Entities (R3)

Question 1

charitable contributions rule for corps

Answer 1

max deduction is up to 10% of taxable income

Question 2

insurance premiums paid by a corporation

Answer 2

not deductible if corp is the beneficiary (directly or indirectly)

Question 3

organizational and start up costs

Answer 3

can elect to deduct up to $5000. then do organization costs - 5000 deduction = remaining. divide remaining by 180 months and add that on top of 5000 deduction for the year. - costs associated with distributing own stock is not included - “commission paid to underwriters - ignore!”

Question 4

dividend received deduction (on qualified dividends) for corporations

Answer 4

0-20% owner = 50%
20-80 = 65
80+ = 100

Question 5

temporary book to tax differences

Answer 5

depreciation, gain or loss on sale of assets, bad debt expense, or business interest expense

Question 6

permanent differences examples

Answer 6

-interest income and life insurance proceeds on key employees are both nontaxable
-DRD is only for tax purposes
-fines, penalties, political contributions and entertainment exp are all nondeductible
-federal taxes are not deductible for tax purposes, but state taxes are.

Question 7

estimated payments of C corps

Answer 7

lesser of 100% of: current year or preceding year

Question 8

general business credit for C corps

Answer 8

credit cannot exceed net income tax less 25% of net regular tax liability over 25000

Question 9

accumulated earnings tax for c corp

Answer 9

20%

Question 10

personal holding companies

Answer 10

50% owned by 5 or fewer people and has 60% ordinary gross income from: net rent, interest, royalties, and dividends

Question 11

when calculating basis for a partnership, how is interest treated

Answer 11

tax exempt interest income: is not taxable
US treasury interest: is included

Question 12

how are cash distributions treated

Answer 12

not included in calculating a partners AGI, but it is on the K-1 to use in basis calculation (decreases basis)

Question 13

guarenteed payments

Answer 13

partner recognizes it as income, and the partnership deducts that amount when determining ordinary business income

Question 14

S Corp requirements

Answer 14

-must be individuals, estates, or trusts
-cannot be a resident alien (must be US)
-qualified retirement and 501c can be
-corporations and partnerships cannot (single member llc are treated as individual)

Question 15

depreciation - separately stated or not for S Corps

Answer 15

MACRS regular is a part of ordinary business income, so it is not separately stated, but section 179 is separately stated.

Question 16

C Corps - how much business interest to deduct

Answer 16

limited to: business interest income + 30% of ATI + floor plan financing interest expense

Question 17

how to treat guarenteed payments

Answer 17

deducted to get to ordinary business income - make sure to include partners health insurance premiums also if listed

Question 18

seperatley stated items for partnerships (not included in calculating ordinary income)

Answer 18

charitable contributions,

Question 19

DRD taxable income limitation for C corps

Answer 19

DRD equals the lesser of:
-50 or 65% of dividends received or
-50 or 65% of taxable income computed ignoring the DRD, or NOLs

Question 20

who cant take the DRD

Answer 20

personal service corporations, personal holding companies, or S corps

Question 21

DRD for affiliated corporations

Answer 21

80 percent or more ownership that file a consolidated return are allowed 100% DRD

Question 22

what DRD is allowed for small business investment corporations (SBICs)

Answer 22

100%

Question 23

general formula for corporations

Answer 23

Gross Income - Deductions = A, - Charitable Contributions = B, - DRD= taxable income or loss

Question 24

how to calculate what is deductible for charitable contributions

Answer 24

= taxable income + if DRD was taken x 10%

Question 25

rules for paying estimated taxes for regular C corps

Answer 25

lesser of: 100% of current year tax or 100% of prior year tax

Question 26

rules for paying estimated taxes for large corporations

Answer 26

must pay 100% of tax shown in the current year

Question 27

general business credit for corps

Answer 27

just a combination of multiple credits, limited to:, can be carried back one year and forward 20 years

Question 28

research and development tax credit

Answer 28

20% of the increase in qualified research over a defined base amount

Question 29

foreign tax credit

Answer 29

find qualified foreign taxes paid, then find

Question 30

how to treat penalties paid for late payment for partnership tax basis

Answer 30

a nondeductible expense but does decrease tax basis

Question 31

how to treat life insurance premiums paid on lives of partners for partnership tax basis

Answer 31

a nondeductible expense but does decrease tax basis

Question 32

how to treat municipal bond interest when calculating for partners K-1

Answer 32

not included in the taxable interest income because it is nontaxable - but do include it in the nontaxable income section

Question 33

what is included in guaranteed payments to partners on the 1065

Answer 33

guaranteed payment amount given and partners health insurance premiums

Question 34

how to treat retirement plan contributions

Answer 34

contributions for employees are included in ordinary business income on the 1065; contributions for partners are included on Sch K of the partnership income as seperatley stated items