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Accumulated adjustments account
An S corporation account that reflects the cumulative total of undistributed net income previously taxed to shareholders. Distributions from the AAA are generally treated as nontaxable and are a return of a shareholder's stock basis.
Accumulated earning tax
A penalty tax imposed on a corporation (in addition to regular income tax) if it accumulates earnings in excess of reasonable business needs in order to avoid a shareholder tax on divided distributions. The tax is not self-assessing, and does not apply to personal helding companies.
A parent-subsidiary chain of corporations in which at least 80% of the voting power (and total value) of stock is owned by includable corporations. An affilated group may elect to file a consolidated tax return.
2 or more corporations owned by the same individuals or entitites. Controlled groups include parent-subsidiary corporations, brother-sister corporations, and combined groups. The 2 or more corporations that make up a controlled group are in the aggregate limited tot he tax benefits available to a single corporation.
A corporate distribution of property to shareholders on their stock that is made from the corporation's current or accumulated earnings and profits.
Dividens received deduction (DRD)
A deduction allowed a corporation for dividends received from other taxable domestic corps. The %age used varies according to the %age of stock owned. If < 20%, DRD is 70% of dividends received. If at least = 20%, but < 80%, the DRD is 80%. If at least 80%, the DRD is 100% (if consolidated return is not filed).
Include expenses of temporary directors and organizational meetings, state fees for incorporation, and accounting and legal service costs incident to incorporation. A corporation may immediately expense the first $5000 (subject to phaseout) of organizational expenditures and generally amortize the remainder over a period of 180 mo. beginning w/the mo. that business begins.
Personal holding company tax
A penalty tax imposed on a personal holding company (in addition to regual income tax) to discourage individuals from placing investment property in a corporation in order to have investment income taxed at lower corporate rates. The tax is self-assessing.
A qualifying small business corp. for which an election has been made to be taxed under the provisions of subchapter S of the IRC. An S corp. generally pays no corporate income tax and is treated as a passthrough entity. An S corp.'s items of income, gain, loss, deduction, and credit pass to shareholders and are reported on the tax returns of its shareholders.
Sec. 1244 Stock
Stock issued by a qualifying small business corp. that entitles the original holder to deduct an ordinary loss (rather than a capital loss) if the stock is disposed of at a loss or becomes worthless. The annual ceiling on ordinary loss treatment is $50,000 ($100,000 for married individuals filing jointly).
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