R4 Flashcards
Name some temporary differences when calculating taxable income
Interest income in advance, Rental income in advance, Royalty income in advance, depreciation
Name some permanent differences when calculating Taxable income
Interest income from muni or state bonds, proceeds for “key person” life insurance, Federal income taxes
When are advanced Rental payments taxable?
Taxable when paid
Under the TCJA what is the new rule concerning business meals and entertainment?
Business meals = 50%
Entertainment = non deductible
What are the two rules which accrual- basis corp can deduct accrued contribution?
- It was authorized to a qualified charity by board before resolution before end of taxable year
- Paid by the 15th day of the 4th month after the end of the tax year (4/15)
What amount of the penalty for the underpayment of FIT is deductible?
It’s not moron
What does rental income include?
Cash received + rent receivable + Nonrefundable deposit
What is the carryover rules for Charitable Contributions?
5 years CFWD
What is deducted from a PHC in computing PHCI?
FIT and Net LTCG are deducted
If an individual did not pay PY tax, what method is used in Yr2?
Annualization method
Formula for Accumulated Earnings Tax.
TI - FIT - 250k exclusion
What are examples of Personal Service Corporations?
accounting, law, consulting, engineering, architecture, health, actuarial science
What is similar about PSC and PHC’s?
Both must include 100% of dividends received from unrelated taxable domestic corps in GI in computing regular TI
What is Sec. 1244 stock?
When stock is sold or becomes worthless. If the original owner then able to treat as ordinary loss(tax deductible= 100k MFJ, 50k all else ) rather than capital loss
Loss in excess of amount is capital loss (3k max)
What is the gain that is recognized from a Corporate liquidation and distribution?
capital Gain is recognized to the extent that FMV of assets> shareholders basis in corporations stock
How do shareholders treat property received in a complete liquidation of corporation?
Shareholders treat this as full payment for their stock,
Shareholder recognizes CG/CL = FMV - Basis
When is there no G/L recognized by a parent or sub in a liquidation?
When the parent owns atleast 80%
What companies is the accumulated earnings tax imposed on?
- does not depend on the number of shareholders a corporation has
- PHC and PSC are not liable for this Accumulated earnings tax
- regular corporation
In a liquidation between sub to parent, what is the basis of the asset?
The basis is a carryover basis from the sub to parent
What kind of interest is included in PHCI?
interest that is included would be the interest included in corp income. not tax free interest
What value is a dividend taxable in a distribution?
A dividend paid in property other than money is taxable to individual to the extent of the property FMV (not in excess of E&P)
Can you recognize G/L on the formation of a C corp?
No, the formation of a corporation Is a nontaxable event
Can a shareholder of an S corp recognize a gain?
Yes ONLY if the liabilities are in excess of the basis of property contributed
Which type of entity has the most flexibility in accounting period?
C Corp
For corporation purposes, what amount of underpayment of estimated tax will receive a penalty?
If the tax for that year is less than $500
What are the 2 deductions for a PHC in determining undistributed personal holding company income?
FIT and Net LT capital gain less related FIT
For corporation purposes, what is the annual estimates tax payment to avoid an underpayment penalty?
Lessor of:
- 100% of tax liability of the PY return(if positive tax liability
- 100% of the CY tac liability
- 100% of estimated CY liability
What type of entity can the accumulated earnings tax be imposed on?
On regular corporations not classified as PHCs; does not depend on the number of shareholders
What is the character of C Net capital loss /
BCAK 3 yrs and CFWD 5 yrs, always treated as Short Term
What is the character of the basis of assets a corp receives from its subs in a liquidation?
Carryover basis
What is the gain recognized in a corporate liquidation?
Gain is recognized to the extent that FMV of assets distributed to a shareholder exceeds the shareholders basis in the corporations stock
What amount of dividend income does a shareholder recognize?
to the extent of cash received + FMV of noncash (the FMV of date of declaration is irrelevant)
How are losses treated in nonliquidating distributions?
no deduction
If a nonliquidating liquidation is distributed at a gain, how is the dividend income calculated?
To the extent of Current E and P + Acc E and P + Gain on disposition
What is the result to shareholders of a distribution in a complete liquidation of corporation?
Capital gain or loss
As of 2018, what is the rule regarding NOL
Can only offset up to 80% of NOL, No CBCK and unlimited CFWD.
Before 2018 - can offset up to 100%. 2 BACK 20 FWD
What is the min holding period requirement in order to have a DRD?
45 days
How is a gain recognized in the transfer of equipment to a corporation?
If the liabilities assumed by the corporation are greater than the basis of the property contributed
Are interest incurred on loans to carry U.S obligations and the provision for state corporation income tax Adjustment to schedule M1?
No
How much the DRD is applicable in a consolidation?
100% is applied so dividend income is eliminated in consolidation
What are the two levels of taxation in a corporate liquidation of distributions?
- recognize G/L= selling assets @ FMV
2. s/o G/L= FMV - basis
How do you calc gain a shareholder recognizes on the liquidating of distribution?
gain is recognized to the extent that the FMV os assets are distributed to a shareholder exceeds the shareholders basis in stock
What is the charitable contribution limit for Corporations?
10%
When can a shareholder recognize income for cash?
only if they acquire up to 80% of stock in acquiring
What organization uses cash method of accounting?
Qualified personal service organization
What type of deduction method does a corporate that is not a small bank use?
Direct charge of method
