r4

Question 1

S Corp

Answer 1

• Classified as a corporation but taxed as a partnership
• maximum of 100 SH
• ## Non resident alients, corporations, foreign trusts May not be shareholders

Question 2

Corporation ( Method of accounting)

Answer 2

Corporation(other than a qualified PSC) must used accrual based accounting if its average receipts for the previous three years exceed $5m.

Question 3

Gross income includes

Answer 3

• Gross receipts or sales, rental income collected in advance, non- refundable rent deposits, lease cancellation payments, royalties collected in advance

Question 4

Gross income exclusions

Answer 4

• Interest income from municipal bonds ( cuz they want you to invest in state and local governements)
• Proceeds from life insurance paid on an officer f the corporation. Premiums on this life insurance are not deductible either

Question 5

Income inclusions and deductibility

Answer 5

If you cant deduct , you don’t include in income

Question 6

conditions for bad debt deduction

Answer 6

• accrual basis TP
• Income has to be recorded
• must use direct write off method

Question 7

Taxes that can be deducted by a corp

Answer 7

• state and local income tax
• Employer portion of payroll tax
• real estate tax

Question 8

Taxes that Cannot be deducted-

Answer 8

Federal income tax

Question 9

organizational costs- limits

Answer 9

• limited to 5k
• Amortize remaining over 15 years/ 180 months
• Org cost deduction reduced dollar for dollar for any amount above $50k.
• 55K org cost, cannot deduct anything, except amortize

Question 10

Org cost examples

Answer 10

• attorney fees to draft articles of inco,bylaws,state incur fees etc

Question 11

Org cost exclusions

Answer 11

• syndication fees - cost of issues or selling stock or securities such as professional fees , commissions and printing costs. capitalized into cost of stock

Question 12

Startup costs have the same limits as org costs

Answer 12

same

Question 13

start up costs

Answer 13

• Startup costs occur after org costs but before you start business

Question 14

Start up costs examples

Answer 14

• advertising and promotion related to opening of business
• employee training costs
• Insurance, license and permit fees
• Market analysis etc

Question 15

Other deductible business expenses

Answer 15

• Business travel is 100% deductible
• meals and travel 50%
• Business gifts- $25 per receipient plus wrapping, taxes and shipping

Question 16

Other deductible business expenses

Answer 16

• Executive compensation uptp $1m unless based on performance
• Casualty losses are fully deductible
• MACRS Depreciation

Question 17

non-deductible business expenses

Answer 17

• Bribes and kickbacks
• Premiums on key person life insurance policy
• Fines and penalties

Question 18

M-1

Answer 18

• Part of corp tax return
• reconciles book income to tax income
• anything that reduces book income but not tax income is added back
• there are also expenses that are deducted on that tax return and not on books. Like 179 depreciation, tax depreciation greater than book depreciation
• required

Question 19

M2

Answer 19

• Retaining earnings roll that ties to the financial statement
• required

Question 20

M3

Answer 20

corp assets of $10m or more, with additional details, breaking into perm and temp differences, pulling out foreign income