r4 Flashcards
S Corp
- Classified as a corporation but taxed as a partnership
- maximum of 100 SH
- ## Non resident alients, corporations, foreign trusts May not be shareholders
Corporation ( Method of accounting)
Corporation(other than a qualified PSC) must used accrual based accounting if its average receipts for the previous three years exceed $5m.
Gross income includes
- Gross receipts or sales, rental income collected in advance, non- refundable rent deposits, lease cancellation payments, royalties collected in advance
Gross income exclusions
- 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
Income inclusions and deductibility
If you cant deduct , you don’t include in income
conditions for bad debt deduction
- accrual basis TP
- Income has to be recorded
- must use direct write off method
Taxes that can be deducted by a corp
- state and local income tax
- Employer portion of payroll tax
- real estate tax
Taxes that Cannot be deducted-
Federal income tax
organizational costs- limits
- 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
Org cost examples
- attorney fees to draft articles of inco,bylaws,state incur fees etc
Org cost exclusions
- syndication fees - cost of issues or selling stock or securities such as professional fees , commissions and printing costs. capitalized into cost of stock
Startup costs have the same limits as org costs
same
start up costs
- Startup costs occur after org costs but before you start business
Start up costs examples
- advertising and promotion related to opening of business
- employee training costs
- Insurance, license and permit fees
- Market analysis etc
Other deductible business expenses
- Business travel is 100% deductible
- meals and travel 50%
- Business gifts- $25 per receipient plus wrapping, taxes and shipping
Other deductible business expenses
- Executive compensation uptp $1m unless based on performance
- Casualty losses are fully deductible
- MACRS Depreciation
non-deductible business expenses
- Bribes and kickbacks
- Premiums on key person life insurance policy
- Fines and penalties
M-1
- 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
M2
- Retaining earnings roll that ties to the financial statement
- required
M3
corp assets of $10m or more, with additional details, breaking into perm and temp differences, pulling out foreign income
