Dividends Received Deduction Is Computed After Charitable Deduction

...

7; A gain from an illegal activity is includible in income. To determine the gain, a deduction is permitted for cost of merchandise. Business expenses for operating an illegal business, other than the cost of merchandise, are not permitted as deduction.

Recognized gain on the exchange of stock pursuant to a plan of corporate reorganization was $0.

17:Interest expense on the debt incurred to carry the municipal bonds.nondeductible.

Interest income from municipal bonds are excludable in calculating taxable income.

A taxpayer does not extend the time for payment of tax by extending the filing deadline for the return. If there is tax owed when the return is filed, interest must be paid at the rate prescribed by IRC$5521. There is no delinquency penalty if the taxpayer files its return, pays at least 90% of the tax due by the due date, and pays the balance due on or before the extended due date.

College matching contributions are deductible;

Under these facts the estimate was accurate based on information available when the return was filed. When the exact amount is known, the difference is included in income in the year the amount is received or the exact amount is determined.

In filling a consolidated federal income tax return, a corporate group eliminates the dividends from group members.

A corporation's penalty for underpaying federal estimated taxes is not deductible.

When computing a corporation's income tax expense for estimated income tax purposes, both corporate tax credits and the alternative minimum tax should be taken into account.

The accrual basis method of accounting for tax purposes is required for the following:

1: The accounting for purchases and salels of inventory,

2: Tax shelters,

3: Certain farming corporations, and

4:C corporations, trusts with unrelated trade or business income, and partnerships having a C corporation as a partner provided the business has greater than $5 million average annual gross receipts for the three-year period ending with the tax year.

A personal service corporation is primarily involved in the performance of one of the following fields: accounting , law, consulting ,engineering ,architecture, health and actuarial science.

Shareholders treat property received in a complete liquidation of a corporation as full payment for their stock. Therefore, the shareholder must recognize capital gain or loss equal to the difference between the fair market value of the property received and the basis of the stock surrendered.

A c corporation has considerable flexibility in choosing an accounting period. An C corporation generally has the same choice of accounting periods as do individual taxpayers. All of the other forms have some limitations (and these are identified in the textbook in chapter R3 and R4.)

In

In a tax-free incorporation, the percentage for "Control" is 80%

An S corporation reports both separately stated and non-separately stated (net business) items of income. The dividend income is a separately stated item and is not included in the calculation of net business income.

In general, a partnership can distribute appreciated property tax-free to its partners (in general, a non liquidating distribution to a partner is nontaxable). Since a LLC is taxed like a partnership, a limited liability company can distribute appreciated property to its owners tax-free.

10/22

Unless the organization is taxable as a trust, its unrelated business taxable income is subject to regular corporate taxes.

Interest expense on bank loans to purchase U.S. treasury bonds are deductible since the interest income earned on U.S. treasury bonds is taxable.

The selection of an accounting method for tax purposes by a newly incorporated C corporation is made on the initial tax return by using the chosen method.

A corporation’s capital loss carryback or carryover is always treated as a short-term capital loss.

Losses resulting from the sale, exchange or worthlessness of Section 1244 qualifying stock(also called small business stock) are treated as ordinary losses up to $50,000 in any tax year. However, this loss is available only to original owners of the stock. Because X inherited the stock, he is not the original owner. Therefore, in this case, no ordinary loss may be deducted.(Note that X would be allowed a capital loss in the year the stock was deemed entirely worthless. The capital loss would be deducted under under the personal capital loss rules and calculated using the likely transfer basis of $25,000)

A corporation is a personal holding company (PHC) if (1) at any time during the last half of the taxable year more than 50% of the value of the outstanding stock is owned by 5 or fewer individuals, and (2) at least 60% of its adjusted ordinary gross income for the year is investment-type income.

The dividends paid deduction taken to arrive at personal holding company income includes dividends for the taxable year as well as actual dividend distributions made.

A consent dividends is a hypothetical distribution made by agreement with the shareholders of the company whereby the shareholders pick up that amount in their personal income without an actual distribution being made.

A C corporation (a regular corporation) must pay federal income tax. A C corporation is not a pass-through entity like the other entities listed.

A general partnership, a limited partnership, a joint venture are a pass-through entity, and don’t pay federal income tax.

错题：

The owner’s basis in an S corporation is increased by the owner’s share of profits and decreased by the owner’s share of losses. It is not affected by any bank loans increased or decreased by the corporation. It is only increased by direct loans made to the corporation by the owner. For a partnership, the basis is also affected by increases and decreases of bank loans.

Under