Ind. IO Chap. 16 - 2008

Ind. IO Chap. 16 - 2008 - Chapter I:16 Corporations...

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Chapter I:16 Corporations Learning Objectives After studying this chapter, the student should be able to 1. Identify the types of entities that can be classified as a corporation for federal tax purposes. 2. Calculate the corporate income tax liability. 3. Apply the nonrecognition of gain or loss rules for corporate capitalization. 4. Understand the significance of earnings and profits. 5. Determine the tax consequences of nonmoney distributions and stock redemptions. 6. Understand the tax implications of a corporate liquidation to the liquidating corporation and its shareholders. Areas of Greater Significance Since this chapter is only an initial exposure to corporations for the student, the instructor may wish to stress those topics which directly impact individual taxpayers (shareholders). These topics include formation transactions, capitalization, earnings and profits, distributions and redemptions, and liquidations. Areas of Lesser Significance In the interest of time, the instructor may determine that the following areas are best covered by student reading, rather than class discussion: 1. Corporate tax structure compared with other forms of business organization 2. Definition of a corporation I:IO16-1
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Problem Areas for Students The following areas may prove especially difficult for students: 1. Computation of the corporate alternative minimum tax. 2. Shareholder tax consequences on formation. 3. Determining whether certain distributions are dividends or redemptions. Highlights of Recent Tax Law Changes The following item of tax law has changed from the 2007: 1. The U.S. Production Activities Deduction has increased to 6% of the applicable tax base. Teaching Tips 1. Stress to the students that this chapter is a broad overview of corporations. More detailed analysis will be provided in a second undergraduate tax course and in specialized graduate tax courses. 2. At this point in the students' tax career you may wish to concentrate on computation of corporate tax, specific rules applicable to corporations, and transfers of property to controlled corporations. Lecture Outline I. Similarities and Differences Between the Taxation of Corporations and Individuals A. Similarities Calculation of corporate taxable income is similar to the calculation of taxable income for a sole proprietorship. B. Differences Differences between corporate taxable income and individual taxable income include: 1. No AGI, standard deduction, or personal/dependency exemptions for corporations. 2. Corporations have a dividend received deduction - individuals don't. 3. Limitations on charitable contributions for corporations are much more stringent than for individuals. I:IO16-2
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II. Specific Rules Applicable to Corporations A. Capital Gains and Losses (Examples I:16-2, I:16-5) 1. Net capital gain (whether short-term or long-term) is taxed as ordinary income. 2.
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This note was uploaded on 11/18/2008 for the course ACCT 45089 taught by Professor Instructor during the Spring '08 term at University of Phoenix.

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Ind. IO Chap. 16 - 2008 - Chapter I:16 Corporations...

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