Spl Corporate Deductions

Question 1

What are the dividend deduction rules?

Answer 1

A C corporation owning less than 20 percent of a domestic corporation may deduct 70 percent of dividends received or accrued from that corporation. Owning 20 percent or more but less than 80 percent of a domestic corporation allows for the deduction of 80 percent of the dividends received or accrued from that corporation. Similarly, if a C corporation owns 80 percent or more of a domestic corporation, it may deduct 100 percent of the dividends received or accrued from that corporation.
However, the dividend received deduction is limited to a percentage of the taxable income of the corporation, unless the corporation sustains a net operating loss. If the corporation has a net operating loss, the dividend received deduction may be taken without limiting the deduction to a percentage of the corporation’s taxable income. To qualify for the dividends received deduction, the C corporation must hold the stock or securities for at least 46 days.

Question 2

List the characteristics of organizational expenditures.

Answer 2

1. $5,000 may be deducted; phased out $1 for $1 once organizational expenses exceed $50,000;
2. Remaining amount is amortized over 180 months;
3. Must be incurred before end of first tax year;
4. Stock issuance fees are not included.

Question 3

List the characteristics of charitable contributions.

Answer 3

1. Can deduct accrued contributions if paid within 2 1/2 months following year-end;
2. Limit is 10% of taxable income;
3. Excess carried forward for 5 years.

Question 4

What is the dividends-received deduction when a corporation owns less than 20% of stock?

Answer 4

70% of dividends received.

Question 5

What is the dividends-received deduction when a corporation owns 80% or more of stock?

Answer 5

The deduction is 100%.

Question 6

What is the dividends-received deduction when a corporations owns 20 to 79% of stock?

Answer 6

The deduction is 80%.

Question 7

List the characteristics of a dividends-received deduction.

Answer 7

1. Percent of domestic dividends;
2. Percentage depends on amount of stock held by corporation;
3. Limited by taxable income unless it creates or adds to a net operating loss.