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Corporate Taxable Income (Trade or business deductions ( ordinary and…
Corporate Taxable Income
Gross income
Accrual basis is required for some circumstances
Trade or business deductions ( ordinary and necessary expense)
Domestic production deduction: 9% of lesser of (1) Qualified production activities income or (2) Taxable income
Executive compensation: Max 1000k (1 million) if performance-based
Bonus accruals ( non-shareholder/employees): pay by 4/15
Bad debt: Specific charge-off method
Accrual basis: tax deductible when specific AR is written off
Cash basis: no deduction
Business interest expense
On business: incurred & paid-> deduction
On investment: up to taxable investment income
Prepaid: deduct later when incurred
Charitable contributions ( 10% of Adjusted taxable income limit)
Accrual & pay by 4/15
disallowed charitable contribution may carry forward for 5 yrs
Business losses or casualty losses: 100% dedcutible
Partially destroyed: lesser of (1) decline FMV (2) NBV before casualty
Fully destroyed: NBV
Organization expenditures: 5k & start-up costs: 5k
+Excess amortize over 15 yrs (180 months)
Amortization, depreciation and depletion
Goodwill: amortize over 15 yrs
Life insurance premiums ( expense)
Corp as beneficiary: not deductible
Insured employee as beneficiary: deductible
Business gifts: up to $25 per year per recipient
Business meals and entertainment:50%
Penalties and illegal activities not deductible
Taxes
State, city and federal payroll taxes are deductible
Lobbying and political expenditures: not deductible unless direct-type lobbying
Captial losses deduction not allowed; only offset capital gains
Inventory valuation methods
Dividends-Received deduction
Lesser of (1) 70% or 80% dividends received (2) 70% or 80% taxable income without DRD, NOL ,capital loss carryback, DPAD
Exception: losers
Entities DRD does not apply: personal
100% dividends-received deduction
Form 1120 C-corp tax return