REG- Corporation

Question 1

What are the different tiers of the Dividend Received Deduction?

Answer 1

50% - ownership of 0 > 20%
65% - ownership of 20% > 80%
100% - ownership of 80% or >

Question 2

How to calculate the DRD?

Answer 2

DRD is the lesser of
50% or 65% dividends received or,
50% or 65% taxable income without regard to DRD, and any NOL carryforward or backward.
The investor corporation must own the investee’s stock for a specified minimum holding period of more than 45 days.

Question 3

How is charitable contributions calculated for a corporation?

Answer 3

Max. of 10% of TI to qualifying organization.
TI is calculated before the deduction of
1. Charitable contribution deduction
2. DRD
3. Capital loss carryback

Question 4

What is the accumulated earnings tax?

Answer 4

This is a penalty tax imposed on C Corps whose accumulated retained earnings are more than $250K if the earnings are considered to be improperly retained instead of being distributed to shareholders as dividends.

Regular C corp is entitled to $250K of AET in a lifetime. Any additional amount is taxed at a flat 20%.

Question 5

What is a Personal Holding Company (PHC)?

Answer 5

2 criteria in determining whether a company is a PHC:
a) more than 50% of the stock must be owned by 5 or fewer individuals, and
b) at least 60% of the adjusted ordinary gross income must consist of certain investment income (e.g., interest, dividends, etc.).
A shareholder is considered to own stock held by family members, including brothers, sisters, ancestors and lineal descendants. In-laws are not considered family members.

Question 6

What are the rules for Net Operating Losses (NOLs)?

Answer 6

NOL for tax yrs ending on or before 12/31/17, 2 yrs carryback 20 yrs carryforward
NOL for tax yrs ending after 12/31/17 and or before 12/31/2020 5 yrs carryback, indefinitely carryforward
NOL for tax yrs ending after 12/31/2020 0 yrs carryback indefinitely carryforward

Question 7

How is Net Capital Loss for a corporation treated?

Answer 7

1. Only use capital loss to offset capital gain
2. They are carried over as short-term capital losses.
3. Carried Back 3 yrs carried forward 5 yrs.

Question 8

What are the terminating events for an S Corp?

Answer 8

1. Shareholders holding more than 50% of the stock consent to a voluntary revocation.
2. Failure to meet any of the qualifications for S Status.
3. Excess passive investment income: greater than 25% of the corps. gross receipts from passive income for 3 consecutive yrs.

Question 9

What are separately stated items and how are they treated?

Answer 9

Separately stated items are income and expenses that are
- subject to special limitations and calculations
- reported on different tax forms, or
- taxed at different rates.

Question 10

What are the qualifying items for S-Corp. status?

Answer 10

• Shareholder cannot be a corporation, & or partnership.
• Maximum shareholders for S Corp. is 100.
• Shareholder must be US citizen or resident.
• Family members are counted as 1 and include nephews, cousins, step children, inlaws.