R3- C corps & S corps

Question 1

Formation of Corps

Corporation Basis in Assets Rec’d

Answer 1

Basis= greater (Sholder NBV + gain they recog) OR (liabs assumed)

NO g/l on their side

Question 2

Formation of Corps

Shareholder Basis in Stock Rec’d

Answer 2

basis of stock = (CashorFMVprop) - COD + gain recog

no g/l recog if 80%control & NO BOOT recd

if liabs(COD) > basis -> gain of diff bet the 2. Gain but NO boot

Question 3

Distributions of Corps

Shareholder taxable amount

Answer 3

Divs up to E&P amount
RetofCap up to basis
CapGain -> excess

acc&curr positive -> both used for divs
+curr&-acc-> divs up to curr amt
-curr& +acc -> NET & use netted amt
both neg -> NO divs

Question 4

Distributions of Corps

Corporation taxable amount

Answer 4

NOT taxable. E&P decreases
taxable if APPRECIATED prop
– recog gain as if prop sold for FMV
– gain increases E&P

Question 5

Stock redemption

Answer 5

Proportional -> div income
DISproportional -> cap G/L to sholder
— stock must be <50% of company

Question 6

Complete Liquidation

Answer 6

2 option

1) sell assets & give $ to shareholders
- recog gain sale(sp-ab) & sholdrs recog gain if amt recd>basis
2) give assets to sholders
- recog gain on distrib (fmv -ab) and sholders recog if when they sell SP>AB

parent NO g/l when subsid liquidates

Question 7

S Corp Distributions taxability

Answer 7

NONtax up to AAA
div inc up to E&P
RetofCap up to BASIS
excess -> capG

if not E&P then nontax up to basis. excess->cagG

Question 8

S Corp basis calculation

Answer 8

+income items INCL taxfree stuff

• addtil invmts in company
• distribs
• loss/exp items

Question 9

Interest taxability

Answer 9

deductible EXCEPT if incurred to buy taxFREE stuff

Question 10

Charitable Contributions

Answer 10

10% GI limit

BEFORE DRD, NOL & Caploss carrybacks

Question 11

casualty

Answer 11

no floor and no limit
full destruction -> loss =AB
semi destruction -> loss = lesser of decrease of FMV or AB

Question 12

Orgexps &Start Up costs

research costs

Answer 12

5k deduction and the rest atmzd 180 mths
reduced by amount of excess over 50k

research just amtzd over 60 mths

Question 13

life ins prems paid

Answer 13

benef= corp -> NONdecuc but proceeds when dead NOT includible
benef= person -> deduc but proceeds also includible

Question 14

state& city taxes

Answer 14

deductible just federal taxes NOT deduc

Question 15

Cap Loss & NOL

Answer 15

cap loss - 3B &5fwd
NOL- 2B &20 fwd. cant use char cont to calc
- DRD you use the option that CAUSES NOL

Question 16

Inventory

Answer 16

FIFO most common

LIFO ok to use but must also use for gaap

Question 17

Gen Bus Credit

Answer 17

combination of arious
1back 10 fwd
cannot exceed NEt inc tax - greater of (25%excess of tax liab over 25k OR tent min tax)

Question 18

DRD

Answer 18

0-20=70%deduc
20-80= 90%
80-100 = 100%

Lesser of %divs recd OR % taxinc w/o DRD

cant be used by personal stuff (S corp, PHC, PSC)

Question 19

Depreciation MACRS

NOT real estate

Answer 19

MACRS for stuff used in business
5 yrs - computer, ans, copiers, cars
7r- furniture, fixtures, equip
10
15
20

No SV
HALFYEAR convention - during = midpoint
MidQ convention - >40% prop in last Q

Question 20

Depreciation MACRS

REALestate

Answer 20

residential 27.5
NON residential 39

midMONTH convention- HALF moth depr taken when placed and when disposed off

stline

Question 21

179 expense

only depr prop NOT RE

Answer 21

fixed amount allowed to expense instead of depr
up to the cost of the asset
‘12 limits- 125k expense reduced by excess over 500k
‘13 limits - 25k expense reduced by excess over 200

Question 22

S1231
S1245
S1250

Answer 22

S12331 - Gains = CapG (1245 or 1250)
- losses = ordinary

1245= personal prop = ord inc LESSER of AccDepr OR gain recog . (leftover gain if AD used is CapG)

1250 = real prop = ord income of EXCESS depr taken OVER stline. Remaining gain is taxed @25%

Question 23

AMT components

Answer 23

Adjustments-> LIE
preferences -> PPP
ACE adj-> MIND
exemption

rate 20%
carryfwd Forever
when paid -> credit against future ref tax

Question 24

AMT exemption

Answer 24

40k reduced by AMTI exess over 150k

Question 25

ACE adj

Answer 25

75% of diff bet ACE (MIND) & AMTI

Munic (tax exempt income)
Increase in CSV
Nonstline depr
DRD deduc of 70%

Question 26

Acc Earnings Tax

Answer 26

applies to C corps & PSC(PSC normal tax 35%)

C corps - 250k allowed
PSC - 150K allowed

excess taxed at 15%

NOT apply to PHC (own tax), taxexempt, passive foreign invmts

to avoid show REAS NEEDS or need to buy dead person’s stock

Question 27

PHC

Answer 27

owned by 60% income comes from passive income (EXCL nontaxable int)

undistrib income X15% = tax

Undistrib income = tax inc - fed inc tax - net LTcapG

Question 28

S1244 worthless stock & gains when sold

Answer 28

worthless
allowed ordinary loss of 50K single OR 100k MFJ

gains
allowd exclusion of
50% of GREATER (10Xbasisofstock OR !0M)

includible portion taxed at 28%

Question 29

S corps

Answer 29

<100sholders
cant be patnshps or corps
1 class of stock

50% of total stock needed to terminate
ALL needed to elect

if elect before mar15 it applies for this year
if after then it applies next year

Question 30

S corp taxes

Answer 30

NO tax at corp level UNLESS used to be a C corp.
3 possible taxes

1) Lifo Recapture -> include in tax inc excessFIFO over LIFO
2)B.In.G-> FMV >AB of asset contributed at election date.
tax = 35% LESSER (recog BING this yr OR tax inc as if c corp)
3)passive invmt inc- 35% LESSER (NI or Excess passive)
passive cant be more than 25%gross receipts

Question 31

UBI- unrelated business income

Answer 31

must be
unrelated to org purposes
regularly done
business activity

only taxed if >1k

stuff not included: passive income, g/l of stuff not for sale, activs lmtd to tax exempt orgs, income on exch of membership list