square4 The stock is forfeitable until the employee serves the employer 6 years

Square4 the stock is forfeitable until the employee

This preview shows page 45 - 48 out of 48 pages.

square4The stock is forfeitable until the employee serves the employer 6 years.square42007: After 6 yrs., the restriction is lifted when the FMV = $2,000.Example on Restricted Stock Compensation:Deductions Requiring Special Treatment—CompensationSOLUTION:QUESTION:What is the timing and amount of the employee’s taxable income & the corporate employer’s deduction?Chapter 16, Exhibit 16c2001: No taxable income to employee; no deduction to employer.2007: $1,500 ordinary income to employee; $1,500 corporate deduction 1,500[2,000 - 500]
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Rules for Net Operating Losses (NOLs)Same as corporate.2 years back, 20 years forward. [For pre-8/5/97 NOLs: 3 yrs. back; 15 yrs. forward.]Carryovers[NOLs from tax years beginning after 8/5/97.]:Same general definition as corporate.Excess business exp. over bus incomeDefinition of NOLProprietorshipsCorporationsComparison of NOL Rules Between Corporations and ProprietorshipsSame as corporate.May elect to forego carrybacks.Election:Deduction for AGI in a subsequent year.Deduction from gross income in a subsequent year.If carried forward.:Same as corporate.Prior taxable income (TI) is recomputed, & taxpayer files for a refund with an amended return.If carried backward:Chapter 16, Exhibit 18a
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Form 1120.A corporation files its federal return on Form 1120.Schedule M-1.Reconciling accounting and tax income is done on Schedule M-1 of Form 1120. M-1 addresses Reconciling Book and Taxable Incomedone on Schedule M-1 of Form 1120. M-1 addresses differences, both permanent and temporary, between accounting and tax income. The differences are caused by using different accounting and tax methods to report income and expenses. In addition to tax reporting, the M-1 is also useful for tax planning.Chapter 16, Exhibit 23a
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Reconciling Book and Taxable Income
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