R3

Question 1

When are there no shareholder tax consequences to corporate shareholders upon formation?

Answer 1

80% Control and Boot Not Involved.

Question 2

What is a Corporation’s basis in property received?

Answer 2

Greater of:

• Adjusted Basis Plus Gain Recognized by SH
• Debt Assumed

Question 3

What is a shareholder’s basis in corporate stock?

Answer 3

Adjusted Basis of property reduced by any debt on the property assumed by the corporation.
Cash: Amount Contributed.

Question 4

When is gain recognized in Shareholder formation?

Answer 4

Boot is received.

Question 5

When must owner employee bonuses be paid? Non owner employees?

Answer 5

Owners: Year bonuses are paid.

Non Owners: Within 2 1/2 Months after YE.

Question 6

When does a corporation Write Off Bad Debts?

Answer 6

Specific Charge-off method.

Question 7

What is a corporation’s Charitable contribution limited to?

Answer 7

10% of Adjusted AGI before charity, DRD, Operating Losses, Capital loss carrybacks.

Question 8

How are Business Casualty Losses deducted?

Answer 8

100% deductible against ordinary losses.

Question 9

What is a business’ casualty loss limited to?

Answer 9

Lesser of decline in value or adjusted basis.

Question 10

How are corporate Capital Loss Carryovers treated?

Answer 10

Back 3 Forward 5 and carried over as ST Capital losses.

Question 11

What is the DRD limited to?

Answer 11

70/80% of Dividends received; or

70/80% of Taxable income pre DRD, NOL, Carrybacks

Question 12

When does the taxable income limitation on DRD not apply?

Answer 12

If Taking the full DRD deduction, the result is a NOL.

Question 13

What entities are subject to the DRD deduction?

Answer 13

Personal Service Corporations, Personal Holding Companies, and personally taxed S Corps. Don’t take is personally,

Question 14

When is a C Corp’s Tax Return Due?

Answer 14

March 15.

Question 15

When are estimated payments of Corporate Tax Due?

Answer 15

15th Day of Fourth, Sixth, Ninth, and Twelfth Month.

April, June, September, December.

Question 16

When can an Entity file a consolidate tax return?

Answer 16

80% of Voting power and 80% of value of outstanding stock.

Question 17

What are the AMTI Tax adjustments that increase or decrease income?

Answer 17

L = Long Term Contracts
I = Installment Sale
D = Depreciation Adjustments

Question 18

What are the AMTI Tax adjustments that are add backs?

Answer 18

P = Percentage Depletion
P = Private Activity Bonds
P = Pre 87 ACRS

Question 19

What are the Adjusted Current Earnings AMTI items?

Answer 19

M = Muni Interest
O = Organizational Expense Amortization
L = Life Insurance Proceeds
D = Difference between AMT and ACE depreciation
D = Dividends received deduction

Question 20

What is the AMT Formula?

Answer 20

Exemption - 25% excess threshold = Allowed Exemption.

Question 21

Which entities are subject to the Accumulated Earnings Tax?

Answer 21

C Corps with accumulated earnings > 250K, PSC > 150K. 20% Tax, that are not Personal Holding Corporations.

Question 22

What is a personal Holding Company?

Answer 22

> 50% Owned by 5 or fewer.

Question 23

When is a corporate distribution considered to be a capital gain?

Answer 23

When There is no E and P /Basis

Question 24

Taxation of Corporate Liquidations?

Answer 24

Results in double taxation.
Sells assets for cash or Distributes assets to Shareholders:
FMV Less Stock Basis = Taxable G/L
Corp = FMV less basis in property

Question 25

What is the purpose of Adjusted Current Earnings?

Answer 25

Ensures corps do not report a profit for financial statement purposes but pay little or no income taxes.

Question 26

Which Entities cannot claim the DRD?

Answer 26

Don’t Take it Personally:

Personal Holding Companies, Personal Service Corporations, Personally Taxed S corps.

Question 27

When must the S corp election be made?

Answer 27

March 15.

Question 28

Which items are included on a K-1?

Answer 28

Ordinary Income, Real Estate Income, Rental income Interest Income, Dividends, Royalties, Capital gains, Collectibles gain, unrecaptured 1250, 1231 gain, other income, 179 deduction, credits, foreign transactions.

Question 29

What S Corp items are not considered to be At Risk Amounts?

Answer 29

Nonrecourse loans.

Question 30

When are S Corp distributions to shareholders taxable?

Answer 30

Taxed as long-term capital gain when distributions are in excess of basis.

Question 31

When is an S Corp Terminated?

Answer 31

Holders Consent, Fails to meet eligibility requirements, > 25% passive income for 3 years.

Question 32

What is the recognized gain?

Answer 32

Lesser of Realized Gain or Boot Received.

Question 33

What is the amount realized?

Answer 33

Greater of Asset’s FMV or liability assumed by shareholder?

Question 34

When must accrual basis be used for tax purposes?

Answer 34

Purchase/sales of inventory, Tax Shelters, Sales > 5,000,000.

Question 35

What is the impact of a property dividend to shareholders and corporations?

Answer 35

Shareholder recognizes income equal to the FMV of Property. Corporation recognizes gain as if FMV was sold less basis.

Question 36

What income items are used to determine PHCs?

Answer 36

N = Net Rent
I = Interest (Taxable)
R = Royalties
D = Dividends