reg taxes 01 Flashcards
What % is the Adjusted Current Earnings (ACE) adjustment equal to?
75% of the difference between ACE and pre-ACE AMTI.
Can the ACE adjustment be pos and/or neg?
Yes. ACE adjustment may be either = or - but a neg. ACE adjustment is limited in amt to prior year’s pos. ACE adjustments.
What is starting point in calc of AMT?
The regular taxable income.
What increases or decreases reg. taxable income when calculating AMT?
Increase by tax preferences and increased or decreased by specified adjustments.
What is represented by an excess of tentative min tax over a Corp’s regular tax?
Represents a corp’s AMT and is payable in addition to reg tax.
What is a corp’s allowable exemption in computing AMTI?
$40,000. This amt is reduced by 25% of the corp’s AMTI in excess of $150,000.
In what instances will a corp. not be subject to AMT?
A corp is exempt from AMT for it’s first tax year. After the first year, it is exempt from AMT for each year it passes a gross receipts test. A corp. is exempt for second year if G.R for first year did not exceed $5 Million. For all subsequent years a corp. will be exempt if its avg. annual GR for the testing period (all prior 3 year pds.) do not exceed $7.5 Million
What is the amt of div reportable by corp distributee on a property distribution?
The FMV of the property less any liability assumed.
Explain the deductions for organizational expenditures
May deduct up to $5,000 in tax yr corp begins business. The $5,000 must be reduced by the amt org. exps. exceed $50,000. Remaining exps are deducted ratably over 180 mo. period beginning with the mo. in which corp. begins bus.
What limits a corp’s charitable contrib. deduction?
Corp char. contrib. deduction is limited to 10% of taxable income computed before the deduction for cc, the DRD, the deduction for a NOL carryback and cap loss carryback and DPAD. Although limitation is computed before deducting NOL and CL carrybacks, NOL and CL carryforwards are deducted in arriving at the contribution base amount.
How are a corps char contribs calculated?
Char Contribs limited to 10% of corp taxable income before the deduction for cc, the drd, the deductions for a NOL carryBACK, cap loss carryBack, and the domestic productivity activites deduction (DPAD).
Although limitation is computed before deduction, NOL and Cap Loss carryBACKS, NOL and Cap Loss carryForwards are deducted in arriving at the contribution base amount.
May a corp make a charitable contribution in yr 1 and take a deduction in yr 1 but not make he actual contribution until yr 2?
An accrual method corp. may deduct actual contributions made for during reporting tax year plus may elect to deduct any contrib. auth. by board during reporting tax yr as long as the contribution is subsequently made no later than 2 1/2 months after the end of the tax yr.
DRD for less than 20% owned urelated domestic corp.
generally eligible for 70% DRD but if taxable income before the DRD is less than the amt of the dividend, the DRD lis limtied to 70% of taxable income, unless the full DRD creates or increases a NOL.
What is defined as a corps taxable income before special deductions?
Gernerally includes all income and all deductions except for the DRD.
What are qualifications for a DRD?
Investor corp must own the investee’s stock for more than 45 days (90 days for preferred stk if the divs rec’d are in arrears for more than one year).
What are the percentages for corps to claim DRD?
70% DRD from less than 20% owned.
80% DRD from at least 20% owned.
100% at least 80% owned when a consolidated return is not filed.
Determining a NOL in current year re: NOL carry over and DRD.
A NOL carry over would not be allowed in computing a NOL in current year. A DRD is allowed in computing a NOL since a corp’s DRD is not subject to limitation if it creates or increases a NOL.
What is proper treatment of a C corp’s NCL?
Can only be used to offset NCG. May carryBACK 3 yrs, carryForward 5 yrs.
NOL Carryback and Carryforward periods
CarryBACK2 years, carryFORWARD 20 yrs. to offset taxable income.
What is proper treatment for qualifying research and experientation exps?
Taxpayer may elect to deduct qualifying rresearch and experimentation exps as a current exp if the taxpayer so elects for the first year in which the exps are incurred. Then, if the capitalized costs are not subject to depreciation (becasue there is no determinable life), the taxpayer can amortize them over a pd of 60 months or longer.
What are quidelines to deduct org. exps?
Deduct up to $5,000 of org. exp. during tax year in which corp begins business. The $5,000 must be reduced by the amt the org. exps. exceed $50,000. Remaining exps. are deducted ratably over 180 mo pd beginning with the month in which corp begins business.
What is amt of gain recognized when selling property rec’d as a gift?
A donee;s basis for appreciated property rec’s as a gift is generally the same as the donor’s basis.
What is donee’s basis in gifted property when a gift tax has been paid?
Donee’s basis is same as donor’s basis, increased by any gift tax paid that is attributable to the property’s net appreciation in value. The amt of gift tax that can be added is limited to the amt that bears the same ratio as the property’s net apprec. bears to the amt of taxable gift.
basis + [gt x fmv-basis/fmv-exclusion] =new basis.
What is the basis for gain of property acquired by gift?
The basis of the donor (transferred basis) increased by any gift tax paid attributable to the net appreciation in the value of the gift.
What is basis for loss on property acquired by gift?
The lesser of gain basis or FMV on date of gift.
What is the basis of stock rec’d as dividend?
Depends on whether it was included in income when rec’d.
- If included in income, basis is FMV at date of distribution.
- If nontaxable when rec’d, basis of orig. stock is allocated between the div stk and orig stk in proportion to their relative FMVs.
What is the basis of stk rights?
- If stk rights were allowed to expire, deemed to have no basis and no loss can be declared.
- If rights were nontaxable and exercised or sold: (a) Basis is zero if less than 15% of FMV of stk, unless taxpayer elects to allocate basis (b) if FMV of rights at date of rec. is at least 15% of FMV of stk, or if taxpayer elects, basis is:
FMV of rights/ [FMV of rights + FMV stk] x Basis in stk
- If rights were taxable and included in income, basisi ts their FMV @ date of distribution.
How do you calc G or L in a taxable exchange of property?
It is the diff between the AB of prop. exchanged and the FMV of the property rec’d.
What is the basis of property rec’d in a taxable exchange?
The FMV
What type of property does not get Like-Kind exchange treatment?
Property held for personal use, inventory, stocks, bonds, notes, intangible evidences of ownership, and interests in a partnership.
What is time limit to complete like-kind exchange?
- Prop. to be rec’d must be identified w/in 45 days after date on which old prop. is relinquished. 2. xchng must be completed w/in 180 days after date on which old prop. is relinquished, but not later than the due date of the tax return (incl. extensions) for the yr that the old prop is relinquished.
In like-kind exchange what is basis of unlike property rec’d?
Called “boot”, basis is FMV on date of exchg
Basis of like-kind property rec’s
If property xchged soley for like-kind, no gain or loss is recognized. Basis for property rec’d is basis of property xferred.
Is gain or loss recognized in like-kind xchng if boot is given?
No gain or loss is generally recognized. However, g or l is recognized if the boot given consists of property witha FMV different from it’s basis.
example:
In a like-kind xchng how is gain realized if boot is rec’d?
Any realized gains recognized to the extent of the lesser of (1) the realized gain, or (2) the FMV of boot rec’d.
In a like-kind exchng where boot is rec’d, would you recognize loss due to the receipt of boot?
No loss is recognized due to the receipt of boot.
How are liabilities assumed in a like-kind exchng treated
Liabilities assumed in a l-k xchng are treated as boot. Boot given in form of assumption of a liab. does NOT offset boot given in cash. Boot given in cash or unlike property DOES offset liab. assumed by other party.
