R3

Question 1

The basis of property in a corporation is the

Answer 1

greater of: Adjusted basis (NBV) or debt assumed by corporation

Question 2

When is no gain or loss recognized for the shareholder when he gives property?

Answer 2

When there is at least 80% control and there is no boot involved

Question 3

Formula for basis of common stock to shareholder of property given

Answer 3

Asset NBV - Liability = Stock Basis

Question 4

What is the domestic production deduction

Answer 4

9% deduction of the lesser of: qualified production activities income or taxable income

Question 5

What is the charitable contribution limitation for corporations?

Answer 5

10% of adjusted taxable income

Question 6

Difference for business losses or casualty losses related to business and individual casualty losses

Answer 6

In business casualty there is no $100 reduction and no 10% of AGI reduction

Question 7

What is the calculation for Organizational Expenditures and Start-up Costs?

Answer 7

$5,000 + Excess 15 years (amortized over 180 months)

Question 8

What are the included costs for organizational expenditures and start-up costs?

Answer 8

Legal services, accounting services, and fees paid to the state of incorporation

Question 9

What are excluded costs for organizational expenditures and start-up costs?

Answer 9

costs of issuing and selling the stock, commissions, underwriter’s fees, and costs incurred in the transfer of assets to a corporation

Question 10

What is the tax rule for goodwill? And what is the GAAP Rule?

Answer 10

Tax Rule- Amortized on a straight-line basis over 15 years

GAAP Rule– Not amortized; test for impairment

Question 11

Business gifts maximum deduction is

Answer 11

$25 per person per year

Question 12

What taxes are tax deductible?

Answer 12

state income, city income, and federal payroll (not federal income taxes)

Question 13

What is the general business credit formula?

Answer 13

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

Question 14

Dividend Received Deduction percentages

Answer 14

0 to 20% = 70% deduction
20 to 80% = 80% deduction
80% or more = 100% deduction

Question 15

For what entities does the DRD not apply?

Answer 15

Personal Service corporations, Personal holding companies, (Personally taxed) S Corporations
PPP
DRD “don’t take it personally”

Question 16

When is accrual basis of accounting required for tax purposes?

Answer 16

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

Question 17

What are small corps required to pay for estimated payments of tax?

Answer 17

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)

Question 18

What are large corps required to pay for estimated payments of tax?

Answer 18

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

Question 19

What are affiliated groups and what can they do?

Answer 19

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

Question 20

What are brother-sister corps and can they file a consolidated return?

Answer 20

When an individual owns 80% or more of stock of two or more corps and no they cannot

Question 21

What are adjustments for AMT for corps?

Answer 21

Items the taxpayer will either add back or subtract from regular taxable income
LID
Long-Term Contracts, Installment Sales–Dealer, and Depreciation Adjustments

Question 22

What are preferences for AMT for corps?

Answer 22

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

Question 23

What are the adjustments for adjusted current earnings (ACE)?

Answer 23

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

Question 24

The minimum tax credit (MTC) can be carried forward how many years? and what does it offset? can it be carried back?

Answer 24

Forever and it offsets regular taxable income, no it cannot be carried back

Question 25

What is the tax rate for the alternative minimum taxable income (AMTI)?

Answer 25

20%

Question 26

What is the exemption amount for AMT?

Answer 26

$40,000 less 25% of AMTI in excess of $150,000

Question 27

When does the accumulated earnings tax apply and what percentage is it?

Answer 27

When C corps have earnings over $250,000 and improperly retain instead of distribute as dividends. Tax rate is 20%

Question 28

Personal Holding Company definition

Answer 28

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

Question 29

What is the addition tax for PHC’s?

Answer 29

20% on net income not distributed

Question 30

How much is the minimum accumulated earnings credit?

Answer 30

$250,000

Question 31

Is 1244 loss ordinary or capital?

Answer 31

Ordinary

Question 32

What is gain realized?

Answer 32

FMV - shareholder’s basis of property

Question 33

What is Gain recognized?

Answer 33

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.

Question 34

What is basis on balance sheet in property contributed?

Answer 34

Financials use fair market value

Question 35

What is basis for tax purposes in property contributed?

Answer 35

No tax on transfer means use Net book value [PLUS cash paid for the asset)