Wiley CPAexcel Exam Review 2015 Focus Notes: Regulation

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 ...