Special Deck - Corporate Taxation 3 Flashcards
What is the accumulated adjustment account for an S Corp comprised of?
All the S Corps income sources minus all their expenses and distributions.
When a corporation starts up in the first few years, what year-to-year requirements are there to stay exempt from AMT?
1st year- automatically exempt. 2nd year- yr 1 income under $5 million. 3rd year- average income yr 1+yr 2 under 7.5 million. 4th year- years 1-3 income under $7.5 million. Yr 5 and beyond- prior 3 year period less than $7.5 million income
In sales transactions between partners and their partnerships, are sales and losses generally recognized? Are there any exceptions?
Yes, they are generally recognized.
Yes, there is an exception: if the partners owns more than 50% of partnership, losses only are disallowed.
When a partner joins a firm through asset contribution when does the holding period for the partnership interest begin?
With land or section 1231 assets it starts the day the property was acquired by the partner. For all other assets it begins the day the partnership interest is granted.
Define what a partner’s at risk basis is and how is it related to.
A patner’s at risk basis is the max amount of money he is liable for in the partnership. This is generally the same as his partnership basis.
Are a partners proportional share of partnership losses subject to passive activity losses? If so, how?
Passive activity losses apply at the partner level, not partnership level. They apply the same way they would for the individual in that passive activity losses are only deductible to the point that they can be offset by passive activity gains in which the partner does not materially participate
A partnership uses a fiscal year. How does this work out for the individual partner declaring taxable income?
The fiscal year wins out. For example, if either guarneteed payments or distributive income is received in a fiscal year tha goes from Oct 1, 2014 to Sept 31, 2015 then part of the income from 2014 will be reported for the partner’s 2015 tax return.
What is a Schedule K-1?
Schedule K-1 is the “W-2 form” for partners. It is submitted to individual partners in a firm showing their distributive share of income along with other sources of income tha must be listed separately like dividends and tax exempt income.
In calculating a partners taxable share of partnership income, how do guaranteed payments figure into the calculation?
Guranteed payments must be subtracted from total partnership income first (even if not distributed). The balance of partnership income is then used to calculate partners percentages.
What is the difference between property distribution in an S-Corp and an LLC?
Since an LLC is a partnership, appreciated property can be distributed tax free to a partner. In an S-Corp the gain must be recognized
Would a business meals deduction be allowed in reconciling income per books to income per return? If so, why or why not?
Yes. The business deduction would be added back to books, but only 50% of the amount because that is all tha is allowed for tax purposes.
Would a net capital loss deduction be allowed in reconciling income per books to income per return? If so, why or why not?
Net Captial losses are not allowed for tax purposes, so the net capital loss amount must be added back to the book amount of income.
When a corporation is formed and property is exchanged for stock in a 351 tax-free exchange, what percentage ownership must the contributors have? What is the definition of property in a 351 exchange?
- Percentage of ownership in a tax-free 351 exchange must be at least 80%
- Property can be land, securities, or cash. Services performed ARE NOT INCLUDED.
What are the carryback and carryforward limits for NOL?
Back 2 years, forward 20 years.
What are the carryback/carryforward limits for capital gains/losses?
3 years back, 5 years forward as short-term captial losses to offset capital gains
