| Term | Definition |
|---|
| Organization expense | May elect to deduct up to $5,000 of the costs of organizing a corp or partnership, reduced by excess expenditures in excess of $50,000 , and the remaining expenditures are amortized over 180 months, costs include meetings, legal fees, accounting fees, and state incorp fees, doesn't include cost of printing and issuing stock (reduces paid-in capital) |
| Bond transactions | Bonds sold at face value realize no gain or loss, is bonds are redeemed at less than issue price then they are recognized as ordinary income, if redeemed for more than issue price, then excess is an ordinary expense; if issued for a premium it must be amortized over the life of the bond as ordinary income, discounts are recognized as ordinary expenses on a pro rate basis over life o fbond |
| Unreasonable compensation | deductions for unreasonable salaries paid to shareholders will be disallowed, treated as dividends, limited to $1 million annually unless commission based |
| Returns for affiliated corporations | Separate tax returns can be filed for each company or a consolidated return, if they consolidate then they must on future returns, intercompany transactions must be eliminated |
| Earnings and profits | Distributions are first considered to come from current E&P, which is allocated on a pro rate basis to all distributions made over the year, any distributions in excess of current E&P come from accumulated E&P, distributions in excess of both are considered return of capital |
| Adjustments to E&P | Accelerated depreciation is not allowed in determining E&P, only straight-line, cost depletion is used versus percentage depletion, interest on state and municipal bonds increase E&P, federal income taxes reduce E&P, nondeductible capital losses reduce E&P |
| Accumulated earnings tax | tax levied to discourage corporations from not distributing profits to shareholders, first $250,000 of accumulated earnings is not subject to tax, |
| Estimated tax payments | Due in four installments on the 15th day of the 4th, 6th, 9th, and 12th month, no penalty for underpayments if the payments equal 100% of tax owed last year, large corps. (taxable income of $1 mill or more) must make 100% of current year taxes |
Combine with other sets
Share on Facebook
Share on MySpace