Special Deck - Corporate Taxation 4 Flashcards
Greene Corporation reported adjusted current earnings of $500,000 for 2015. Its alternative minimum taxable income before the alternative minimum tax NOL and ACE adjustment) was $200,000. Calculate Greene’s alternative minimum taxable income (after exemption) for 2015.
- Pre-ACE AMTI $200,000
- Adjusted Current Earnings, which is the Pre-ACE AMTI plus SLIM. Pre-ACE AMTI must be subtracted to get SLIM, then multiplied by .75 to get ACE adjustment $500,000
- SLIM (calculated) $300,000
- ACE Adjustment(SLIM x .75) $225,000
- AMTI (200,000 + 225,000) $425,000
- AMTI exemption 40,000 - [25*(150,000-425,000)] = 0
If an S corp has debt, such as a mortgage or a loan, is it passed through to the shareholder?
No, only negative amounts passed through to the shareholders would be capital losses.
When an S-corp has a capital loss wht accounts are affected in what order: first, second, third, etc.
For example, if:
- owner’s basis $10,000
- Capital loss - $25,000
What is the balance, and what account is it in?
- Capital losses first reduce owners basis
- Amount left over is capital loss to individual
In example, Capital loss would reduce owners basis to zero, and bring it down from $25,000 to $15,000. The $15,000 would be a capital loss for the owner, and can be carried forward to decucted against basis for stock or debt to absorb it.
What types of items cannot and can be passed through an S-Corp to the shareholder?
Items that occur in normal everyday business activites, like expenses, are not passed through.
Items of income, loss, deduction and credit are passed through to the shareholder.
In a corporate distribution when a shareholder receives property which value is used for the tax basis?
FMV
When a parent corp receives property from a 100% owned branch corp is gain involved in the transfer?
No. Gain not recognized
Are Life insurance proceeds collected on death of key corporate employees taxable? If not, why not?
No, income from life insurance proceeds on death of key employee are non-taxable because the life insurance premiums are not deductible for tax purposes.
Property transfer from shareholder to corporation in a 351 exchange: is gain recognized? Is is taxable?
Gain not recognized; non-taxable.
Calculate Klaus Corporations alternative minimum ACE adjustment for 2015
2013__2014__2015
Ace $200,000 $200,000 $200,000
AMTI 100,000 240,000 350,000
Negative ACE adjustment is limited to prior years net postive ACE adjustments
2013 2014 2015
Ace $200,000 $200,000 $200,000
AMTI 100,000__240,000__350,000
(100,000)
