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highly touted by Green in advertising to its customers. To maintain constant quality control, Ed is required to live in a residence owned by Green and located adjacent to its brewery. If Green sold this residence for a gain, it may not use § 121 to exclude such gain. Had the residence been owned by Ed (and not Green Brewing Corporation), § 121 would be available to Ed.36
c.Credits that are personal in nature (child credit, earned income credit) are not available to corporations.d.Charitable contributions and casualty/theft losses have substantially different limitations for corporations and individuals. ACCOUNTING PERIODS AND METHODS12.C corporations may choose a calendar year or a fiscal year for reporting purposes, but S corporations and personal service corporations (PSCs) are subject to restrictions in the choice of a fiscal year.13.Cash method of accounting, available to individuals, is not available to most regular corporations. Cash method is allowed for S corporations, qualified PSCs and corporations with average annual gross receipts of not more than $5 million.CAPITAL GAINS AND LOSSES14.Differences in corporate and individual taxpayer treatment of capital gains and losses.a.Net capital gains of corporations are not subject to lower rates, as are net capital gains of individuals.b.Corporate capital losses may only offset capital gains while individuals may deduct up to $3,000 of losses in excess of capital gains.c.Excess corporate capital losses are carried back 3 and forward 5 years to offset capital gains, while capital losses of individuals are carried forward indefinitely. When corporations carryover capital losses, they are treated as short term. For individuals, capital losses retain their original status as long term or short term.RECAPTURE OF DEPRECIATION15.The § 291 amount is treated as additional § 1250 depreciation recapture. The result is a recharacterization of what would otherwise be § 1231 gain as ordinary income. Corporate taxpayers do not receive a preferential tax rate on long-term capital gains (e.g., a net § 1231 gain), but the recharacterization might reduce a corporation’s ability to utilize capital losses in the current year. PASSIVE LOSSES16.Passive loss limitations apply to closely held C corporations and personal service corporations (PSCs). However, closely held C corporations may offset passive losses against active income.CHARITABLE CONTRIBUTIONS37