R3 Flashcards
Domestic Production Deduction
- 9% of the:
- lesser of
1. QPAI (qualified production activity income)
2. taxable income disregarding the QPAI deduction
Are federal payroll taxes deductible?
Yes
General Business Credit
- may not exceed NET INCOME TAX LESS the GREATER of:
1. 25% of regular tax liability above $25,000
2. tentative minimum tax for the year
Organizations not eligible for the dividends received deduction (DRD)
- personal service corporations
- personal holding companies
- (personally taxed) S corporations
(don’t take it personally)
How to calculate ACE for AMT purposes
75% of the difference between AMTI & ACE
Corporate Exemption Amount for AMT
*$40,000 less
25% of AMTI over $150,000
Which tax credit is available to corporations for AMT purposes?
Foreign Tax Credit
**can either be a credit or a deduction, but NOT both
What is the corporate AMT tax rate?
20%
What is the tax rate for accumulated earnings tax?
20%
same as dividends since it is a tax on dividends that should have been paid and taxed
Are property dividends taxable?
- they are taxable to the corporation IF they have appreciated in value
- tax is on the gain amount
- amount realized is GREATER of:
- *FMV or liability given up
Stock Redemption & Income Type
- Proportional –> ?
- Disproportional –> ?
- Proportional = dividend income
2. Disproportional = capital gain/loss
Formula to compute the shareholder basis in stock of newly formed corporation
NBV of property transferred \+ FMV of services provided \+ gain recognized - liability given up (100%) - cash (boot) - FMV of personal property (boot) = basis in stock
How long do corporations have to pay out bonuses or charitable deductions if they have been accrued in order to be deductible on the current year’s return?
2 1/2 months (March 15 for calendar year)
Unrelated Investment = ?%
20%
What effect does tax exempt income have on the basis of an S corporation shareholder?
It increases it, even though it is tax exempt
Return Due Dates (assuming calendar year) for:
- Corporation
- Individual
- Tax Exempt
- *assuming calendar year
1. Corporation: March 15
2. Individual: April 15
3. Tax Exempt: May 15
Can you deduct interest expense that was used to acquire tax-free income?
No
Which two taxes is Personal Holding Company tax reduced by?
- federal income tax
2. net long-term capital gain (net of tax)
How long do corporations have to pay out dividends in order to qualify for a reduction used in calculating the Accumulated Earnings Tax?
*due by the tax due date (usually March 15)
Process for determining the Accumulated Earnings Tax
- Start with beginning E&P
- Subtract out “corporation needs”
- Lifetime Credit ($250,000 for regular corp; $150,000 for service corp)
If there is still more E&P…. - Taxable income before
a. DRD
b. NOL
c. charity deduction
d. capital loss carryover - Deduct all: charity, capital losses, and taxes (including federal)
- Deduct dividends
- Subtract out the remaining credit
- Multiply by 20%
When appreciated property is distributed as a dividend, make sure to add this back into E&P before calculating dividend income.
Taxable gain recognized by corporation
Definition of Personal Holding Company
- 50% ownership by 5 or fewer individuals
- 60% or more of income comes from:
N et rent
I nterest (taxable)
R oyalties
D ividends (unrelated corporation)
Estimated Payments of Corporate Tax for:
- Small Corporations
- Large Corporations
- Small Corporations are required to pay the lesser of
a. 100% of tax for current year
b. 100% of tax for preceding year (unless they owed no tax) - Large Corporations ( >$1 million in any three preceding years):
a. 100% of the tax shown on the current year
Underpayment Penalty for estimated payments of corporate tax
Two Conditions
- estimated payments are not made
- amount owed on the return is $500 or more