AC553_Chapter_14_Part IV - Chapter 14 Taxation of...

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1 Chapter 14 Taxation of Corporations —Basic Concepts Part IV ©2011 CCH. All Rights Reserved. 4025 W. Peterson Ave. Chicago, IL 60646-6085 1 800 248 3248 www.CCHGroup.com
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2 of 40 Chapter 14 Exhibits Chapter 14, Exhibit Contents A 1. Computation of Tax Liability 2. Corporate Regular Income Tax Rates 3. Determining Gross Tax Liability – Example 4. Corporate Regular Income Tax Rates – Personal Service Corporations 5. Corporate Alternative Minimum Tax 6. Adjustments to Taxable Income 7. Adjusted Current Earnings 8. AMT ACE Adjustment – Example 9. Exemption Amount 10. Tentative Minimum Tax
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3 of 40 Chapter 14 Exhibits Chapter 14, Exhibit Contents B 11. Net AMT Liability 12. Minimum Tax Credit 13. AMT – Example 14. Controlled Groups of Corporations 15. Parent-Subsidiary Corporations 16. Brother-Sister Corporations 17. Consolidated Returns 18. Combined Groups 19. Allocations of Income, Deductions, and Credit 20. Controlled Groups – Example 1 21. Controlled Groups – Example 2
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4 of 40 Computation of Tax Liability n Corporation first computes its regular tax liability u This is reduced by any tax credits to which it is entitled n Additionally, corporation must compute an alternative minimum tax Chapter 14, Exhibit 1
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5 of 40 Corporate Regular Income Tax Rates Marginal federal tax rate for corporations and associations taxed as corporations ranges from 15 to 39 percent as follows: Taxable income Rate $0 to $50,000 15% $50,001 to $75,000 25% $75,001 to $100,000 34% $100,001 to $335,000 39% $335,001 to $10,000,000 34% $10,000,001 to $15,000,000 35% $15,000,001 to $18,333,333 38% Over $18,333,333 35% Chapter 14, Exhibit 2
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6 of 40 Determining Gross Tax Liability – Example X Company had: gross receipts of $150,000 expenses of $60,000 What is its gross tax liability (GTL)? Y Company had: gross receipts of $80,000,000 expenses of $50,000,000 What is its gross tax liability (GTL)? Chapter 14, Exhibit 3a
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7 of 40 Determining Gross Tax Liability – Example X Company: Gross receipts $150,000 Expenses 60,000 Taxable Income (TI) $90,000 GTL: $7,500 + 25% x $10,000 = 2,500 $10,000 Y Company had: Gross receipts $80,000,000 Expenses 50,000,000 TI $30,000,000 GTL: 35% x $30,000,000 = $10,500,000 Chapter 14, Exhibit 3b
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8 of 40 Corporate Regular Income Tax Rates— Personal Service Corporations n Taxed at a flat tax rate of 35% n Personal service corporation: 1. Substantially all activities involve performance of services in: « Health « Law « Engineering « Architecture « Accounting « Actuarial science « Performing arts « Consulting Chapter 14, Exhibit 4a
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9 of 40 Corporate Regular Income Tax Rates— Personal Service Corporations 2. Substantially all of stock (95%) held by: « Employees « Retired employees, or « Their estates Chapter 14, Exhibit 4b
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10 of 40 Corporate Alternative Minimum Tax n Alternative Minimum Tax (AMT) u Payable to extent it exceeds corporation’s regular income tax n Starting point for computing AMT is corporation’s taxable income Chapter 14, Exhibit 5a
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11 of 40 Corporate Alternative Minimum Tax The tax is computed as follows: Taxable Income (+ or –) Adjustments to Taxable Income + Tax Preference Items (+ or –) Adjusted Current Earnings Adjustment AMT-NOL Deduction (limited to 90 percent) _________________________________________ = Gross Alternative Minimum Taxable Income (AMTI) Exemption Amount _________________________________________ = Net Alternative Minimum Taxable Income × 20% Tax Rate __________________________________________ =
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AC553_Chapter_14_Part IV - Chapter 14 Taxation of...

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