C corporations, S corporations, partnerships, trusts and estates basics.
40 cards · basic cards · AI-written, checked twice. Edit anything.
- What tax concept results from C corporations being taxed at both the corporate and shareholder levels?
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Double taxation. Corporate income is taxed at the C corp level, then dividends are taxed again when distributed to shareholders.- What tax rate applies to long-term capital gains of a C corporation?
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21%. C corporations are taxed on all income, including capital gains, at the flat 21% corporate tax rate since 2018.- What is the accumulated earnings tax and to whom does it apply?
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A 20% penalty tax on accumulated taxable income of C corporations. It applies when earnings are retained beyond business needs to avoid shareholder-level taxation.- Which tax applies to a C corporation classified as a personal holding company and is imposed on undistributed personal holding company income?
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Personal holding company tax. A 20% penalty tax on undistributed personal holding company income if the corporation meets PHC status requirements.- What is the charitable contribution deduction limit for a C corporation as a percentage of taxable income?
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10%. C corporations can deduct charitable contributions up to 10% of taxable income (computed without the deduction itself).- What is the holding period requirement for a C corporation to receive capital gain treatment on the sale of a capital asset?
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More than one year. Long-term capital assets must be held more than one year; the rate is the same as ordinary income (21% for C corps) but it remains long-term property.- Do passive activity loss limitations apply to C corporations?
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No. Passive activity loss limitations do not apply to C corporations. They apply to individuals, partnerships, S corporations, estates, and trusts.- What is the flat corporate income tax rate for C corporations under current law?
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21%. The federal corporate tax rate is a flat 21% on all taxable income (effective since January 1, 2018).- What is the fundamental tax characteristic of an S corporation?
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Pass-through entity. S corporations do not pay entity-level income tax; income, deductions, and credits pass through to shareholders in proportion to ownership.- What is the one-class-of-stock requirement for S corporation eligibility?
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An S corporation must have only one class of stock. All shares must have identical rights to distributions and liquidation proceeds.- Who can own stock in an S corporation?
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Only U.S. citizens, U.S. residents, certain trusts, and estates. Foreign individuals and corporations, partnerships, and other entities are not eligible owners.- How is income allocated to S corporation shareholders?
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Pro-rata based on stock ownership percentage and the number of days held during the tax year. Each shareholder's share is determined by their ownership share.- What is the starting basis for an S corporation shareholder who contributes property to the corporation?
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The adjusted basis of the property contributed, plus any gain recognized by the shareholder, minus liabilities assumed by the corporation.- What is the built-in gains tax and when does it apply to S corporations?
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A corporate-level tax on built-in gains when an S corporation disposes of property within 5 years after conversion from C corporation status. The rate is 21%.- What is LIFO recapture and which tax entity must recognize it upon converting to S corporation status?
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The taxpayer must include the LIFO reserve in gross income over four years. A C corporation that used LIFO inventory must recapture the difference between LIFO and FIFO value.
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