Podcast
Questions and Answers
Which type of business formed after 1996 is not automatically taxed as a corporation?
Which type of business formed after 1996 is not automatically taxed as a corporation?
A business was formed in 1990 and has been taxed as a corporation since its inception. According to current regulations, what is its tax status?
A business was formed in 1990 and has been taxed as a corporation since its inception. According to current regulations, what is its tax status?
What condition defines a nonexempt closely held corporation as a personal holding company (PHC)?
What condition defines a nonexempt closely held corporation as a personal holding company (PHC)?
Which of the following entities would automatically be taxed as a corporation?
Which of the following entities would automatically be taxed as a corporation?
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A single-member LLC wants to be taxed as a corporation. What action must it take?
A single-member LLC wants to be taxed as a corporation. What action must it take?
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What is the primary consequence for a personal holding company (PHC) that does not distribute its income?
What is the primary consequence for a personal holding company (PHC) that does not distribute its income?
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Which factor is most critical in determining whether a closely held corporation will be classified as a Personal Holding Company (PHC)?
Which factor is most critical in determining whether a closely held corporation will be classified as a Personal Holding Company (PHC)?
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What characteristic is most important in determining if a group of corporations is classified as a controlled group?
What characteristic is most important in determining if a group of corporations is classified as a controlled group?
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A business is considering forming either as a C corporation or an S corporation. What is a primary tax disadvantage of choosing a C corporation structure?
A business is considering forming either as a C corporation or an S corporation. What is a primary tax disadvantage of choosing a C corporation structure?
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A group of investors plans to start a new business and wants to limit their personal liability while also dividing profits. Which business structure is MOST suitable?
A group of investors plans to start a new business and wants to limit their personal liability while also dividing profits. Which business structure is MOST suitable?
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Which entity would automatically be taxed as a C corporation, regardless of when it was formed?
Which entity would automatically be taxed as a C corporation, regardless of when it was formed?
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A technology company is structured as a C corporation. Which of the following statements accurately describes how its profits are taxed?
A technology company is structured as a C corporation. Which of the following statements accurately describes how its profits are taxed?
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A business formed in 1990 has centralization of management, continuity of life, and limited liability, but does NOT allow free transferability of interests. Is this business taxed as a corporation?
A business formed in 1990 has centralization of management, continuity of life, and limited liability, but does NOT allow free transferability of interests. Is this business taxed as a corporation?
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What documentation do corporations typically file during their formation?
What documentation do corporations typically file during their formation?
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A corporation earns a profit of $100,000. It pays corporate income tax at a rate of 21%. After taxes, it distributes the remaining earnings as dividends to its shareholders, who pay an individual income tax rate of 15% on the dividends. What is the total amount of taxes paid on the corporation's earnings, considering corporate and individual taxes?
A corporation earns a profit of $100,000. It pays corporate income tax at a rate of 21%. After taxes, it distributes the remaining earnings as dividends to its shareholders, who pay an individual income tax rate of 15% on the dividends. What is the total amount of taxes paid on the corporation's earnings, considering corporate and individual taxes?
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A foreign corporation earns income within the United States. Under what condition is this income considered U.S. source income?
A foreign corporation earns income within the United States. Under what condition is this income considered U.S. source income?
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Which of the following describes the 'asset use' test for determining if income is 'effectively connected' with a U.S. business?
Which of the following describes the 'asset use' test for determining if income is 'effectively connected' with a U.S. business?
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What is the general tax rate applied to fixed, determinable, annual, or periodical (FDAP) income of a foreign corporation from U.S. sources that is not effectively connected with a U.S. trade or business?
What is the general tax rate applied to fixed, determinable, annual, or periodical (FDAP) income of a foreign corporation from U.S. sources that is not effectively connected with a U.S. trade or business?
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A U.S. company purchases goods from a foreign supplier and resells them. How is the gross income from the sale of this inventory sourced?
A U.S. company purchases goods from a foreign supplier and resells them. How is the gross income from the sale of this inventory sourced?
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What form is used to report U.S. source income paid to foreign persons, and when must it be filed?
What form is used to report U.S. source income paid to foreign persons, and when must it be filed?
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By what day must a C corporation's tax return be filed, assuming a calendar year-end?
By what day must a C corporation's tax return be filed, assuming a calendar year-end?
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A C corporation with a June 30 fiscal year-end will have what tax return due date for 2024?
A C corporation with a June 30 fiscal year-end will have what tax return due date for 2024?
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A corporation dissolves on March 10. By what date must its short-period tax return be filed?
A corporation dissolves on March 10. By what date must its short-period tax return be filed?
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A controlled group of corporations must share a single accumulated earnings deduction. If three corporations are members of a controlled group, what is the maximum accumulated earnings deduction each corporation can claim?
A controlled group of corporations must share a single accumulated earnings deduction. If three corporations are members of a controlled group, what is the maximum accumulated earnings deduction each corporation can claim?
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In determining constructive stock ownership, which family member's stock ownership is generally NOT attributed to an individual?
In determining constructive stock ownership, which family member's stock ownership is generally NOT attributed to an individual?
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Which type of corporation can be excluded from a controlled group, regardless of stock ownership?
Which type of corporation can be excluded from a controlled group, regardless of stock ownership?
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What is the tax rate applied to Accumulated Earnings Tax?
What is the tax rate applied to Accumulated Earnings Tax?
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A corporation transferred tangible property to a foreign corporation. Which form is used to report this transfer?
A corporation transferred tangible property to a foreign corporation. Which form is used to report this transfer?
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A U.S. person has transactions with a foreign trust and also receives a large gift from a foreign person. Which form is used to report these?
A U.S. person has transactions with a foreign trust and also receives a large gift from a foreign person. Which form is used to report these?
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A small corporation has gross receipts of $200,000 and total assets of $220,000 at year-end. Which of the following schedules is NOT required to be filed with Form 1120?
A small corporation has gross receipts of $200,000 and total assets of $220,000 at year-end. Which of the following schedules is NOT required to be filed with Form 1120?
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A U.S. person is treated as the owner of a foreign trust under the grantor trust rules. Which form is the foreign trust required to file annually to provide information about the trust and its beneficiaries?
A U.S. person is treated as the owner of a foreign trust under the grantor trust rules. Which form is the foreign trust required to file annually to provide information about the trust and its beneficiaries?
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Which form is used by U.S. persons to report information regarding their interest in, or operation of, a Foreign Branch (FB) or a Foreign Disregarded Entity (FDE)?
Which form is used by U.S. persons to report information regarding their interest in, or operation of, a Foreign Branch (FB) or a Foreign Disregarded Entity (FDE)?
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A U.S. corporation makes deductible payments to its foreign parent company, potentially reducing its U.S. tax liability. Which form is used to determine the tax applicable to this base erosion?
A U.S. corporation makes deductible payments to its foreign parent company, potentially reducing its U.S. tax liability. Which form is used to determine the tax applicable to this base erosion?
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What is the primary purpose of Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI)?
What is the primary purpose of Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI)?
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Which form allows domestic corporations (excluding REITs, RICs, and S corporations) to determine their deduction under Sec. 250 for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI)?
Which form allows domestic corporations (excluding REITs, RICs, and S corporations) to determine their deduction under Sec. 250 for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI)?
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Under what circumstances is Form 8938, Statement of Specified Foreign Financial Assets, required to be filed?
Under what circumstances is Form 8938, Statement of Specified Foreign Financial Assets, required to be filed?
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Which of the following scenarios would necessitate filing Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business?
Which of the following scenarios would necessitate filing Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business?
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Section 59A targets large corporations to prevent what specific action?
Section 59A targets large corporations to prevent what specific action?
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A group of six individuals organizes an LLC to conduct a software publishing business in Florida. The LLC wishes to be taxed as an S corporation. No individual is specifically authorized to make the election. What individual(s) is(are) required to make the election?
A group of six individuals organizes an LLC to conduct a software publishing business in Florida. The LLC wishes to be taxed as an S corporation. No individual is specifically authorized to make the election. What individual(s) is(are) required to make the election?
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In 2023, Panda Corp. has passive losses of $250,000 from a rental activity. Its active business income is $150,000 and its portfolio income is $50,000. What is Panda Corp.'s 2023 taxable income if (a) Panda is a closely held corporation, and (b) Panda is a personal service corporation?
In 2023, Panda Corp. has passive losses of $250,000 from a rental activity. Its active business income is $150,000 and its portfolio income is $50,000. What is Panda Corp.'s 2023 taxable income if (a) Panda is a closely held corporation, and (b) Panda is a personal service corporation?
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Which of the following statements is false with respect to withholding on nonresident aliens and foreign corporations?
Which of the following statements is false with respect to withholding on nonresident aliens and foreign corporations?
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Amanda Jones and Calvin Johnson form Quail Corporation during the year by simultaneously making the following transfers:
Share- holder; Adjusted Basis of Property Transferred; Fair Market Value of Property; Percentage of Stock Received
Amanda $30,000; $60,000; 50%
Calvin $70,000; $60,000; 50%
What is the amount of gain or loss to be reported on these transfers by Amanda and Calvin on their federal income tax returns?
Amanda Jones and Calvin Johnson form Quail Corporation during the year by simultaneously making the following transfers:
Share- holder; Adjusted Basis of Property Transferred; Fair Market Value of Property; Percentage of Stock Received
Amanda $30,000; $60,000; 50% Calvin $70,000; $60,000; 50%
What is the amount of gain or loss to be reported on these transfers by Amanda and Calvin on their federal income tax returns?
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In a Sec. 351 transaction, Mr. Miller transferred assets with an adjusted basis of $76,000 and a fair market value of $80,000 to Way View Corporation in exchange for its capital stock with a fair market value of $72,000. What is Mr. Miller's recognized gain or loss?
In a Sec. 351 transaction, Mr. Miller transferred assets with an adjusted basis of $76,000 and a fair market value of $80,000 to Way View Corporation in exchange for its capital stock with a fair market value of $72,000. What is Mr. Miller's recognized gain or loss?
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Mr. Jacobs transferred an office building to Booda Corporation in exchange for 100% of Booda's only class of outstanding stock and $60,000 cash. The building had an adjusted basis of $300,000 and a fair market value of $500,000. The building was subject to a mortgage of $240,000, which Booda assumed for valid business reasons. The fair market value of Booda's stock on the date of transfer was $200,000. What is the amount of Mr. Jacobs's recognized gain?
Mr. Jacobs transferred an office building to Booda Corporation in exchange for 100% of Booda's only class of outstanding stock and $60,000 cash. The building had an adjusted basis of $300,000 and a fair market value of $500,000. The building was subject to a mortgage of $240,000, which Booda assumed for valid business reasons. The fair market value of Booda's stock on the date of transfer was $200,000. What is the amount of Mr. Jacobs's recognized gain?
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Mr. Brown transferred an office building to Corporation J in exchange for 100% of Corporation J's stock and $30,000 cash. The building had an adjusted basis of $150,000 and a fair market value of $250,000. The building was subject to a mortgage of $120,000, which Corporation J assumed for valid business reasons. The fair market value of Corporation J's stock on the date of the transfer was $100,000. What is Mr. Brown's recognized gain?
Mr. Brown transferred an office building to Corporation J in exchange for 100% of Corporation J's stock and $30,000 cash. The building had an adjusted basis of $150,000 and a fair market value of $250,000. The building was subject to a mortgage of $120,000, which Corporation J assumed for valid business reasons. The fair market value of Corporation J's stock on the date of the transfer was $100,000. What is Mr. Brown's recognized gain?
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Wilson exchanged his land, which has a fair market value of $45,000 and an adjusted basis of $35,000, for 80% of the stock of Weston Corporation. The stock has a fair market value of $70,000. Wilson also received land with an adjusted basis of $15,000 to Weston and a fair market value of $22,000. Each piece of land is for productive use at Weston. What is the amount of Wilson's recognized gain on this transaction?
Wilson exchanged his land, which has a fair market value of $45,000 and an adjusted basis of $35,000, for 80% of the stock of Weston Corporation. The stock has a fair market value of $70,000. Wilson also received land with an adjusted basis of $15,000 to Weston and a fair market value of $22,000. Each piece of land is for productive use at Weston. What is the amount of Wilson's recognized gain on this transaction?
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Mr. Smith and Mr. Jones each transfer property with a basis of $10,000 to a corporation in exchange for stock with a fair market value of $30,000. The total stock received by them represents 75% of each class of stock of the corporation. The other 25% of each class of stock was issued earlier to Mr. Brown, an unrelated person. The taxable consequences are:
Mr. Smith and Mr. Jones each transfer property with a basis of $10,000 to a corporation in exchange for stock with a fair market value of $30,000. The total stock received by them represents 75% of each class of stock of the corporation. The other 25% of each class of stock was issued earlier to Mr. Brown, an unrelated person. The taxable consequences are:
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Westover Health Services, Inc., a personal service corporation, has two shareholders. Westover was incorporated 17 years ago and has made irregular and infrequent distributions to its shareholders. The balance sheet of Westover Health Services, Inc., reflects unappropriated retained earnings in the amount of $800,000 and no marketable securities. Westover has no specific, definite, and feasible plans for use of the earnings accumulation in its business. It has been determined that the amount needed to redeem a deceased shareholder's stock is $500,000 for estate taxes and administrative expenses. What is the amount of Accumulated Earnings Tax that Westover Health Services, Inc., could be subject to for tax year ended December 31, 2023?
Westover Health Services, Inc., a personal service corporation, has two shareholders. Westover was incorporated 17 years ago and has made irregular and infrequent distributions to its shareholders. The balance sheet of Westover Health Services, Inc., reflects unappropriated retained earnings in the amount of $800,000 and no marketable securities. Westover has no specific, definite, and feasible plans for use of the earnings accumulation in its business. It has been determined that the amount needed to redeem a deceased shareholder's stock is $500,000 for estate taxes and administrative expenses. What is the amount of Accumulated Earnings Tax that Westover Health Services, Inc., could be subject to for tax year ended December 31, 2023?
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Ms. M transferred a building to Corporation C. The building had a basis to M of $15,000 and a fair market value of $90,000. In addition, an outstanding mortgage of $20,000 on the building was assumed by C upon the transfer. In return, M received 80% of C's only class of outstanding stock (fair market value of $65,000) and a car with a fair market value of $5,000. What is Ms. M's recognized gain on the transaction?
Ms. M transferred a building to Corporation C. The building had a basis to M of $15,000 and a fair market value of $90,000. In addition, an outstanding mortgage of $20,000 on the building was assumed by C upon the transfer. In return, M received 80% of C's only class of outstanding stock (fair market value of $65,000) and a car with a fair market value of $5,000. What is Ms. M's recognized gain on the transaction?
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Joyce and Edward combine their sole proprietorships by forming the Lair Corporation. Joyce transfers land and a building having a combined $50,000 adjusted basis and a $100,000 FMV to the corporation in exchange for 40% of the Lair Corporation stock. Edward transfers equipment with a $60,000 adjusted basis and a $150,000 FMV to the corporation in exchange for 60% of the Lair stock with a par value of $10. Joyce and Edward received no other property then the Lair stock. What is Edward's recognized gain on this transaction?
Joyce and Edward combine their sole proprietorships by forming the Lair Corporation. Joyce transfers land and a building having a combined $50,000 adjusted basis and a $100,000 FMV to the corporation in exchange for 40% of the Lair Corporation stock. Edward transfers equipment with a $60,000 adjusted basis and a $150,000 FMV to the corporation in exchange for 60% of the Lair stock with a par value of $10. Joyce and Edward received no other property then the Lair stock. What is Edward's recognized gain on this transaction?
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The Snow Corporation, a calendar-year taxpayer, estimates at the end of March 2023 that its federal income tax for 2023 will be $800,000. It pays $200,000 of estimated tax by April 15, 2023, and pays another $200,000 on June 15, 2023. At the end of August 2023, a recalculation shows that its 2023 tax is expected to be $900,000. Which of the following is true?
The Snow Corporation, a calendar-year taxpayer, estimates at the end of March 2023 that its federal income tax for 2023 will be $800,000. It pays $200,000 of estimated tax by April 15, 2023, and pays another $200,000 on June 15, 2023. At the end of August 2023, a recalculation shows that its 2023 tax is expected to be $900,000. Which of the following is true?
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Kari Corp., a manufacturing company, was organized on January 2, 2023. Its 2023 federal taxable income was $400,000, and its federal income tax was $84,000. What is the maximum amount of accumulated taxable income that may be subject to the accumulated earnings tax for 2023 if Kari takes only the minimum Accumulated Earnings Credit?
Kari Corp., a manufacturing company, was organized on January 2, 2023. Its 2023 federal taxable income was $400,000, and its federal income tax was $84,000. What is the maximum amount of accumulated taxable income that may be subject to the accumulated earnings tax for 2023 if Kari takes only the minimum Accumulated Earnings Credit?
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WEB Corporation, a calendar-year corporation, estimated its income tax for the current year to be $40,000. WEB deposited the first two estimated tax installments on April 15 and June 15 in the amount of $10,000 each (25% of $40,000). On July 1, WEB estimated its tax to be only $25,000. How much estimated tax should WEB Corporation pay on September 15?
WEB Corporation, a calendar-year corporation, estimated its income tax for the current year to be $40,000. WEB deposited the first two estimated tax installments on April 15 and June 15 in the amount of $10,000 each (25% of $40,000). On July 1, WEB estimated its tax to be only $25,000. How much estimated tax should WEB Corporation pay on September 15?
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A single-member limited liability company (LLC) may be taxed as a corporation.
A single-member limited liability company (LLC) may be taxed as a corporation.
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A controlled group generally may not choose any method to allocate the amounts among the members of the group.
A controlled group generally may not choose any method to allocate the amounts among the members of the group.
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A parent-subsidiary type of controlled group requires one of the corporations owns stock that represents 80% or more of total:
A parent-subsidiary type of controlled group requires one of the corporations owns stock that represents 80% or more of total:
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Any two or more corporations are considered a brother-sister controlled group if the stock of each owned by the same five or fewer:
Any two or more corporations are considered a brother-sister controlled group if the stock of each owned by the same five or fewer:
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A corporation is a PSC if its employee-owners own more than ______% of the fair market value of its outstanding stock on the last day of the testing period.
A corporation is a PSC if its employee-owners own more than ______% of the fair market value of its outstanding stock on the last day of the testing period.
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Like corporations, PSCs are taxed at a flat rate of ______%.
Like corporations, PSCs are taxed at a flat rate of ______%.
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Match the form name with its description.
Match the form name with its description.
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Flashcards
C Corporations
C Corporations
Businesses taxed at the corporate level and then again at the individual level upon distribution.
S Corporations
S Corporations
Corporations that avoid double taxation by passing income directly to shareholders.
Partnerships
Partnerships
Businesses where two or more individuals manage and operate the business together.
Sole Proprietorships
Sole Proprietorships
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Controlled Groups
Controlled Groups
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Personal Service Corporations (PSCs)
Personal Service Corporations (PSCs)
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Corporate Charter
Corporate Charter
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Corporate Bylaws
Corporate Bylaws
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U.S. Source Income
U.S. Source Income
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Effectively Connected Income
Effectively Connected Income
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Asset Use Test
Asset Use Test
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FDAP Income
FDAP Income
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Withholding Tax Requirement
Withholding Tax Requirement
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Form 1042
Form 1042
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Corporate Tax Return Due Date
Corporate Tax Return Due Date
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Short-period Return
Short-period Return
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Automatically taxed corporations
Automatically taxed corporations
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Types of automatically taxed businesses
Types of automatically taxed businesses
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Single-member LLC taxation
Single-member LLC taxation
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Disregarded entities
Disregarded entities
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Personal Holding Company (PHC)
Personal Holding Company (PHC)
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Closely held corporation
Closely held corporation
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Controlled group of corporations
Controlled group of corporations
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Penalty tax on undistributed PHC income
Penalty tax on undistributed PHC income
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Accumulated Earnings Tax
Accumulated Earnings Tax
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Tax Rate for Controlled Group
Tax Rate for Controlled Group
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Accumulated Earnings Deduction Limit
Accumulated Earnings Deduction Limit
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Reasonable Needs Accumulation
Reasonable Needs Accumulation
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Exempt Corporations from Controlled Group
Exempt Corporations from Controlled Group
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Filing Requirements for Small Corporations
Filing Requirements for Small Corporations
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Form 926 Purpose
Form 926 Purpose
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Form 3520 Purpose
Form 3520 Purpose
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Form 5472
Form 5472
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Form 8865
Form 8865
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Form 8858
Form 8858
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Form 8938
Form 8938
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Form 8991
Form 8991
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Form 8992
Form 8992
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Form 8993
Form 8993
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Section 59A
Section 59A
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LLC Tax Election
LLC Tax Election
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Panda Corp. Taxable Income
Panda Corp. Taxable Income
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Foreign Income Source
Foreign Income Source
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Withholding on Nonresidents
Withholding on Nonresidents
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Sec. 351 Gain or Loss
Sec. 351 Gain or Loss
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Mr. Bass's Property Transfer
Mr. Bass's Property Transfer
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Recognized Gain Calculation
Recognized Gain Calculation
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Mr. Jacobs' Property Transfer
Mr. Jacobs' Property Transfer
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Accumulated Earnings Credit
Accumulated Earnings Credit
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Tax Due Date for Corporations
Tax Due Date for Corporations
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Estimated Tax Payments
Estimated Tax Payments
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Large Corporation Qualification
Large Corporation Qualification
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Form 8832 Election Form
Form 8832 Election Form
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Mr. Brown's Recognized Gain
Mr. Brown's Recognized Gain
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Sec. 357 Liability Assumption
Sec. 357 Liability Assumption
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Section 6655(e) Requirements
Section 6655(e) Requirements
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Accumulated Income Taxable Income
Accumulated Income Taxable Income
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Nonresident Alien Withholding
Nonresident Alien Withholding
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Stock Control Requirement
Stock Control Requirement
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Recognized Gain from Equipment Transfer
Recognized Gain from Equipment Transfer
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Payment Estimates by Corporations
Payment Estimates by Corporations
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FOB Shipping Point vs. Destination
FOB Shipping Point vs. Destination
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Sec. 351 Exchange Conditions
Sec. 351 Exchange Conditions
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Form for Foreign Transactions
Form for Foreign Transactions
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Accumulated Earnings Tax Rate
Accumulated Earnings Tax Rate
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Recognized Gain for Cash Received
Recognized Gain for Cash Received
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Corporate Estimated Taxes
Corporate Estimated Taxes
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Nonrecognition Rule Under Section 351
Nonrecognition Rule Under Section 351
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Study Notes
Businesses Taxed as Corporations
- Businesses legally chartered as corporations, joint-stock companies, insurance companies
- Other businesses formed before 1997 with more than two of these characteristics: centralization of management, continuity of life, free transferability of interests, limited liability
- Businesses formed after 1996 are automatically taxed as corporations:
- Businesses formed under federal or state law designating them as corporations, bodies corporate, or body politic
- Businesses formed under state law as joint-stock companies or joint-stock associations
- Insurance companies
- Certain banks
- Businesses wholly owned by state or local government
- Businesses requiring corporate tax status by the Internal Revenue Code (e.g., certain publicly traded partnerships)
- Certain foreign businesses
Controlled Groups and Personal Service Corporations (PSCs)
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Controlled groups of corporations include corporations with specific stock ownership relationships.
-
Parent-subsidiary controlled groups:
- Two corporations where one owns 80% or more of the total voting power or 80% or more of the total value of the other corporation's outstanding stock.
- Includes any corporations that meet the requirements above (if two or more corporations involved).
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Brother-sister controlled groups: Two or more corporations where the same five or fewer persons (individuals, trusts or estates) hold 80% or more of the voting power or 80% of the value of all classes of stock in each corporation.
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Stock deemed both actually and constructively owned is counted.
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A person constructively owns stock if they are in a family relationship (spouse, child, grandchild, parent or grandparent).
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Stock can be owned within a corporation, partnership, estate or trust with a 5% or greater interest.
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Excluded corporations: Tax-exempt corporations, insurance corporations
U.S. Source Income
- Foreign corporation income is U.S. source income if it is effectively connected with a U.S. business
- Income is effectively connected if:
- The income was derived from assets used or held for use in conducting a U.S. business
- The U.S. business was a material factor in the production of income
- Withholding isn't required for effectively connected income.
- Fixed, determinable, annual or periodic income is taxed at a flat 30% rate if not effectively connected and must be withheld.
Tax Return Filing
- Corporations file Form 1120 to report their income.
- Due date is the 15th day of the 4th month after the tax year end for C corporations. Excemptions exist for corporations with a June 30 fiscal year. Exceptions exist for C corporations with a June 30 fiscal year will continue having a due date of the 15th day of the 3rd month following the close of their tax year. These provisions will remain in effect until tax years beginning after December 31, 2025.
- Penalties exist for late filing.
- The penalty for late filing is 5% of the tax due each month or part of a month the return is late, but does not exceed 25%.
- There's a minimum penalty of $485 if the return is more than 60 days late.
- Corporations are not required to file balance sheets, income reconciliation, or analysis of unappropriated retained earnings for their financial statements if their gross receipts and total assets were less than $250,000 for the tax year,
Additional Corporate Taxes
- Accumulated earnings tax is levied on corporations that don't distribute profits sufficient for their business operation.
- Taxable Income + Positive Adjustments - Negative Adjustments = Accumulated Taxable Income *20% = Accumulated Earnings Tax
- Certain organizations are exempt from accumulated earning tax (S corporations, tax-exempt corporations, Personal Holding Companies, Foreign Personal Holding Companies, and Passive Foreign Investment companies).
- Reasonable needs of a business include items and plans for using the earnings and the amount needed to redeem stock of a deceased shareholder (limited by the amounts of estate taxes or inheritance or both.)
- Corporate alternative minimum tax (CAMT) is a special minimum tax on large corporations.
- Some of the requirements for a CAMT corporation are: applicable to corporations other than S corporations, RICs, or REITs with an annual average adjusted financial statement income of $1 Billion and other conditions.
- This tax determines taxable income and regular corporate tax
- Includes a foreign tax credit reduction.
Estimated Tax Payments
- Corporations are required to pay estimated taxes unless their liability is below $500.
- Payment schedule is on the 15th of the 4th, 6th, 9th, and 12th months of the tax year. (April 15, June 15, September 15, and December 15).
- Tax amount is 25% of the lesser of the prior tax year or the current tax year's tax.
- Corporations with uneven income can annualize income and pay estimated taxes accordingly. Payment amount must total 100% of the tax due by the last installment payment date (December 15 for calendar year).
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Description
This quiz covers the taxation of businesses chartered as corporations, including joint-stock companies and insurance firms. It also discusses the characteristics that define controlled groups and personal service corporations (PSCs). Test your knowledge on how various business structures are taxed and their legal classifications.
