Chapter7-Corporation Taxation - AICPA Golden CPA Focus...

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AICPAGolden CPA FocusReview-Regulation
Chapter7CORPORATION TAXATION
This chapter covers corporate taxation and the rules thatapply throughout the life cycle of a corporation.FormationSpecialrules,includingthecharitable contributionsdeduction and the dividends received deductionCorporate distributions to shareholdersLiquidationReview of the special rules that apply to S corporations andtheirshareholders,andthetaxeffectsof corporatereorganizations.Overview
I. FORMATIONA. Tax Consequences1. No Gain or Loss Recognized When:Reacquisition - Purchase of treasury stock.Resale - Sale of treasury stock.Formation - Issuance of common stockNote:不需要确认收益也就是不需要纳税C Corporation
A. Tax Consequences2. Basis of Property (corporation receives)The general rule is that the basis of the property receivedfrom the transferor/shareholder is the greater of:a.Adjustedbasis(netbookvalue)of thetransferor/shareholder (plus any gain recognized by thetransferor/shareholder), orb. Debt assumed by corporation.I. FORMATION
B. Shareholder Tax Consequences1. No Gain or Loss RecognizedThe shareholder contributing property (not services) inexchange for corporation common stock has no gain or loss ifthe following two conditions have been met:a. 80% Control (Immediately after the transaction)b. No Boot is Received by the ShareholderI. FORMATION
B. Shareholder Tax Consequencesb. No Boot is Received by the ShareholderThe following items represent boot (taxable) and willtrigger gain recognition:(1) Cash withdrawn (boot received may generate gainto transferor) and(2) Receipt of debt securities (e.g., bonds)I. FORMATION
B. Shareholder Tax ConsequencesNote regarding C.O.D. (cancellation of debt) - The amount ofliabilities assumed that exceeds the adjusted basis of the totalassets transferred to the corporation is not boot (per se) butdoes generate gain.Note: NBV Assets- Liabilities =Excess Liability=BootI. FORMATION
B. Shareholder Tax Consequences2. Basis of Common Stock ( to shareholder)The basis of common stock received from the corporationwill be:a. Cash - Amount contributedb. Property - Adjusted basis (NBV)(1) The adjusted basis of property is reduced by anydebt on the property(e.g., C.O.D.) assumed by the corporationI. FORMATION
B. Shareholder Tax Consequencesb. Property - Adjusted basis (NBV)(1) The adjusted basis of property is reduced by anydebt on the property(e.g., C.O.D.) assumed by the corporation(2) Gain recognized by the shareholder (i.e., when debtexceeds the assets adjusted basis) is added to bringthe stock basis to zero.I. FORMATION
B. Shareholder Tax Consequencesc. Services - Fair Market Value (taxable)Ordinary income (taxable) - The shareholder receivingcommon stock for services rendered must recognize thefair market value as ordinary income.

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Term
Spring
Professor
N/A
Tags
Business Law, Taxation in the United States, C CORPORATION, Corporate Taxable Income Loss

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