Corporate & Partnership Tax Exam 1

$32 million gross receipts

What is the limit for corporations to use the cash method of accounting?

Related party transactions

Limits an accrual basis taxpayer to recognizing a deduction until a cash basis related party reports the amount as income

Related party

An individual or corporation that owns more than 50% of the outstanding stock, including family

Capital losses only offset capital gains

What is the rule for corporations concerning capital gains?

CB = 3 years

CF = 5 years

What is the carryback / carryforward for capital gains?

Business interest expense

What deduction has unlimited carryforward?

Gross receipts >$32 million

What is the limitation for business interest expense deduction?

• Business interest income

• Adjusted taxable income * 30%

• Floor plan financing interest

What is the formula for business interest expense?

• Nonbusiness income, g/l, or deduction

• Business interest

• NOL deduction

• Qualified business income deduction

• Depreciation / amortization

When calculating adjusted taxable income for the business interest expense deduction, what things are disregarded?

• Authorized by BOD before year end

• Paid on or before April 15th of following year

What stipulations must a charitable contribution make to be recognized in the year prior to payment?

FMV, basis

Long term capital gain property can be deducted at _______ while property put to unrelated use or held for short term can be deducted at _______

• Charitable contribution deduction

• Dividends received deduction

What items are not included in taxable income for purposes of calculating the floor/ceiling for charitable contribution deduction?

Charitable contribution ceiling and floor

1% / 10% of taxable income

5 year carryforward

How many years of carryback / carryforward is allowed for charitable contribution deductions?

80% of taxable income

What is the carryforward limit for net operating loss?