Corp. Sol., 2008 Chap.5

Corp. Sol., 2008 Chap.5 - Chapter C:5 Other Corporate Tax...

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Other Corporate Tax Levies Discussion Questions Unless otherwise stated, all answers assume the corporation does not qualify for the AMT’s small business exemption. C:5-1 Congress enacted the corporate AMT to ensure that every corporation with substantial economic income pays a minimum amount of tax despite the use of exclusions, deductions, and credits. p. C:5-2. C:5-2 a. Tax preference items are a series of items specified in Sec. 57(a) that are added to corporate taxable income along with adjustments to compute AMTI (see Table C:5-1). b. AMT adjustments are increases or decreases to corporate taxable income (generally reflecting the recomputation of income, gain, loss, or deduction items) made to compute AMTI (see Table C:5-1). c. Alternative minimum taxable income (AMTI) is the corporation's taxable income increased by tax preference items, increased or decreased by adjustments (income, gain, loss, and deduction adjustments that must be recomputed under the AMT) and reduced by the alternative tax NOL deduction (See Table C:5-1). d. Statutory exemption amount is $40,000 and is reduced by 25% of the amount by which AMTI exceeds $150,000. The corporate exemption is completely phased-out when AMTI reaches $310,000. In addition, the statutory AMT exemption must be allocated among the members of a controlled group. e. Tentative minimum tax (TMT) is calculated by (1) multiplying 20% times the corporation's AMTI, net of the statutory exemption amount remaining after the phase-out, and (2) subtracting the allowable AMT foreign tax credit (AMT FTC). f. Minimum tax credit equals the amount of alternative minimum tax paid. A C corporation can use this credit only on a prospective basis to the extent that its regular tax in later years exceeds its tentative minimum tax. pp. C:5-4 through C:5-7, C:5-9, and C:5-14. C:5-3 a. Small C corporations are exempt from the AMT for tax years beginning after December 31, 1997. A C corporation created after 1997 is generally exempt from the corporate AMT for its initial tax year regardless of its gross receipts for the tax year. A special aggregation rule applies if the operating results of a C corporation are aggregated with those of one or more corporations under Sec. 448(c)(2) or is a successor to another corporation under Sec. 448(c)(3). To qualify for the second tax year, gross receipts for the first tax year must not exceed $5 million. To qualify for the third tax year, the corporation’s average gross receipts for the first two tax years must not exceed $7.5 million. To qualify for the fourth tax year, the corporation’s average gross receipts for the first three tax years must not exceed $7.5 million. This three-year look-back rule is used for succeeding tax years. Special transitional rules applied to corporations formed after December 31, 1993 and before January 1, 1998. The transitional rules are discussed on page C:5-2 of the textbook. C:5-1
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This note was uploaded on 09/23/2008 for the course ACCT 72481 taught by Professor Backer during the Fall '08 term at CSU Fresno.

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Corp. Sol., 2008 Chap.5 - Chapter C:5 Other Corporate Tax...

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