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Wiley CPAexcel Exam Review 2014 Focus Notes: Regulation by Wiley

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Module 38: Corporate Taxation

CORPORATE INCOME TAX

Section 351 Transfer to Controlled Corporation

No gain or loss is recognized if property is transferred to a corporation solely in exchange for stock if the transferors of property (in the aggregate) control the corporation.

  • Property includes cash and everything but services
  • Control is the ownership of at least 80% of the corporation's stock

Services for Stock

Taxable transaction

  • Taxable compensation to shareholder = FMV of stock
  • Shareholder basis for stock = FMV
  • Corporation has expense or asset = FMV of stock

Property for Stock

Generally a nontaxable transaction

  • Whenever shareholders providing cash and property have total ownership ≥ 80%
  • Shareholder basis for stock = basis for asset given (exchanged basis) + gain recognized − boot received
  • Corporation basis for asset = same as shareholder's basis + gain recognized to shareholder

Taxable transaction

  • When shareholders providing cash and property have ownership < 80%
  • Shareholder recognizes gain or loss = FMV − Basis
  • Shareholder basis for stock = FMV
  • Corporation basis for asset = FMV

Computing Corporate Income Tax

Gross income

Deductions
= Taxable income
× Tax rate
= Preliminary tax liability
+ Personal holding company tax
+ Accumulated earnings tax
+ Alternative minimum tax
= Total tax liability
Credits
= Net tax liability
Estimated payments
= Tax due (or refund)

Gross Income

General concept of gross income applies to a corporation

  • Corporation ...

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