Special corporate deductions

Question 1

Organizational, Start-Up, and Syndication Expenditures

Answer 1

expenses up to $5,000 deductible

Question 2

Examples of organizational expenditures

Answer 2

legal services incident to organization, accounting services, organizational meetings of directors and shareholders, and fees paid to incorporate. They must be incurred before the end of the taxable year that business begins (but they do not have to be paid, even if on the cash basis).

Question 3

Syndication expenses

Answer 3

Costs of issuing and selling stock

can only be capitalized

Question 4

Dividends-received deductions - eligibility

Answer 4

the stock must be of a domestic corporation held over a 45-day window (90 days for preferred stock). This prevents dividend stripping. The DRD cannot be claimed by S corporations, personal service corporations, and personal holding companies.

Question 5

The following steps are required to compute the DRD

Answer 5

1. Multiply dividends received by the deduction percentage.
2. Multiply taxable income before dividends-received deduction as calculated previously by the deduction percentage.
3. Subtract Step 1 from taxable income before dividends-received deduction.
4. If Step 3 yields a negative amount (i.e., loss), Step 1 is the dividends-received deduction.
5. If Step 3 yields a positive amount, the dividends-received deduction is the lower of Step 1 or Step 2

Question 6

casulty losses

Answer 6

1. There is no $100 floor.
2. If property is completely destroyed, the amount of loss is the property’s adjusted basis.
3. A partial loss is measured the same as for an individual’s nonbusiness loss (i.e., the lesser of the decrease in FMV, or the property’s adjusted basis).

Question 7

Research and Development Expenditures of a Corporation (or Individual)

Answer 7

Currently expensed in year paid or incurred
Amortized over a period of 60 months or more if life not determinable
Capitalized and depreciated over 10 years