Mod 38: Corporate Taxation Flashcards Preview

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Flashcards in Mod 38: Corporate Taxation Deck (150):
1

Transfers to a Controlled Corporation (Sec. 351):

Property includes everything but...

Services

2

Control means ownership of...2

1 80% of total combined voting power

2 80% each class of nonvoting stock

3

Transfers to a Controlled Corporation (Sec. 351):

Boot 3 examples

1 cash

2 short term notes

3 securities

4

Transfers to a Controlled Corporation (Sec. 351):

Receipt of boot will cause...2

1 Recognition of gain

2 but not loss

5

Transfers to a Controlled Corporation (Sec. 351):

Shareholder recognizes gain if liabilities assumed by corporation...

exceed basis of property transferred by shareholder

6

Transfers to a Controlled Corporation (Sec. 351):

Shareholder's basis for stock calculation (3 components)

Adjusted basis of property transferred
+ recognized gain
- boot received
= shareholders basis for stock

7

Transfers to a Controlled Corporation (Sec. 351):

Assumption of liability is always treated as...

Boot for determining stack basis

8

Transfers to a Controlled Corporation (Sec. 351):

Corporation's basis for property calculation

Corporation s basis for property =
Transferor's adjusted basis
+ gain recognized to transferor

9

What forms do a C corp and S corp file?

C-corp = form 1120

S-corp = form 1120S

10

Aumptioj of liability by corporation is not recognized as a gain but is...

Added to basis of the stock

11

If you don't get control (80%) when property is transferred...

Gain or loss is recognized

12

If you transfer property that is less than 80%, basis of property transferred to corporation will...

Be FMV

13

If you transfer property that is 80% or more of transfer to corporation, basis of property will...

Equal original basis

14

If you receive stock for services rendered, you will have taxable income equal to...(equation for taxable income)

Taxable income = (FMV of shares at date of distribution) x (# of shares)

15

Stock received for services rendered, amount included in taxable income will be...

Basis of stock

16

What does AMTI stand for?

Alternative minimum taxable income

17

NOL are a deduction and expense on...

Current year corporate return

18

If large corporation, you can't base estimated payments on...

2) you must base estimated payments on...

Last year's tax

2) 100% of current year's tax

19

Penalties are...

Interest on penalties are...

Penalties are not deductible

Interest on penalties are deductible

20

If corporation's taxable income is $1 million or more in any of the 3 prior years, they must make estimated payments equal to...

100% of current year's tax liability

21

Only compute AMT for...2

1 C-corp

2 don't compute AMT for S-corp

22

AMT:

Preference items added back 2

1 tax-exempt interest (except 2009, 2010)

2 excess ACRS depr. Before 1987

23

AMT:

Adjustments 3

1 Real estate MACRS depreciation

2 must use percentage completion method

3 personal property after 1986

24

AMT:

Adjustment of Real estate MACRS depreciation for property placed into service...

After 1986 but before 1999

25

AMT:

Adjustment of Real estate MACRS depreciation for property placed into service after 1986 and before 1999, must use...

1 depreciation over 40 years instead of 27.5 years

26

AMT:

Adjustment of Real estate MACRS depreciation for property placed into service after 1986 and before 1999. There is no adjustment if...

Placed into service after 1999

27

AMT:

Personal property after 1986 (regular tax uses 200% declining balance) must recompute to use...

150% declining balance

28

What does ACE stand for?

Adjusted current earnings

29

AMT:

Adjusted Current Earnings (ACE), 3 items added

1 tax exempt interest of bonds

2 tax exempt life insurance death benefits

3 70% dividend received deduction

30

AMT:

Adjusted Current Earnings (ACE), municipal bonds/tax exempt interest, what are 2 exceptions?

2009 and 2010 interest is not added back

31

AMT:

2 Other ACE item added

1 capitalized organizational expenditures and

2 start up costs

32

Small corporation exemption from Corp. AMT tax:

Corporation is exempt from corporate AMT in...

First tax year

33

Small corporation exemption from Corp. AMT tax:

Small corp is exempt in second year, if first year's gross receipts don't exceed...

$5 million

34

Small corporation exemption from Corp. AMT tax:

Small corp is exempt in third year, if 1st and 2nd year's gross receipts don't exceed...

$7.5 million

35

Small corporation exemption from Corp. AMT tax:

Small corp is exempt in 4th year, if 1st, 2nd and 3rd year's gross receipts don't exceed...

$7.5 million

36

Adjustment for accelerated depreciation taken on 2013 5-yr. property is the excess of...

200% MACRS depreciation over 150% depreciation

37

Use of percentage completion method of accounting for LT contracts is...

An adjustment

38

If a corporation buys and resells treasury stock it is...

Not taxed

39

Any event where a corporation is transferring its own stock is...

Not a taxable event

40

If you don't amortize organization expenditures in first year, they...

can't be amortized and remain capitalized

41

Don't calculate amortization for organizational expenditures until...

Month you begin business

42

Stock issue cost is not...

Not an organization cost

43

You calculate limited 10% taxable income for charitable contributions before what 3 items?

1 contribution deduction

2 dividend received deduction

3) NOL carryback

44

You calculate limited 10% taxable income for charitable contributions before NOL carryback but after...

Carryover

45

What does DRD stand for?

Dividend received deduction

46

Contributions exceeding 10% limit can be carried forward...

5 consecutive years

47

If you own 80%, what percent of dividends received can you exclude?

100% dividends received

48

If you own 20%-79.99%, what percent of dividends received can you exclude?

80% dividends received

49

If you own less than 20%, what percent of dividends received can you exclude?

70% of dividends received

50

For dividends received deduction to apply, the dividends must be from...

Domestic unaffiliated corporation

51

If dividend received deduction doesn't create a loss, when there is an operating loss, the reduction would be...

80% of taxable income before DRD

52

Losses are disallowed between corporation and...

Related party

53

Corporation's capital loss carryback =

3 yrs

54

Corporation's capital loss carry forward =

5 years

55

Capital loss is always carried back as...

Short term

56

Business bad debt can be deducted against ordinary income if...2

1 corporation is on accrual basis

2 debt is uncollectible

57

Corporate casualty losses are treated the same for individual except there is no...

No $100 floor

58

Corporate casualty losses are treated the same for individual except if property is completely destroyed, the amount of the loss is...

The property's adjusted basis

59

Corporate casualty losses:

partial loss is measured the same as...

For individual's Nonbusiness loss

60

Corporate casualty losses:

partial loss is measured the same as for an individual's Nonbusiness loss which is...2

1 Lesser of decrease in FMV or

2 property's adjusted basis

61

NOL is carried back how many years? Carried forward?

Carried back 2 years

Carried forward 20 years

62

Must carry NOL back if you...

Can carry it back

63

When a company with an NOL makes no special election to waive NOL carryback, it means...

They will use the carryback

64

3 expenses that can be deducted on form 1120?

1 MACRS depreciation

2 sec. 179 depreciation

3 amortization of organization costs

65

R+D costs can be treated 3 ways

1 currently expensed in year paid or incurred

2 amortized over 60 months

3 capitalized + depreciated over determinable life

66

R+D costs can be amortized over 60 months or...

More if life not determinable

67

If corporation takes out life insurance policy on key person, if the beneficiary is the corporation then...

Corporation can't deduct the premiums

68

If corporation takes out life insurance policy on key person, if the beneficiary is not the corporation then...

Corporation can deduct the premiums

69

Estate franchise tax occurs if you pay...

Estate corporate tax

70

If you pay estate franchise tax on federal return you can...

Deduct amounts for state franchise tax

71

On schedule M-1, you reconcile book income with taxable income before...2

1 NOL deduction and

2 dividend received deduction

72

To file schedule M-1, the corporation must have...

Less than $10 million in total assets

73

Provision for state income tax is deductible on...2

1 Book income and taxable income

2 so don't add or subtract

74

Interest expense on bank loan to purchase US Treasury Bonds is considered...

Investment interest expense

75

Interest expense on bank loan to purchase US Treasury Bonds is considered investment interest expense, it is...

Deductible on books and from taxable income

76

Corporation's can deduct investment income expense...

Whether they have investment income or not

77

2 items that are deductible on the books, but not deductible on the tax return?

1 federal income tax

2 net long term capital loss

78

Life insurance proceeds from death of corporate officer are...

Not deductible on federal tax return

79

When determining net income per books, items not deductible on federal tax return are...

Added back in determining net income per books

80

Schedule M-2, related to...

Balance of retained earnings available for books

81

Transfers to a Controlled Corporation (Sec. 351):

No gain or loss is recognized if property is transferred to corporation...

2) and immediately after exchange those persons transferring property...

solely in exchange for stock

2) control corporation


82

Affiliated group 2

1 parent owns at least 80% of combined voting power

2 total value of all stock owned by includible corporation

83

2 other names for dividends

1 current distributions

2 nonliquidating distributions

84

Total liquidation, what occurs?2

1 sub sells stock back to parent company and

2 is totally liquidated

85

When a corporation distributes appreciated property to shareholder, order of 3 ways the distribution is treated?

1 dividend income

2 return of basis

3 capital gain

86

If liability is assumed by stockholder it...

Reduces the amount of distribution

87

No loss can be recognized on...

Nonliquidating distribution to shareholders

88

If liability distribution by corporation exceeds basis of property, it is...

Recognized as gain to corporation

89

Net accumulated earnings are negative, a distribution of cash is...2

1 A return of basis

2 doesn't effect acc. E+P

90

It FMV of property distributed exceeds basis, that becomes...

Current E+P

91

In a complete liquidation, if the stockholder assumes debt, the debt is... Show equation

FMV property distr. - FMV

92

Basis of property to stockholder is always its FMV ignoring the...

Liability

93

In a total liquidation a corporation can recognize...

A gain as well as a loss

94

When current E+P isn't positive, you should...

Net them

95

When net of Acc. E+P and current E+P are negative, the distribution is...

Reduction in stock basis

96

Stock redemption 2 conditions

1 all stock is redeemed

2 redemption from individual shareholder

97

When Stock redemption is from individual shareholder, it is a...

Partial liquidation

98

Stock redemption:

A distribution is a stock redemption when used to...

Pay death taxes

99

Stock redemption:

When all stock is redeemed or redemption is from individual shareholder it is treated as...

Capital gain or loss

100

Interest on borrowings used to repurchase stock are...

Deductible

101

Legal and account fees in connection with repurchase of stock are...

Not deductible

102

In liquidation of subsidiary, subsidiary is selling its stock...

Back to parent company

103



No gain or loss is recognized to parent corporation under sec, 332 on receipt of property in complete liquidation of...

80% or more owned subsidiary

104

No gain or loss is recognized to a subsidiary corporation on the distribution of property to its parent if...

Sec. 332 applies to parent corporation

105

Company is considered a personal holding company if...

Over 60% of income is portfolio or passive income

106

What does PHC stand for?

Personal holding company

107

Personal holding companies are subject to...

Penalty tax on undistributed PHC income

108

2 tests for personal holding company

1 stockholder test

2 income test

109

Consent dividends reduce...

Adjusted taxable income

110

Tax exempt interest earned is not considered income for personal holding company because it is...

Non taxable

111

One requirement for personal holding company is that 5 or fewer stockholder's own...

Over 50% of company

112

Investment company

All of its business is to buy and sell investments

113

What does AET stand for?

Accumulated earnings tax

114

Accumulated earnings tax (AET) is assessed by...

IRS (not self assessed)

115

Accumulated earnings credit for manufacturing company?

Personal service corporation?

1 manufacturing company = $250,000

2 personal service corporation = $150,000

116

Acc. Earnings credit is a lifetime minimum credit

Once used up you don't get it again

117

Net capital loss for current year is allowed as deduction to calculate...

Accumulated earnings tax

118

Accumulated earnings credit is the greater of...2

1 reasonable business needs or

2 remaining minimum deduction

119

S-corp, how many classes of stock does it have?

1

120

4797 gain

Depreciation is recaptured as ordinary income

121

4797 gain goes on...

Line 4 of 1120S

122

Foreign taxes paid of an S-Corp is...

Not deductible to arrive at ordinary income

123

S-Corporation's:

For both Ordinary loss and capital loss, amount of loss deducted is limited to...

Basis in S-Corp stock

124

A loss on an S-corp can...

Be carried forward indefinitely

125

Fringe benefits paid to an over 2% shareholder of an S-corp are...2

1 taxable to shareholder

2 deductible to S-Corp

126

Family coverage under the health insurance plan for an S-corp is...

Taxable to 2% shareholder in full

127

S-election can be revoked voluntarily with over 50% of stock, it doesn't matter if...

Stock is voting or nonvoting

128

How long must a terminated S-corp wait to become an S-corp again?

5 years

129

An S-corp is not permitted to deduct for...

Charitable contribution

130

What does AAA stand for?

Accumulated adjusted account

131

Ordinary income + losses go...

Into AAA

132

Accumulated Adj. Account

Order of Distribution 4

1 distribution out of AAA
2 E+P
3 return of stock basis
4 capital gain

133

Accumulated Adjustment Account (AAA):

Distribution out of AAA is...

Non taxable

134

Accumulated Adjustment Account (AAA):

E+P was from...

2) how is it treated?

Previous C-corp

2) taxed as dividend income

135

Accumulated Adjustment Account (AAA):

Distributions of E+P do not...

Do not reduce stock basis

136

If transfer of assets from C-corp to S-corp, you have to...

Recognize built in gain

137

Built in gain of S-corp. is compared to...

Taxable income as if corp was C-corp

138

If you have built in gain or taxable income, you should...

Take lesser of built in gain or taxable income

139

Untaxed built in gain is...2

1 suspended and

2 taxed 1 year later

140

Whichever is less, taxable income or LT capital gain untaxed in previous year is multiplied by...

35%

141

Corporate reorganization so generally result in...

Non-recognition treatment

142

Corporate reorganization:

Type B

Acquiring 80% of stock

143

Corporate reorganization:

Type C

Use voting stock to acquire all target's property

144

Corporate reorganization:

Type A

Statutory merger

145

Statutory merger

2 corps combine to form new corp

146

Corporate reorganization:

Type D, 2

1 transfer by corp to another corp/shareholders

2 after corp has control

147

Corporate reorganization:

Type E, define

Recapitalization to change capital structure of single corp

148

Recapitalization to change capital structure of single corp, example

Bond holders exchange old bonds for new bonds

149

Corporate reorganization:

Type F

Change of identity, form or place of organization

150

Corporate reorganization:

Type G

Transfer of assets by insolvent corp, where creditors become
owners

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