R3 Flashcards
When are there no shareholder tax consequences to corporate shareholders upon formation?
80% Control and Boot Not Involved.
What is a Corporation’s basis in property received?
Greater of:
- Adjusted Basis Plus Gain Recognized by SH
- Debt Assumed
What is a shareholder’s basis in corporate stock?
Adjusted Basis of property reduced by any debt on the property assumed by the corporation.
Cash: Amount Contributed.
When is gain recognized in Shareholder formation?
Boot is received.
When must owner employee bonuses be paid? Non owner employees?
Owners: Year bonuses are paid.
Non Owners: Within 2 1/2 Months after YE.
When does a corporation Write Off Bad Debts?
Specific Charge-off method.
What is a corporation’s Charitable contribution limited to?
10% of Adjusted AGI before charity, DRD, Operating Losses, Capital loss carrybacks.
How are Business Casualty Losses deducted?
100% deductible against ordinary losses.
What is a business’ casualty loss limited to?
Lesser of decline in value or adjusted basis.
How are corporate Capital Loss Carryovers treated?
Back 3 Forward 5 and carried over as ST Capital losses.
What is the DRD limited to?
70/80% of Dividends received; or
70/80% of Taxable income pre DRD, NOL, Carrybacks
When does the taxable income limitation on DRD not apply?
If Taking the full DRD deduction, the result is a NOL.
What entities are subject to the DRD deduction?
Personal Service Corporations, Personal Holding Companies, and personally taxed S Corps. Don’t take is personally,
When is a C Corp’s Tax Return Due?
March 15.
When are estimated payments of Corporate Tax Due?
15th Day of Fourth, Sixth, Ninth, and Twelfth Month.
April, June, September, December.
When can an Entity file a consolidate tax return?
80% of Voting power and 80% of value of outstanding stock.
What are the AMTI Tax adjustments that increase or decrease income?
L = Long Term Contracts I = Installment Sale D = Depreciation Adjustments
What are the AMTI Tax adjustments that are add backs?
P = Percentage Depletion P = Private Activity Bonds P = Pre 87 ACRS
What are the Adjusted Current Earnings AMTI items?
M = Muni Interest O = Organizational Expense Amortization L = Life Insurance Proceeds D = Difference between AMT and ACE depreciation D = Dividends received deduction
What is the AMT Formula?
Exemption - 25% excess threshold = Allowed Exemption.
Which entities are subject to the Accumulated Earnings Tax?
C Corps with accumulated earnings > 250K, PSC > 150K. 20% Tax, that are not Personal Holding Corporations.
What is a personal Holding Company?
> 50% Owned by 5 or fewer.
When is a corporate distribution considered to be a capital gain?
When There is no E and P /Basis
Taxation of Corporate Liquidations?
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
What is the purpose of Adjusted Current Earnings?
Ensures corps do not report a profit for financial statement purposes but pay little or no income taxes.
Which Entities cannot claim the DRD?
Don’t Take it Personally:
Personal Holding Companies, Personal Service Corporations, Personally Taxed S corps.
When must the S corp election be made?
March 15.
Which items are included on a K-1?
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.
What S Corp items are not considered to be At Risk Amounts?
Nonrecourse loans.
When are S Corp distributions to shareholders taxable?
Taxed as long-term capital gain when distributions are in excess of basis.
When is an S Corp Terminated?
Holders Consent, Fails to meet eligibility requirements, > 25% passive income for 3 years.
What is the recognized gain?
Lesser of Realized Gain or Boot Received.
What is the amount realized?
Greater of Asset’s FMV or liability assumed by shareholder?
When must accrual basis be used for tax purposes?
Purchase/sales of inventory, Tax Shelters, Sales > 5,000,000.
What is the impact of a property dividend to shareholders and corporations?
Shareholder recognizes income equal to the FMV of Property. Corporation recognizes gain as if FMV was sold less basis.
What income items are used to determine PHCs?
N = Net Rent I = Interest (Taxable) R = Royalties D = Dividends
