R3 - C Corporations Flashcards
What is the corporation’s basis in an asset the greater of?
Shareholder NBV and liability assumed
What is the percentage used for the domestic production deduction?
9%
What items are includable in start-up costs? Not includable?
Includable are legal, accounting, state fees and not includable are stock fees (commissions/underwriter) and asset transfer costs
What amount of start-up costs may be immediately deducted?
$5,000 and the rest amortized over 15 years
If a building is partially destroyed, what is the treatment?
Lesser of:
a) decline in FMV
b) adjusted basis of property immediately before casualty
Fully destroyed = adjusted basis
What is the tax treatment for intangibles?
Amortized over 15 years
What is the maximum amount of business gifts that may be deducted per person per year?
$25 per recipient per year
T/F: Bribes to officials are tax deductible
False; bribes, kickbacks, fines, penalties and other illegal payments are not deductible
What is the capital loss carryback/forward rules for corporations?
Back 3 years and forward 5
What is the NOL carryback/forward rules for corporations?
Back 2 and forward 20
What percentages of deduction are used for the dividends received deduction?
Ownership % = dividends received deduction %
> 20% = 70%
20 - 80% = 80%
< 80% = 100%
What types of entities are not eligible for the dividends received deduction?
“Don’t take it personally”
Personal service corporations
Personal holding companies
(Personally taxes) S corporations
What amount is used in calculating the dividends received deduction?
Lesser (usually) of:
Dividends received x deduction %
Taxable income x deduction %
Unless you’re a loser, then its the bigger one (if it will create a NOL)
When is an 1120 due?
March 15 (for a December 31 year-end)
When are corporate tax estimates due?
April 15, June 15, September 15, December 15 (for a December 31 year-end)
What amount must a small corporation pay in estimated tax?
100% of PY tax (unless 0 or less than full year) or 100% of CY tax
What is the definition of a large corporation and what amount must they pay in estimated tax?
A coroporation with over $1m of taxable income and they must pay 100% of CY tax
Which long-term contract method must be used for corporate AMT?
The percentage-of-completion method must be used for corporate AMT
What is the exemption amount for AMT for corporations? Is it phased out?
The AMT exemption for a corporation is $40,000 and is phased out as 25% of the excess over $40,000 (thus being completely phased out at $310,000)
What is the only tax credit available for corporate AMT?
Foreign tax credit (“it’s foreign to me”)
How long may the minimum tax credit (MTC) be carried forward?
Indefinitely forward, but never back
What items of adjusted ordinary gross income are included to determine if the 60% threshold has been met to qualify a corporation as a personal holding company?
NIRD Net rents Interest income (taxable) Royalties Dividends
What are the two ways to liquidate a corporation?
Sell assets and distribute cash (both subject to tax) OR distribute assets (also both subject to tax)
T/F: Long-term capital losses can offset short-term capital gains in a corporation
True
T/F: A corporation’s capital loss carryback or carryover is always treated as a short-term capital loss
True
T/F: When Section 1244 stock becomes worthless, the loss to the second shareholder is treated as an ordinary loss
False; it is only the original owner and the limit is $100,000 (MFJ), $50,000 for Single
In running an illegal business, what is the only deduction allowable?
Cost of merchandise (COGS)
T/F: Rents received in advance are allocated as income to the period in which they apply
False; they are included in income when received
T/F: Charitable contribution limits (10%) are deducted prior to recognizing the dividends received deduction
True; also NOL carrybacks, capital loss carrybacks and DPAD
When real value of an estimated amount is made known in a subsequent year, what is done with the difference?
It is included in the current year return
T/F: The imposition of the accumulated earnings tax does not depend on the number of shareholders a corporation has
True
T/F: When property is contributed to form a corporation, it is contributed at its FMV, not at its adjusted basis
False; it is contributed at its adjusted basis, not FMV
T/F: Formation of a corporation by contributing property (or cash) is a nontaxable transaction, even if the FMV of the contributed property is greater than its adjusted basis
True
What are the qualifications for a corporation to be considered a personal holding company?
Five or fewer shareholders own 50%+
60% or more of the income is investment income (NIRD)
What is the usual result to the shareholders of a distribution in complete liquidation of a corporation?
A capital gain or loss
How much is the lifetime accumulated earnings credit?
$250,000
T/F: Total taxable income is calculated before the deduction of any charitable contributions, the dividends received deduction, any net operating loss carryback, or any capital loss carryback
True
What is the order of E&P distributions?
Current then accumulated
If there are more than one distribution in the current year, how is the percentage of current vs. accumulated E&P calculated?
% of distribution to total x current
and the remainder will be from accumulated (until depleted)
