Differences from Individual Income Tax
What is Capital Gains?
A provision to eliminate excess taxation on intercompany transfers of cash
What is the Dividend Received Deduction?
Gross Sales $500,000
Expenses $400,000
Dividend received from a 15% owned Corporation
$20,000
$10,000
Adjusted taxable income of $100,000
No floor plan interest
No interest income
$30,000
The due date for the C Corporation tax return
What is April 15th?
Corporations must use this method of accounting unless meeting an exception
What is the Accrual Method of accounting.
The maximum amount that a public corporation can deduct in wages for the CEO, CFO and next 3 highly compensated employees.
What is $1,000,000 plus retirement plan contributions?
Gross Sales $500,000
Expenses $400,000
Dividend received from a 40% owned Corporation
$20,000
$13,000
Adjusted taxable income of $100,000
No floor plan interest
Interest income of $5,000
$35,000
The safe harbor amount of estimated payments that a corporation should make to avoid penalties.
What is the lesser of 100% of the current year's tax or 100% of the prior year's tax.
These losses cannot offset this similar type of gain in a corporation.
What is a Capital Loss?
A 20% tax on the current year's corporate earnings that were distributed and were in excess of reasonable business needs
What is the Accumulated Earnings Tax?
Gross Sales $500,000
Expenses $400,000
Dividend received from a 100% owned Corporation
$20,000
$20,000
Adjusted taxable income of $400,000
No floor plan interest
Interest income $40,000
$160,000
A reconciliation between book income and taxable income
What is the M-1?
A corporation this size (sales) can choose the cash method of accounting for income taxes.
What is 26 million (indexed for inflation) in gross receipts?
Carries forward but can only offset 80% of future business income.
What is a Net Operating Loss (NOL)?
Gross Sales $500,000
Expenses $510,000
Dividend received from a 15% owned Corporation
$20,000
$5,000
Adjusted Taxable Income $10,000
Floor plan interest $50,000
Interest Income $40,000
$100,000
What is a reconciliation between beginning unappropriated retained earnings and ending unappropriated retained earnings?
What is an M-2?
nonbusiness income, gain, deduction or loss
Business interest income or expense
NOL deduction
Deduction for depreciation, amortization or depletion
What is adjusted taxable income for the business interest expense limitation?
A Corporation must include 20% of the lesser of the depreciation taken or gain realized as ordinary income under this section.
What is Section 291?
Gross Sales $500,000
Expenses $550,000
Dividend received from a 15% owned Corporation
$20,000
$10,000
Adjusted Taxable Income ($15,000)
Floor plan interest $50,000
Interest Income $40,000
$90,000
(The 30% of Adjusted Taxable Income cannot be less than zero)
The objective of this form is more than reconciling book net income to taxable income. It also provides detail and transparency between the two.
What is an M-3?
How is a dividend from a corporation different than a distribution from a partnership?
A distribution from a partnership is a return of capital and is not subject to tax. A dividend from a Corporation is taxed.
Harry is the CFO of Harry Corporation, a publicly traded, calendar year C corporation. For the current year, Harry's compensation package consists of:
Cash compensation $ 1,250,000
Nontaxable fringe benefits $50,000
Taxable fringe benefits $10,000
Bonus tied to company performance $300,000
How much of Harry's compensation is deductible by Harry Corporation?
$1,050,000
Name the steps for calculating the Dividend Received Deduction
1. Multiply dividend by applicable %
2. Multiply taxable income by applicable %
3. Use the lesser of 1 or 2, unless 1 results in an NOL, then use 1
Who is the Business Interest Expense Limitation applicable to?
All taxpayers with several exceptions including a small business exception for businesses with less than $26 million in average gross receipts for the last 3 years.
A temporary difference between book and taxable income that results in higher taxable income in the current year.
What is a deferred tax asset?