R4 - Corp Taxable Income

Question 1

Executive Compensation

Answer 1

Max is $1MM

Question 2

Bonus Accruals

Answer 2

• Deductible if paid to a non-SH or EE

- Must be accrued and paid by 3/15

Question 3

Interest Expense

Answer 3

• Business: Deductible when incurred and paid (limited to 30% of business income) (Limitation does not apply to small businesses).
• Investment: Up to Taxable Investment Income
• Prepaid: Deduct later when incurred.

Question 4

Charitable Contributions

Answer 4

• Must be accrued and paid by 4/15

- Limited by 10% of taxable income before special deductions (DRD, Cap loss Carryback, charity)

Question 5

Casualty Losses: Partially Destroyed

Answer 5

Loss is limited to the lesser of:
- Decrease in FMV
- NBV
Less: Insurance Proceeds

Question 6

Casualty Losses: Fully Destroyed

Answer 6

Loss is NBV (Adj Basis)

Less: Insurance Proceeds

Question 7

UNICAP Rules

Answer 7

Capitalize the following as part of inventory. Do not expense.

• RM
• DL
• OH
• **** Like managerial acct

Question 8

Life Insurance Premiums Expense

Answer 8

• Not deductible as an expense if for owner/SH

- Deductible as an EE Fringe Benefit

Question 9

Life Insurance Proceeds

Answer 9

• Not taxable when not included in taxable income.

Question 10

Dividends Received Deduction

Answer 10

Reduced Dividend income by:

• 50% when ownership is 0-20% “Unrelated”
• 65% when ownership is 20-80%
• 100% when ownership is >80% “Consolidating”

Question 11

DRD Rule

Answer 11

• Must own stock for at least 46 days out of the 91 day period.
• 91 day period starts 45 days before ex-dividend date.

Question 12

DRD TI Limitation

Answer 12

Lesser of:
a. 50%/65% of dividend income
b. 50%/65% of T.I before DRD
If a. creates NOL, b. does not apply.

Question 13

Corp Taxable Income Limitations

Answer 13

Gross Income  
(-) Deductions
(=) Adj Taxable Income (A)
(-) Charitable Contributions 
(=) Adj Taxable Income, after charity (B)
(-) DRD
(=) Taxable Income (loss)