R3: C & S Corp Taxation & Exempt Organizations

Question 1

QPAI Definition and Deduction

Answer 1

“Qualified Production Activities Income” Deduction is equal to the lesser of QPAI or taxable income. QPAI = domestic production or taxable receipts less COGS and allocated overhead (if any)

Question 2

NOL Rules for corporations

Answer 2

Carryback 2 years, forward 20 years. 2/20 - do not take deduction for charitable contributions but DO take the dividends received deduction when calculating.

Question 3

How are corporate dividends taxed?

Answer 3

1 - Dividends (taxable) to the extent of current earnings and profits
2 - THEN dividends (taxable) to extend of accumulated earnings and profits
3 - THEN to extent of any related gains (in the case of property dividends)
4 - THEN return of capital (nontaxable)

Question 4

Corporation capital losses

Answer 4

Are not deductible in excess of capital gains.

Question 5

Unrelated business income:

Answer 5

1 - Derived from an activity that constitutes a trade or business
2 - is regularly carried on
3 - is not substantially related to the organizations tax-exempt purpose.

Question 6

Property dividends

Answer 6

Gain is recognized by corporation on property dividends to the extent of FMV in excess of NBV

Question 7

Corporations basis in contributed land

Answer 7

Adjusted basis of taxpayer contributing plus any amounts paid to secure the land. (i.e. cash in excess)

Question 8

Percentage of “control” for a tax-free incorporation

Answer 8

80%