Corporate Operations and Book-Tax
Differences
Corporate Tax Rate Schedule
Example Corporate Tax Rate Schedule
Texas Corporation has taxable income of $17 million in
the current year.
Using the corporate tax rate schedule, what is Texas
Corporations income
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9" Corporate Formatiao-sr7'
8 Reorganization and
Liquidation
Learning Objectives
Upon completing this chapter, you should be able to:
L0 8-1Review the taxation of property dispositions.
LO 8-2Compute the tax consequences to the
Corporate Formations
Incorporation
a.
b.
c.
Corporations are formed under State law by filing
Articles of Incorporation.
A number of decisions must be made including what
State to incorporate in, what assets will be transferred,
how to accomplish the tran
Entities Overview Choosing a
Business Form for Tax Purposes
Business Forms
a.
Sole Proprietorship
b.
C Corporation
c.
d.
e.
S Corporation a C Corporation that makes a valid
election to be treated as a flow-through entity.
Partnerships General and Limited
Business Income, Deductions, and
Accounting Methods
Business Income
Gross Income is all income from whatever
source derived. Examples include:
Revenue from services
Gross profit from inventory sales
Rental income
Statutory exclusions from business gross
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Section 707 Guaranteed Payments 1. T's only contribution to the partnership is services. What if the agreement is that T will receive $50,000 per year but will not share in the profits or loss? T was enticed to leave his job and become a partner in
Orrisch Allocations per the agreement Capital contribution Loss (before depreciation) Depreciation Basis at book value Equal Allocation at liquidation,per the court* Original capital Loss ($984 + $18,412 = $19,396) Distribution at liquidation Gain (l
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Section 351 Rationale An exchange, but a mere change in form. The taxpayer is dealing with himself or herself. A deferral, not tax forgiven. Neutralize the tax laws regarding choice of entity. Uses Incorporate a proprietorship or partnership. Pool
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