R3- Taxation of a C Corporation Flashcards
What is the filing requirement for C Corp?
- March 15
- if YE 12/31
What form to file for extension of return for a Corp?
Form 7004
6 month extension
Who is required to follow accrual basis of accounting?
Accounting for purchases, sales and inventory
Tax shelters
Certain farming corporation
C Corporations
Trusts with unrelated trade or business income
Partnerships with C Corp as a partner with more than 5 millions gross receipts
What are the statute of limitations for corporations?
same as individuals
3 yrs
6 yrs if 25% misstatement
When is corporation required to pay estimated taxes?
- 15th of 4th month,6th month, 9th month and 12th month of the yr
- 1/4th is due with each payment
- unequal qtrly payments may be made using the annualized income method
- underpayment penalty if 500 or more
What are the estimated payments requirement for Small Corporations?
a. 100% of tax shown on the current year return
or
b. 100% of tax shown on the preceding year return
if no return previous year, cannot used b
What are the estimated payments requirement for Large Corporations?
100% of the current year tax return
What is consolidated Returns?
A group of affiliated companies may elect to be taxed as a single unit
- to eliminated intercompany gains and losses
What are the requirements for consolidated returns?
All Corporations must be-
i. members of an affiliated group at some time during the year
ii. each member must file a consent
What is Affiliated Group?
means that a common parent directly owns-
- 80% or more of the voting power of all outstanding stock
- 80% or more of all the value of all outstanding stock of each corporation
Consolidation rules for GAAP and TAx?
GAAP =50% Ownership
TAx= 80-100% Ownership
What are the rules for Corp Taxation?
Regular taxable Income
Adjust for a LIE
Add back Preferences PPP
MIND=ACE Adjusted Current Earnings
What are the adjustment for corp taxation?
Adjust for a LIE
L=Long term Contracts
I=Installment sale dealer
E=Excess Depreciation post 1986
What are the preferences addback for Corp Taxation?
PPP
P=Percentage Depletion
P=Private activity - Tax Exempt interest income
P=Pre 87’ ACRS Depreciation
What is ACE?
MIND= ACE
Adjusted Current Earnings
What is Long Term Contracts Adjustement in LIE? Explain
LIE=Adjustments
Long Term Contracts- calculate the difference between revenue calculated under the completed contract method and revenue calculated under percentage completion method
What is Installment Sale Adjustment? Explain
An adjustment is calculated for the difference between full accrual revenue and installment sales revenue
What is Excess of Depreciation of tangible property placed in service after 1986? for LIE
a. Straight line for real property using a 40 yr life
OR
b. 150% declining balance for personal property using the applicable class life
What is ACE Adjusted Current Earnings?
M=Municipal Bond interest
I=Increase Life Insurance CSV
N=NOn-Straight Line depreciation after 1989 vs ADS
D=Dividend REc’d Deduction
What is the exemption amount for corp AMTI?
$40,000
Less: 25% of AMTI in excess of $150,000
=Exemption amount
What is the rate of AMT for Corp?
20%
What are the credits available to a Corp?
Foreign tax Credit
What is the Minimum TAx Credit?
- Credit against future regular tax
2. Carryforward indefinitely, not carryback
What is Accumulated Earning tax?
- is a tax imposed on C Corps
- whose accumulated earning are in excess of 250,000
- if improperly retained
- instead of being distributed as dividends to SHs
- is not a self assessed tax, it is IRS Assessed
What are the limitations for accumulated earnings?
C Corp- 250,000 of lifetime earnings
Personal Service Corporation- 150,000 of earnings
No Accumulated earnings tax on- personal holding companies, tax-exempt corporations or passive foreign investment corporations
What is the rate of Accumulated Earnings tax?
Flat 15%
What should one do to avoid Accumulated Earnings tax?
give valid excuses
a. demonstrate specific, definite and feasible plan for use of accumulated profits
b. a need to redeem the corp stock in a deceased SH gross estate
What is a Personal Holding Company?
Corporations which are 50% owned
by 5 or fewer individuals
either directly or indirectly
at any time during the last half of the yr
and having 60% of adjusted original gross income
consisting of- NIRD
N-Net Rent
I-Interest that is taxable( non-taxable is excluded)
R-Royalties
D-Dividends from an unrelated Corp i.e. 20% ownership
Personal Holding Companies have additional taxes
-Additional 15% of net income, not distributed
-Taxable income has to be reduced by federal income taxes and net long term capital gain
-PHCs are not subject to accumulated earnings tax
-tax is self assessed
by filing Schedule 1120PH with Form 1120
What are Personal Service Corporations?
- is involved in accounting, law, consulting, engineering, architecture, health
- PSCs ar denied the right to use the graduated corporate rate
- they pay flat 35%
