R3 Flashcards
The basis of property in a corporation is the
greater of: Adjusted basis (NBV) or debt assumed by corporation
When is no gain or loss recognized for the shareholder when he gives property?
When there is at least 80% control and there is no boot involved
Formula for basis of common stock to shareholder of property given
Asset NBV - Liability = Stock Basis
What is the domestic production deduction
9% deduction of the lesser of: qualified production activities income or taxable income
What is the charitable contribution limitation for corporations?
10% of adjusted taxable income
Difference for business losses or casualty losses related to business and individual casualty losses
In business casualty there is no $100 reduction and no 10% of AGI reduction
What is the calculation for Organizational Expenditures and Start-up Costs?
$5,000 + Excess 15 years (amortized over 180 months)
What are the included costs for organizational expenditures and start-up costs?
Legal services, accounting services, and fees paid to the state of incorporation
What are excluded costs for organizational expenditures and start-up costs?
costs of issuing and selling the stock, commissions, underwriter’s fees, and costs incurred in the transfer of assets to a corporation
What is the tax rule for goodwill? And what is the GAAP Rule?
Tax Rule- Amortized on a straight-line basis over 15 years
GAAP Rule– Not amortized; test for impairment
Business gifts maximum deduction is
$25 per person per year
What taxes are tax deductible?
state income, city income, and federal payroll (not federal income taxes)
What is the general business credit formula?
the credit may not exceed “net income tax” less the greater of: 25% of regular tax liability over $25,000 or “tentative minimum tax” for the year
Dividend Received Deduction percentages
0 to 20% = 70% deduction
20 to 80% = 80% deduction
80% or more = 100% deduction
For what entities does the DRD not apply?
Personal Service corporations, Personal holding companies, (Personally taxed) S Corporations
PPP
DRD “don’t take it personally”
When is accrual basis of accounting required for tax purposes?
For the accounting for purchases and sales of inventory
Tax shelters
Certain farming corporations
and when business has greater than $5 million of average annual gross receipts for the three-year period ending with the tax year
What are small corps required to pay for estimated payments of tax?
lesser of 100% of the tax shown on the return for the current year or
100% of the tax shown on the return for the preceding year? (cannot be used if the corp owed no tax for the preceding year)
What are large corps required to pay for estimated payments of tax?
large corp = 1,000,000 or more in any of its three preceding tax years must) must pay 100% of the tax as shown on the current year return
What are affiliated groups and what can they do?
This means that the parent directly owns 80% or more of the voting power and the value of all outstanding stock of each corporation. and this means they can file a consolidated tax return
What are brother-sister corps and can they file a consolidated return?
When an individual owns 80% or more of stock of two or more corps and no they cannot
What are adjustments for AMT for corps?
Items the taxpayer will either add back or subtract from regular taxable income
LID
Long-Term Contracts, Installment Sales–Dealer, and Depreciation Adjustments
What are preferences for AMT for corps?
Items that are typically not taxed for regular tax purposes, but are added back for AMT purposes
PPP
Percentage Depletion, Private Activity Bonds, Pre-1987 ACRS Depreciation
What are the adjustments for adjusted current earnings (ACE)?
MOLDD
Municipal bond interest = Added back
organizational expense amortization = added back
Life insurance proceeds on key employee = added back
difference between AMT depreciation and ACE depreciation (If AMT > ACE the difference is added back)
70% drd is added back
The minimum tax credit (MTC) can be carried forward how many years? and what does it offset? can it be carried back?
Forever and it offsets regular taxable income, no it cannot be carried back
What is the tax rate for the alternative minimum taxable income (AMTI)?
20%
What is the exemption amount for AMT?
$40,000 less 25% of AMTI in excess of $150,000
When does the accumulated earnings tax apply and what percentage is it?
When C corps have earnings over $250,000 and improperly retain instead of distribute as dividends. Tax rate is 20%
Personal Holding Company definition
corporations more than 50% owned by 5 or fewer individuals and having 60% of adjusted ordinary gross income consisting of: NIRD Net rent Interst that is taxable Royalties Dividends
What is the addition tax for PHC’s?
20% on net income not distributed
How much is the minimum accumulated earnings credit?
$250,000
Is 1244 loss ordinary or capital?
Ordinary
What is gain realized?
FMV - shareholder’s basis of property
What is Gain recognized?
If there is realized gain and boot (e.g, cash) received, gain may be recognized but only to the extent of the boot. If there is no boot, there is no gain.
What is basis on balance sheet in property contributed?
Financials use fair market value
What is basis for tax purposes in property contributed?
No tax on transfer means use Net book value [PLUS cash paid for the asset)
