corp tax notes - Accumulated Earnings Tax A....

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Accumulated Earnings Tax A. Purpose--discourage the retaining of earnings in a corporation to avoid the double taxation that would have been imposed on distributions to stockholders B. Tax Computation--the accumulated earnings tax is equal to 15% of accumulated taxable income 1. Applicability--where both the accumulated earnings tax and the personal holding company tax are applicable, only the personal holding company tax is imposed a. Regular Tax--the accumulated earnings tax is imposed in addition to the regular tax b. Minimum Tax--the accumulated earnings tax is imposed in addition to the minimum tax on tax preferences 2. Accumulated Taxable Income--the accumulated taxable income is equal to the taxable income for the current taxable year increased or decreased by certain adjustments and decreased by the accumulated earnings credit and by the dividends paid deduction a. Adjustments 1) Deductions a) Federal Income Tax--federal income taxes, including the minimum tax on tax preferences, are deducted from taxable income b) Excess Charitable Contributions--charitable contributions in excess of the 10% limit on charitable contributions are deducted from taxable income c) Capital Losses--any net capital loss incurred during the current taxable year reduced by any net capital gain deductions of prior taxable years that have not previously reduced any net capital loss deduction is deducted from taxable income I) Illustration--a corporation has a net capital loss of $10,000 during the taxable year; during previous taxable years the corporation had a long-term capital gain net of tax of $7,000 and a capital loss of $3,000 Capital Loss Deduction = 10,000 - (7,000 - 3,000) = 6,000 d) Long-term Capital Gain Net of Tax--the excess of the net long-term capital gain incurred during the current taxable year over the tax attributable to the net long-term capital gain reduced by any net capital loss deductions of prior taxable years that have not previously reduced any net capital gain deduction is deducted from taxable income I) Illustration--a corporation has a net long-term capital gain of $10,000 during the taxable year; the 1
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tax on the net long-term capital gain is $3,400; during previous taxable years the corporation had a capital loss of $7,000 and a long-term capital gain net of tax of $3,000 Capital Gain Deduction = 10,000 - 3,400 - (7,000 - 3,000) = 2,600 2) Additions a) Dividends Received Deduction--any dividends received deduction that is reflected in taxable income is added to taxable income b) Net Operating Loss Carryover--any net operating loss carryover that is reflected in taxable income is added to
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This note was uploaded on 07/04/2011 for the course ACC 4302 taught by Professor Jones during the Spring '11 term at University of Houston.

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corp tax notes - Accumulated Earnings Tax A....

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