Chapter 1-6: Corporate Formation and Taxation

Flashcards covering key vocabulary and concepts related to corporate structure, taxation, and formation, with a focus on relevant sections of the tax code and landmark court cases.

ASC 740

Accounting standard for reporting income taxes in an entity's financial statements, not a tax standard.

Tax Provision

Another term for income tax expense.

Currently Payable Taxes

Taxes that must be paid immediately.

Deferred Taxes

Taxes that are due later, which includes deferred tax assets (providing future tax deductions) and deferred tax liabilities (causing more cash taxes than financial statement income suggests).

Physical Presence

The traditional requirement for a corporation to be subject to tax in a state, involving a physical connection like an office or employees.

Wayfair Case

Supreme Court case that established the 'economic presence' standard, requiring companies making money off a state's citizens to collect sales tax, even without physical presence.

Economic Presence

The standard established by the Wayfair case, asserting that making money off a state's citizens constitutes presence, requiring sales tax collection.

Temporary Differences

Differences between accounting policies and procedures for financial reporting purposes versus tax returns (e.g., accrued vacation).

Permanent Differences

Differences between what is done for financial statements and tax returns that do not reverse over time.

Hybrid Entity

An organization treated as a partnership in a foreign country but as a corporation under US law.

Section 351

Deals with no gain or loss recognition when property is transferred to a corporation in exchange for stock, if control requirements are met.

Section 118

States that a corporation does not recognize gain for a capital contribution.

Section 7701

Section of the tax code that defines what a person is, including individuals, trusts, estates, partnerships, associations, companies, or corporations.

Check the Box Regulations

Regulations that allow eligible entities (like LLCs) to choose their tax classification.

Control (under Section 368(c))

Defined as owning at least 80% of the stock immediately after the exchange of assets for stock.