

Net capital loss for current year is allowed as deduction to calculate…

A

Accumulated earnings tax

118
Q

Accumulated earnings credit is the greater of…2

A

1 reasonable business needs or

2 remaining minimum deduction

119
Q

S-corp, how many classes of stock does it have?

A

1

120
Q

4797 gain

A

Depreciation is recaptured as ordinary income

121
Q

4797 gain goes on…

A

Line 4 of 1120S

122
Q

Foreign taxes paid of an S-Corp is…

A

Not deductible to arrive at ordinary income

123
Q

S-Corporation’s:

For both Ordinary loss and capital loss, amount of loss deducted is limited to…

A

Basis in S-Corp stock

124
Q

A loss on an S-corp can…

A

Be carried forward indefinitely

125
Q

Fringe benefits paid to an over 2% shareholder of an S-corp are…2

A

1 taxable to shareholder

2 deductible to S-Corp

126
Q

Family coverage under the health insurance plan for an S-corp is…

A

Taxable to 2% shareholder in full

127
Q

S-election can be revoked voluntarily with over 50% of stock, it doesn’t matter if…

A

Stock is voting or nonvoting

128
Q

How long must a terminated S-corp wait to become an S-corp again?

A

5 years

129
Q

An S-corp is not permitted to deduct for…

A

Charitable contribution

130
Q

What does AAA stand for?

A

Accumulated adjusted account

131
Q

Ordinary income + losses go…

A

Into AAA

132
Q

Accumulated Adj. Account

Order of Distribution 4

A

1 distribution out of AAA
2 E+P
3 return of stock basis
4 capital gain

133
Q

Accumulated Adjustment Account (AAA):

Distribution out of AAA is…

A

Non taxable

134
Q

Accumulated Adjustment Account (AAA):

E+P was from…

2) how is it treated?

A

Previous C-corp

2) taxed as dividend income

135
Q

Accumulated Adjustment Account (AAA):

Distributions of E+P do not…

A

Do not reduce stock basis

136
Q

If transfer of assets from C-corp to S-corp, you have to…

A

Recognize built in gain

137
Q

Built in gain of S-corp. is compared to…

A

Taxable income as if corp was C-corp

138
Q

If you have built in gain or taxable income, you should…

A

Take lesser of built in gain or taxable income

139
Q

Untaxed built in gain is…2

A

1 suspended and

2 taxed 1 year later

140
Q

Whichever is less, taxable income or LT capital gain untaxed in previous year is multiplied by…

A

35%

141
Q

Corporate reorganization so generally result in…

A

Non-recognition treatment

142
Q

Corporate reorganization:

Type B

A

Acquiring 80% of stock

143
Q

Corporate reorganization:

Type C

A

Use voting stock to acquire all target’s property

144
Q

Corporate reorganization:

Type A

A

Statutory merger

145
Q

Statutory merger

A

2 corps combine to form new corp

146
Q

Corporate reorganization:

Type D, 2

A

1 transfer by corp to another corp/shareholders

2 after corp has control

147
Q

Corporate reorganization:

Type E, define

A

Recapitalization to change capital structure of single corp

148
Q

Recapitalization to change capital structure of single corp, example

A

Bond holders exchange old bonds for new bonds

149
Q

Corporate reorganization:

Type F

A

Change of identity, form or place of organization

150
Q

Corporate reorganization:

Type G

A

Transfer of assets by insolvent corp, where creditors become
owners

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