Chapter 7 Flashcards
(39 cards)
What expenses are not qualified organizational expenses?
- professional fees for issuance of stock
- printing costs for stock certificates
- broker’s commission on sale of stock
- commission paid to underwriters
What is excluded in determining limit for charitable contributions?
- charitable contributions
- DRD
- Dividends paid deduction
- NOL carryback
- capital loss carryback
What is the dividend received deduction?
Less of percent of TI or dividend
<80% = 80%
80% & affil = 100%
What is excluded in determining limit for DRD?
- . DRD
- Dividends paid deduction
- NOL carryback
- capital loss carryback
- certain extraordinary div adjustments
What is the rule with DRD and NOL’s?
If DRD produces NOL, it is not limited.
If DRD doesn’t produce NOL, lesser of DRD or that
% of TI
What is formula for DRD that has indebtedness?
Dividend times 70% of (100% - average indebtedness %) . Use 80% if at least 20% owned
average indebt % =
Avg amt of indebt during period / avg amt of AB during period
When is the DRD allowable for dividends received from foreign corporations?
- foreign corp is at least 10% owned by recipient
domestic corp. - foreign corp is subject to U.S. federal income
tax - foreign corp has income effectively connected
with T or B in US - foreign corp not a foreign personal holding co.
What is the business gift limitation?
$25 per donee per year
What is the deductibility limitation for compensation
in a public corp?
Excess of $1 million dollars. Further, no amount of parachute payment is deductible
What is the amount allowed for direct costs for influencing legislation?
$2,000
What is the treatment of research and experimental expenditures?
May be amortized over 60 months, capitalized or expensed
What costs are included for R&E?
Costs in development of a model, process or similar property.
What costs are not included for R&E?
costs of market research, sociological research or development of art.
What is the treatment for worthless securities?
Treated as capital loss, except when security of affiliated corp, which is ordinary loss
What is the rule for casualty losses for business property?
Partially destroyed - lesser of decline in FMV or property’s AB (before loss)
Fully destroyed - property’s AB prior to loss
What method is used for MACRS for personal property?
PERSONAL PROPERTY
200% DB for 3,6,7,10 year
150% DB for 15,20 year and farm personal prop
Half year convention except if 40% of assets are purchased in fourth quarter
Otherwise, mid quarter convention should be used
What is mid quarter convention?
For personal property. Treated as if purchased mid quarter. Multiply full year by following percentages 1st quarter - 87.5% 2nd quarter - 62.5% 3rd quarter - 37.5% 4th quarter - 12.5%
How is real property depreciated?
Straight line and mid month
What is the recovery period for residential rental property?
27.5 year (mid month convention)
What is recovery period for non residential real estate?
39 year mid month
What three types of real property qualify for 15 year straight line?
leasehold property
restaurant property
retail improvement property
When is alternative depreciation system required?
- listed property
- property used, leased or financed by tax
exempt organizations - tangible property used predominately
outside U.S. - imported property from country that engages
in discriminatory trade practices
What is the limit for section 179 expense
No more than:
$500,000 minus excess over $2 million or
taxable income from T or B
What is an amortizable asset?
- intangible
- personal (as opposed to real)
- determinable useful life
- used in TorB for production of income
