CORPORATIONS: INTRODUCTION AND OPERATING RULES
(LO 2, 7) Gray Corporation should defer the gift of the land until 2016. This would allow Gray to fully
deduct in 2015 the carryover contribution amount of $75,000. If, instead, Gray gifted the
GRADUATE SCHOOL OF BUSINESS ADMINISTRATION
TXGB-7001-004 Corporate Taxation
Thursday, 8:00pm 10:00pm
Paul M Bochner
By appointment only (Lincol
26 points Personal Holding Company (PHC)
PHC should distribute every single dollar of E&P, or 20% corporate penalty tax
What makes a PHC?
1/ 5 or fewer individuals own more than 50% of the company.
E.g. 10 unrelated shareholders equally own 100,
Redemption will be in video
Earnings and profitE&Pdividend come out of E&P not earned income
In accounting, dividend comes out of retained earnings.
Only C-Corp has E&P
1. Come out of E&P are taxed as a dividend (taxabl
Main section: 351, 358, 362, 357
Section 351: Transfer to corporation controlled by transferor
Corporate formation, also for preexist corporation
(a) General rule:
No gain or loss shall be recognized if property is transferred to a cor
AMTAlternative Minimum Tax
Regular taxable income
- Tax credits
= final regular tax
Regular taxable income
+ preference items (must be +)
AMT Base (much boarder base)
- certain credits
foreign tax credit
A company has FMV of 8,000,000. The total E&P is 3,000,000.
Shareholder owns 100 out of 100 shares100% of the company for 10 years
The basis of the 100 share is 1,000,000
A. Sells 10% of company for 800,000 to a stranger
Internal Revenue Code
Section 301-385 print it wholesub chapter C
The inter-relationships of corporation and shareholders.
Treasury stock=redemption=recall back stock
Liquidate of corporation
C-corp vs S-corp
What come first?
Corp Answer S/H Answer
EG: two investment opportunities
a. 100,000,000 11% Bond
b. 100,000,000 9% Preferred Stock
=110 interest income
*35% tax rate
-38.5 tax payable
=71.5 after tax income
1000 preferred stock
90 divided income
70% DRD rate
TITLE 26INTERNAL REVENUE CODE
(2) 1250 GAIN.Section 291(a)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall apply to
sales or other disposition after December 31, 1982, in
taxable years ending after such date.
(3) POLLUTION CO
Corporate Tax Final
1. Three kinds of distributions [Ordinary, Redemption, Liquidation]; 2 kinds of taxpayers, generally, what are they prefer?
Individuals prefer Sale or Exchange (qualified redemption and liquidation treated as long-term capital gain or
Corporate Tax Midterm
1. [pp 2-11, pp 2-12, EX 11] Sale of stock, corporate stock, is an ordinary deduction, or capital deduction, if there is a
LOSS? Is it a capital or ordinary, is it always capital, always ordinary? Can it be capital, can it be ordinar