c-tax - Corporate Taxation A Tax Formula Gross Income-Deductions =Taxable Income B Tax Rates 1 Rate Schedule_Taxable Income Tax Rate 050,000 15

# c-tax - Corporate Taxation A Tax Formula Gross...

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Corporate Taxation A. Tax Formula Gross Income -Deductions =Taxable Income B. Tax Rates 1. Rate Schedule ___Taxable Income____ Tax Rate 0- 50,000 15% 50,000- 75,000 25% 75,000- 100,000 34% 100,000- 335,000 39% 335,000-10,000,000 34% 10,000,000-15,000,000 35% 15,000,000-18,333,333 38% 18,333,333- 35% a. Personal Service Corporation--a corporation where the principal activity is the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, the performing arts, or consulting and where substantially all of the stock is owned by employees, retired employees, or their estates is subject to a flat tax rate of 35% 2. Illustrations a. A corporation had taxable income of \$60,000 Tax: 15% x 50,000 7,500 25% x (60,000 - 50,000) _2,500 10,000 b. A corporation had taxable income of \$180,000 Tax: 15% x 50,000 7,500 25% x 25,000 6,250 34% x 25,000 8,500 39% x (180,000 - 100,000) 31,200 53,450 1
c. A corporation had taxable income of \$350,000 Tax: 15% x 50,000 7,500 25% x 25,000 6,250 34% x 25,000 8,500 39% x 235,000 91,650 34% x (350,000 - 335,000) __5,100 119,000 C. Specific Provisions 1. Capital Gains and Losses--a corporation uses the same procedures for determining net capital gains and losses as an individual, except that long-term capital gains and losses are not separated into 28%, 25%, and 20% gains and losses a. Net Capital Gains--net capital gains are included in taxable income b. Net Capital Losses--net capital losses are not deductible 1) Unused Capital Losses a) Carryback--unused capital losses may be carried back to the three preceding taxable years and offset against capital gains starting with the earliest taxable year first b) Carryforward--unused capital losses may be carried forward to the five succeeding taxable years and offset against capital gains 2) Holding Period--the holding period of any unused capital losses is short term c. Illustrations 1) A corporation had taxable income excluding capital gains and losses of \$130,000, a net long-term capital gain of \$10,000, and a short-term capital gain of \$5,000 Taxable Income = 130,000 + 10,000 + 5,000 = 145,000 2) A corporation had taxable income excluding capital gains and losses of \$130,000, a net long-term capital gain of \$10,000, and a short-term capital loss of \$5,000 Taxable Income = 130,000 + (10,000 - 5,000) = 135,000 3) A corporation had taxable income excluding capital gains and losses of \$130,000, a net long-term capital loss of \$10,000, and a short-term capital gain of \$5,000 Taxable Income = 130,000 + ((5,000 - 10,000) or 0) = 130,000 The carryback or carryforward is short term. 2. Net Operating Loss--the excess of deductions over gross income for the current taxable year 2
a. Carryback--the net operating loss may be carried back to the two preceding taxable years and used in the recalculation of taxable income starting with the earliest taxable year first 1) Waiver--a corporation may make an irrevocable election not to carry back the net operation loss b. Carryforward--the net operating loss may be carried forward to the twenty succeeding taxable years and used in the calculation of taxable income c. Illustration--a corporation had gross income from operations of \$100,000 and expenses from operations of \$150,000 during year 1

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• Fall '14
• Taxation in the United States