REG_4_04

  1. On what date is a corporate tax return due? Is an extension available?
    • April 15 for a calendar year end with a 5 month extension available OR
    • 15th day of the 3rd month after close for a fiscal year end with a 7 month extension available
  2. Estimated tax payments must be made by a corporation if the tax owed is more than $_____?
    $500.
  3. True / False: When calculating the estimated tax payments for a corporation, the amount to be estimated should include probable tax credits and the AMT.
    True
  4. Personal service corporations are subject to which tax rate(s)?
    A flat 35% regardless of the source of their income.
  5. How is the Research and Development tax credit determined?
    20% of the increase in R&D expenditures over the base amount for the year.
  6. There are several credits involved in the overall General Business Credit. How is the actual credit applied to the corporate tax return calculated?
    • The raw General Business Credit
    • less the greater of 
    • ++ (regular tax liability - 25,000) * 25% OR
    • ++ the Tentative Minimum Tax
  7. Assume a corporation owes $225,000 in taxes. It has $225,000 in general business credits. The Tentative Min. Tax is $40,000. Calculate the actual general business credit that may be applied to the tax return.
    • $225,000 business credit available
    • -  25,000 min. credit not allowed
    • $200,000 sub total
    • x      25%
    • $50,000 potential credit reduction
    • OR $40,000 Tentative Min Tax (use whichever is greater)
    • ++++++++++
    • $225,000 business credit available
    • - 50,000 reduction in credit
    • $175,000 business credit usable
  8. Can unused business credits be carried backward / forward?
    Back 1 year, forward 20 years.
  9. How can the R&D Tax Credit be utilized in special ways by (a) Eligible small businesses, or (b) Qualified small businesses?
    • Eligible Small Business: <$50M per year. The R&D credit can be used to offset AMT
    • Qualified Small Business: <$5M per year. The R&D credit can be used to offset the employer's FICA portion up to $250,000 annually.
  10. How is the Foreign Tax Credit determined?
    • Use the lesser of
    • ++ the foreign income taxes paid OR
    • ++ the foreign tax credit limitation, which is the US tax paid x (foreign source taxable income / worldwide income)
  11. Can unused foreign tax credits be carried backward / forward?
    Back 1 year, forward 10 years
  12. Describe the Accumulated Earnings Tax.
    A penalty tax on corporate retained earnings not distributed to shareholders. The IRS wants its share of taxes -- if the corporation holds the money and doesn't distribute it to shareholders, the IRS doesn't get its share of taxes; thus, the IRS penalizes corps for holding the money.
  13. What amount of retained earnings may be held by a (a) corporation, (b) personal service corp, or (c) personal holding company without requiring justification and yet avoid the Accumulated Earnings Tax?
    • Corporations: $250,000
    • PSC: $150,000
    • PHC: Not subject to this tax
  14. Under what conditions can a corporation avoid the Accumulated Earnings Tax?
    • (1) There is a legitimate business need to retain the money (saving for a piece of equip or special R&D project)
    • (2) The lifetime credit has not been exceeded (corp=$250,000, Service corp=$150,000)
    • (3) The accumulated earnings are distributed either through a charity deduction or dividends paid.
  15. How much is the Accumulated Earnings Tax? Who assess the tax?
    • An additional flat 20% on the excess holdings
    • Only the IRS assesses the tax if the IRS determines there has been an abuse of excessive holdings. The corp does NOT self-assess this tax.
  16. What is a personal holding company?
    • Corporations where:
    • ++ 5 or fewer people own 51% or more of the corporation AND
    • ++ 60% or more of the income is from taxable (not tax-free) passive sources
  17. How is a personal holding company taxed? At what rate?
    An additional 20% (above the corp rate + AMT amt) on holding company net income NOT distributed.
Author
BethM
ID
336219
Card Set
REG_4_04
Description
Becker Review 2017
Updated