Corporate Taxation Flashcards
(37 cards)
T or F, the rules for the formation of an S corp are the same as for a C corp.
T
is the penalty for underpayment of federal estimated taxes deductible?
Hell NO
what is the key indicator that a business must use the accrual method of accounting?
business has greater than 25,000,000 of avg annual gross receipts for the preceding 3 years
how are organization costs (e.g., legal fees) of a corporation treated?
amortized over a period of not less than 180 months beginning in month business begins. TP may elect to deduct up to 5,000 immediately, subject to limitations (50,000 total expenditure, deduction reduced dollar for dollar over the 50,000)
*this rule also applies to partnerships
can corporations deduct any capital losses in excess of capital gains in a year?
NO
which entities are required to use the accrual method of accounting?
tax shelters, large C corps, and manufacturers
what are the corporate dividend-received deductions?
80% owned sub in a consolidated return = 100% deduction
less than 20% owned (unrelated) = 50% deduction
all other = 65% deduction
*S corps cannot take this deduction
what is the charitable contribution deduction of a corp limited to?
10% of taxable income without regard to:
contribution deduction
dividends received deduction
NOL carryback
capital loss carryback
T or F, a corp can only use net capital losses to offset net capital gains.
*net capital g/l are short term and long term netted together
T
3 year carryback and 5 year carryforward
when are accrued charitable contributions not paid by the end of the year deductible in the year of accrual?
BOD authorizes the contribution during the tax year AND the accrual-basis corp pays the accrued amount within 3 and 1/2 months following the end of the year
when is rental revenue received in advance taxable?
in the year of receipt
are business gifts deductible?
Yes, up to 25 per recipient per year
the dividends-received deduction equals the lesser of:
50% or 65% of dividends received OR 50% or 65% of taxable income without regard to: the DRD any NOL carryforwad any capital loss carryback
*limitation does not apply if taking the full DRD deduction (% x dividends received) results in a NOL
to find taxable income, what do you do with this situation: tax depreciation > book depreciation?
subtract the difference from book income
is interest expense to carry municipal bonds tax deductible?
NO. deduction per book, but not tax
is the book/tax difference in the bad debt deduction considered a temporary or permanent difference?
temporary
when are expenses owed by an accrual-basis corporation to a cash-basis shareholder who owns at least 50% of the corporation’s stock deductible by the corporation?
when the corporation actually pays the shareholder cash
what type of business can the accumulated earnings tax be imposed on?
regular corporations (acc RE in excess of 250,000) and personal service corporations (acc RE in excess of 150,000)
when does the personal holding company status apply?
if a corporation is owned more than 50% by 5 or fewer individuals at any time during the last half of the tax year and if at least 60% of adjusted ordinary gross income for the tax year is personal holding company income
*stock ownership 50% ; income 60%
PHC is not subject to accumulated earnings tax, but is subject to regular tax on corporate income and 20% tax on its undistributed PHC income
what sources of income must be considered to determine if the income requirements for a personal holding company have been met?
dividends (no DRD allowed)
taxable interest
royalties, but not mineral, oil, gas, or copyright royalties
net rent, if less than 50% of ordinary gross income
what are some examples of a personal service corporation?
accounting, law, consulting, engineering, architecture, health, and actuarial science
how do you determine the required estimated tax payments for a C corp?
just remember least of 100% off prior liability (preceding year method), current liability, estimated current liability (annualized income method)
when will no penalty be imposed on a corp for underpayment of estimated tax?
underpayment is less than $500
what 2 things must be deducted from a PHC’s taxable income to determine undistributed PHC income prior to the dividend-paid deduction?
federal income taxes AND net LT capital gain (net of tax)
