Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
110 Cards in this Set
- Front
- Back
|
as a general rule - what are the tax implications to the c-corporation upon formation
|
GR: NONE
|
|
|
as a general rule - what is the c-corp's basis in property received during formation
what's the exception |
GR: GREATER of:
adjusted NBV of shareholder + gain (if any) OR debt assumed by corp exception: if NBV greater than FMV, then FMV is basis (prevents built in losses) |
|
|
in C-Corp formation, what 2 things must be present for the shareholder to avoid taxes on contributed property
|
80% control
AND No BOOT received |
|
|
in what 2 forms does BOOT appear
|
CASH/bonds
cancellation of debt |
|
|
in formation of a c-corp, what is the shareholder basis for the following contributions:
Cash Property Services |
Cash - amount contributed
Property - NBV - COD + Taxable BOOT (debt exceeds NBV - to bring stock basis to 0) Services - FMV |
|
|
if I contribute land with a basis of $100 and FMV of $500 and debt of $225 for ownership in c-corp, what is my tax issues and what is my basis - what is the c-corp's basis
|
Taxable:
100 - 225 = -125 Basis 0 c-corp basis: 225 |
|
|
what type of tax differences appear on M-1
|
BOTH permanent AND termporary
|
|
|
for a c-corp - when is interest/rent/royalty income received in advanced taxable
|
when received - creates a temporary tax difference
|
|
|
what are 2 main permanent differences in c-corp taxes
|
muni interest
life insurance on officers |
|
|
what is the amount taken times the percentage deduction in the domestic production deduction and what is the limit
|
NET INCOME from domestic activities
limited to 50% of W-2 wages |
|
|
what 2 conditions are required before bonuses can be deducted
|
all events to establish liability have occured
paid within 2.5 months of YE (March 15) |
|
|
what method of bad debt charge off do the following tax payers use:
accrual basis cash basis |
accrual - must use direct write off
cash - NON - never reported as income because never collected |
|
|
is the following interest expenses deductible:
buinsess interest expense interest on loans for investment prepaid interest |
buinsess interest expense - YES
interest on loans for investment - limited to net investment income (taxable) prepaid interest - must allocate |
|
|
a c-corp borrows money to buy muni bonds - can they deduct interest
|
NO - interest for investment is limited to net taxable investment income - muni's not taxable (0), so limited to 0
|
|
|
what is the c-corp charitable contribution limit and what is the carryback/forward
|
limited to 10% of adjusted taxable income
only carryforward - 5 years accruals must be paid 2.5 months |
|
|
do c-corps have the $100 reduction and 10% AGI limit on casualty losses
|
NO
|
|
|
for c-corps - what is the amount of casualty loss for:
partially destroyed fully destroyed |
partially destroyed:
LESSOR of: decline in value OR NBV fully destroyed: NBV |
|
|
how are organizational exp and start-up costs deducted for taxes
|
1st $5M of each is expensed, remainder is amortized over 180 months (from beginning of business)
|
|
|
how do GAAP and tax differ for org costs and start-up
|
Tax - 1st $5M expensed, rest amort over 180 months
GAAP - expense NOW |
|
|
what expenses are OK for org and start-up costs
|
legal services for charter, bylaws, minutes, fees for accouting, start fees
|
|
|
what expenses are NOT OK for org and start-up costs
|
costs to issue/sell stock, commissions, underwriters fees
COSTS TO RAISE CAPITAL |
|
|
how is amortization calculated if business started April
|
1st $5M expensed, then 9/12 of amortization
|
|
|
how are the following amortized:
goodwill covenants not to compete franchises trademarks |
all over 15 years
|
|
|
how do GAAP and tax differ on goodwill amortization
|
GAAP - test for impairment
TAX - over 15 years |
|
|
are the following tax deductible for c-corp:
life insurance - corp beneficiary life insurance - employee beneficiary |
life insurance - corp beneficiary - NO
life insurance - employee beneficiary - YES |
|
|
what amount of business gifts are deductible (c-corp)
|
$25 per recipient
|
|
|
what amount of meals and entertainment are deductible (c-corp)
|
50%
|
|
|
what amount of penalties and illegal activities are deductible (c-corp)
|
NONE
|
|
|
what taxes are deductible (c-corp)
|
all state and local taxes
|
|
|
are federal taxes deductible (c-corp)
|
NO
|
|
|
are foreign income taxes deductible (c-corp)
|
no - but may be used as credit
|
|
|
are lobbying and political expenditures deductible (c-corp)
|
NO
|
|
|
what amount of capital losses are deductible for c-corp and what is the carryback/forward
|
NONE deductible
3/5 - carried as short-term and can be applied ONLY to capital gains |
|
|
what is the tax rate for captial gains in c-corp
|
taxed like ordinary income
|
|
|
what is the carryback/carryfoward for NOLs
|
2/20
|
|
|
what is:
1. the amount that can be used to offset income 2. carryback/forward for NOL Corp Cap Loss Individual Cap Loss |
NOL - Can offset income - 2/20
Corp Cap Loss - NONE - 3/5 Individual Cap Loss - $3M - 0/unlimited |
|
|
what are the 3 ownership amounts and corresponding dividend received deductions
|
0-20 - 70
20-80 - 80 80-100 -100 |
|
|
what are the limits to DRD (applies only to 0-80% ownership)
|
taxable income before DRD x 80% vs. DRD - take smallest
exception - if you can add to or create a loss by taking larger, take larger |
|
|
which entities do not get DRD
|
don't take it personally
Personal Service Corps Personal holding companies Personally taxed S corps |
|
|
what are the MACRS rules relating to machinery/equipment for:
salvage value convention |
salvage value - ignored (take to 0)
1/2 year convention unless: more than 40% of property put in service in last quarter - then mid-quarter |
|
|
MACRS rules relating to real estate
residential rental property non-residential real property convention |
residental rental - 27.5 years SL
non-residental - 39 years SL mid-month convention |
|
|
explain mid-month convention
purchased Jan 1 and June 1 |
used for real estate
Jan 1 - 11.5/12 June 1 - 6.5/12 |
|
|
what type of property does section 179 apply to and what are the limits
|
new OR used machinery and equipment
$250M - reduced dollar to dollar by amount of property purchased over $800M |
|
|
what qualifies for 179 - new or used mach/equipment
|
BOTH new AND used
|
|
|
what is the bonus depr amount for 2009
|
50% of NEW MACRS property with 20-year life or less
|
|
|
what is the 179 limit for SUV
|
$25M
|
|
|
what are the convention types for:
mach/equipment real estate |
mach/equip - 1/2 year or mid-quarter if 40% in last quarter
real estate - mid-month |
|
|
explain 2 depletion methods for taxes
|
cost depletion - GAAP - cost/units to be sold x unit sold for year
percentage depletion - NONGAAP - take % from IRS (5-22%) - limited to 50% of taxable income before depletion - can take even after cost is completely recovered |
|
|
what are 1231 assets (3 things)
|
depreciable personal and real property
used in taxpayer's business held for over 12 months |
|
|
how are 1231 gains/losses treated
|
1231 gains are treated as capital gains (0/15% tax treatment)
1231 losses treated as ordinary |
|
|
explain personal property 1231 gains
|
personal property:
depreciation induced gain taxed at ordinary, over original cost as 1231 capital gains (0/15) |
|
|
explain real property 1231 gains
|
excess of of accum depr over SL recaptured at ordinary, remaining at max of 25%
|
|
|
how are the following 1231 personal property asset sales recognized:
loss depreciation induced gain gain in excess of original cost |
loss - ordinary with no limit
depr induced gain - ordinary gain in excess of cost - capital (0/15) |
|
|
are 1231 losses first netted with gains
|
YES
|
|
|
when is a corporate tax return due
|
2.5 months after YE
March 15 |
|
|
what est. tax payments do small corpoations have to make
|
lessor of:
100% current year tax 100% prior year tax |
|
|
when does a small corporation have no choice but pay 100% of current tax
|
owed NO tax prior
OR start-up prior year (less than 12 months) |
|
|
what est. tax payments do large corpoations have to make
|
100% of current year
|
|
|
what defines an affiliate group and what return can they file
|
common parent owns:
80% voting power of all stock AND 80% of value of all stock can file as single unit - eliminates intercompany gains/losses |
|
|
can a person who owns 100% of 2 c-corps file consolidated return
|
NO - must be corporate "parent" that owns subs
|
|
|
what is the main advantage of a consolidated return
|
can share capital losses, NOLs and don't have to worry about DRD b-s
|
|
|
in corporate AMT - what are the adjustments, preferences and ACE
|
adjustments (adjust for LIEs)
LT contracts Installment sale dealer Excess Depr Preferences = "P" Percentage depletion Private activity - tax-exempt interest Pre-87 ACRS excess depr MIND is ACE (adjusted current earning) Muni interest Increase in CSV life insurance Non SL depr DRD (under 20% ownership) |
|
|
out of adjustments, preferences and ACE - which are +/- and which is only +
|
preferences only +
all else +/- |
|
|
what is done with foreign tax credit in AMT calc
|
subtracted from gross AMT
|
|
|
when dealing with corporate AMT - explain LT contracts
|
we want to use completed contract but AMT requires % completion - however, we get to subtract amount we already paid under % completion on regular tax calc using completed contract
1/3 1/3 1/3 get to claim 1/3 3rd year for regular |
|
|
what is the corporate AMT exemption amount
|
$40M less 25% of AMTI (alt min taxable income) over $150M
|
|
|
what is the corp AMT tax rate
|
20% flat
|
|
|
what is the only credit when calcing corp AMT
|
foreign tax credit
|
|
|
what does a corp do with AMT paid for future years
|
can take as credit for regular income tax liability - acts as acceleration of payment
|
|
|
what is the carryback/forward on corporate AMT
|
Min Tax Credit
only forward forever |
|
|
explain accumulated earning tax
|
flat 15% (same as dividend rate)
when earnings in excess of $250M are improperly accumulated |
|
|
define personal holding company
|
more than 50% owned by 5 or fewer people (directly or indirectly at anytime during last 1/2 of year)
60% ordinary gross income of: NIRD net rent interest (taxable) royalties (not mineral and oil/gas) dividends from unrelated domestic corp |
|
|
what are the tax implications for a personal holding company
|
additional 15% on net income not distributed
|
|
|
what are the 4 types of dividends (pay out of what) and how are they taxed
|
current E/P - taxable
accumulated E/P - taxable return of capital - tax free and reduces basis capital gain - taxable as capital gain |
|
|
what type of dividends:
no E/P No E/P AND no Basis |
no E/P - return of capital
No E/P AND no Basis - capital gain |
|
|
how are dividends matched with source when we run out paying dividends:
current E/P accum E/P |
current - pro rata
accum - chronological order |
|
|
is with have 15M in current E/P and we dividend out 30M in 4 7.5M dividends, how much is current E/P
|
1/2 is current E/P - pro rata
|
|
|
what are the tax implications for shareholders for stock dividends
|
GR: NONE
|
|
|
what are the taxable dividend amounts for individuals and corporations:
cash property |
cash - amount received
property - FMV corps have DRD |
|
|
what are the tax implication for a corporation for dividends
TESTED ITEM |
GR - none
exemption: property corp recognizes GAIN on appreciated property by taking FMV - NBV increases current E/P |
|
|
if a corpoation has no current or accum E/P and distributes appreciated property - explain what happens
|
corp recognizes gain on property which adds to current E/P
corp then distributes out property creating taxable event for shareholder (to extent of E/P) |
|
|
what are the tax implications to shareholders for stock redemptions:
proportional disproportional |
proportional - dividend income
disproportional - treated as sale of stock - capital gain |
|
|
upon corporate liquidation - what is the general tax implication
|
double taxation
corp pays and shareholder pays |
|
|
upon corporate liquidation - what happens when corp sells assets and distributes cash
|
corp taxed on FMV (sales price) - NBV
individual taxed on proceeds - basis |
|
|
upon corporate liquidation - what happens when corp distributes property
|
corp taxed on FMV - NBV
individual taxed on FMV proceeds - basis |
|
|
what are the tax implications of a corporate reorganization for corp and shareholder
|
corp - nontaxable - tax attributes remain (NOL, cap carryforwards)
shareholder - nontaxable - basis holds |
|
|
how do reorgs differ from liquidations for corps and shareholders
|
liquidations are taxable for both corp and shareholder
reorgs are nontaxable for both corp and shareholder |
|
|
what are the tax implications for shareholder when stock becomes worthless (small exeption)
|
can fully deduct 50/100M from ordinary income rather than dealing with 3M b-s
excess over 50/100 goes income capital loss bucket and 3M rule then would apply |
|
|
what's the tax advantage of small business stock
|
noncorporate shareholder can who has held stock from more than 5 years can exclude 50% of gain on sale/exchange of stock
|
|
|
limitations on s-corps
|
FORdS
no Foreigners 100 shareholders restricted ownership - indivduals,estates, trusts (non corp or partnership) one class of Stock |
|
|
when does an s-corp election have to be made and who need to approve
|
by March 15 - then retroactive for entire year
ALL shareholders (both voting and not) |
|
|
do incoming s-corp shareholders have to approve S election
|
NO
|
|
|
what is general an s-corp's year end
|
12/31
|
|
|
what are the 2 exemptions to S-corps not being taxed
|
LIFO recapture
built-in gains |
|
|
what are the 2 rules to the built-in gains tax for s-corps
|
c-corp elects for S status
AND FMV of assets exceeds basis at election date |
|
|
what are the 3 exemptions to the built-in gains tax for s-corps
|
s corp was never c corp
sales happens after 10 years appreciation occured after s election |
|
|
if I only own s corp for 1/2 year, what does my k-1 show
|
breaks down income in seperate categories on a per share / per day basis
|
|
|
how do loans effect s corp and partnership basis differently
|
s corp - only direct shareholder loans increase basis - guarantees DON'T affect basis
partnership - % of liabilities increase basis |
|
|
which fringe benefits can be deducted for s corps
|
nonshareholders
2% of less shareholders any shareholder if benefit included on w-2 |
|
|
is a distribution from an s corp taxed
|
NO - taxed when earned
|
|
|
what is the ending basis of an s corp
|
beginning basis
+ income (including tax exempt) additional investment - distributions loss/expense items |
|
|
what do distributions do to s-corp basis
|
bring down basis
|
|
|
are tax exempt income items included in s-corp basis calc
|
YES - increase basis
|
|
|
S corp with NO C corp E/P
distributions: to extent of basis excess of basis tax effects |
to extent of basis - not taxable - return of capital
excess of basis - taxable - capital gain (LT if held 1+ years) |
|
|
S corp with SOME C corp E/P
distributions: to extent of AAA to extent of C corp E/P to extent of basis excess of basis tax effects |
to extent of AAA - not taxed - but reduces basis
to extent of C corp E/P - taxed as dividend - does NOT reduce basis to extent of basis - not taxed - return of capital - reduces basis excess of basis - taxed as capital gain |
|
|
S corp with SOME C corp E/P
distributions: to extent of AAA to extent of C corp E/P to extent of basis excess of basis which reduce basis |
to extent of AAA
to extent of basis |
|
|
what is AAA
|
accumulated Adjustments Account
cumulative S corp income/loss |
|
|
what are the 3 ways to get s corp status removed
|
majority of shareholders vote
fails to meet FORdS 25% of sales from passive income for 3 years (3 strikes you're out) |
|
|
what is the normal case of an s corp with passive income
|
made $ as c corp then went to S corp and invests in stocks
|
|
|
if s corp status gets pulled, when can we re apply
|
5 years later
|
