Exam 1 Cheat Sheet

Exam 1 Cheat Sheet - Advantages of a sole prop Not subject to taxation Marginal tax rate may be lower Money belongs pers to owner May

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Advantages of a sole prop: Not subject to taxation Marginal tax rate may be lower Money belongs pers. to owner May contrib. (withdraw) prop w/o gain Business losses may offset nonbus inc Disadvantages of sole prop: Taxed to current individual whether profits remain in company or not Corp tax rates may be higher than indv Must pay full amount of SS Some tax exempt benefits not available Same accounting period for bus and per Advantage of partnership Pays no tax as entity Partners tax rate may be lower than corp Partners can contrib. and withdraw money w/o recogn gain or loss Prtnr basis is increased by his share of income – prevents double taxation Disadvantage of partnership All profts are taxed when earned A prtnr tax rate can be higher than corp Prtnr is not considered an employee Partners generally cannot defer income by choosing a fiscal year for the partnership that differs from the tax year of principal partner C Corp Tax advantage Corp is separate and distinct from ownr Liable for only ½ SS tax Shareholder-employee entitled to tax free benefits Can use fiscal instead of calendar Allowed to exclude 50% of gain realized on sale or exchange of stock C Corp Disadvantage Double taxation of income Cannot withdraw money without recognizing income NOL provide no tax benfits to owners Capital losses provide no tax benefit to owners S Corp Advantage Generally pays no taxes Marginal tax rate may be lower than C Corp losses flow through to separate returns of shareholders and can offset income Can contrib. or withdraw w/o gain Only taxed at shareholder level S Corp disadvantages Shareholders are taxed on all profits regardless if distributed Shareholders marginal tax rate may exceed that of C corp Nontaxable fringe benefits are not available Cannot usually choose a fiscal year Control requirement Dan exchanged property having a 22 adj basis and a 30 fmv for 60% of sun corp. Ed exchanges 20k cash for the remaining 40%. They together own 80%.
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This note was uploaded on 04/08/2008 for the course BACC 442 taught by Professor Moshier during the Spring '08 term at SUNY Albany.

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Exam 1 Cheat Sheet - Advantages of a sole prop Not subject to taxation Marginal tax rate may be lower Money belongs pers to owner May

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