Corporate Tax Outline Cecil Spring 2015
Overview of Corporate Taxation
Introduction to Subchapter C
· General
Separate taxable entity
Two levels of tax – when it earns money and when it distributes earnings to SHs
Corporate Level Income Tax – § 11 of the Code
15% – up to $50k
25% – up to $75k
34% – up to $10 million
Flush language under § 11(b)(1)(d)
For taxable income in excess of $100k, add lesser of 5% of such excess or $11,750
For taxable income in excess of $15 mil, add the lesser of 3% of such excess or $100k
Individual
Corporation
Charitable Contributions
Only those made during the taxable year
Limited to 50% of AGI
Can be made within 2 ½ months after year if board authorizes
Limited to 10% of taxable income
Capital Losses
STCG + LTCG + $3000
Unused losses can be carried forward indefinitely (but die with the taxpayer)
STCG + LTCG only (§ 1211)
Unused losses can be carried back 3 years and forward 5 years
Capital Gains Preference
General LTCGs are capped at a max rate of 15% (25% and 28% rates apply in limited circumstances)
There is no capital gains preference (but § 1201 would cap gains at 35% if rates go higher)
Bad Debt Dedu
165(c))
All losses sustained during the taxable year are deductible (§ 165(a))
Dividends Received Deduction
No deduction for dividends received during the taxable year
70%, 80%, or 100% dividends received deduction allowed, depending on percentage stockholdings
At Risk Rules
Deductibility of losses subject to the at risk rules
Deductibility of losses not subject to the at risk rules
Passive Loss Rules
Deductibility of losses subject to the passive loss rules
Deductibility of losses generally not subject to the passive loss rules
Deduction for Domestic Production Activities – § 199
No deduction available
Deduction allowed for qualified production activities income (deduction phased in over 6 year period – 3%/6%/9%)
· Deductions for Corporations
See §§ 243, 199, 172
Interest on the bonds is not taxable for federal purposes, but it may be taxable for state taxes
Corps. Don't have AGI b/c they don’t have above/below line deductions
§ Statutes
o § 243
If corporate SH owns
