Table of Contents

Chapter 1 - Corporate Taxation - Section 1. 4

Corporation Defined - '7701. 4

Corporate Characteristics. 4

Check-the-Box Regulations. 5

C Corporations. 5

Advantages. 5

Disadvantages. 8

PSC Corporations - '441, '448, '469. 8

Testing Period. 8

Personal Services. 9

Principal Activity & Substantial Performance. 9

Employee-Owner 9

Independent Contractor 10

Passive Loss Limitations - '469(a)(2) 10

Qualified Personal Service Corporation - '448. 10

Incorporation - '351. 11

Basic Requirements. 11

Corporate Nonrecognition. 11

Property. 11

Stock Solely For Services. 11

Impact on Recipient 12

Impact on Other Shareholders. 12

Section 1244 Stock. 13

Maximum Ordinary Loss. 13

Original Issuance. 14

Distributed Stock. 14

General Requirements. 14

Start-Up Expenses - '195. 16

Covered Expenses. 16

Amortization. 17

Organizational Expenses - '248. 17

Definition. 17

Stock Issuance & Syndication Expenses. 18

Amortization. 18

Start of Business. 18

Corporate Income Tax Rates. 18

Tax Tables. 18

Current Rate - 21%... 18

Tax Return & Filing. 19

Corporate Estimated Tax. 19

Alternative Minimum Tax Repealed. 20

Capital Gains & Losses - '1212. 21

Net Capital Loss Carryovers. 21

S Corporation Status. 21

Asset Types. 21

Five-Step Characterization Process. 22

Netting Capital Gains (Losses) 22

Netting Section 1231 Gains (Losses) 23

Character of Section 1231 Gains (Losses) 23

5 Year Averaging. 23

NOL Carryback & Carryover - '172. 23

Loss Computation. 24

Deduction Computation. 24

Dividends Received Deduction - '243. 24

Dividends from Domestic Corporations. 24

65% Exception. 25

Charitable Contributions - '170. 25

Timing of Deduction. 25

Limitation. 26

Carryover of Excess Contribution. 26

Personal Holding Companies - '541. 26

Penalty Tax. 26

Professional Corporations. 27

Named Professionals. 27

Avoidance of PHC Status. 27

Chapter 1 - Section 1 Review Questions. 28

Chapter 1 - Corporate Taxation - Section 2. 29

Accumulated Earnings Tax Trap - '531. 29

Imposition of Penalty Tax. 29

Computation. 29

Accumulated Earnings Credit - '535. 30

Application of Credit to Controlled Groups. 30

Reasonable Accumulations. 30

Working Capital 31

Service Corporations. 31

Minority Stock Redemptions. 31

Majority Stock Redemptions. 31

Stockholder Harmony. 31

Tax Exempt Income. 32

Accounting Periods & Methods. 32

Accounting Periods. 32

Section 444 Election. 33

Business Purpose Tax Year 33

25% Test 34

Length of Accounting Period. 34

Short Tax Year 34

Not in Existence Entire Year 34

Change in Accounting Period. 35

Election of Accounting Period. 35

Changing Accounting Periods. 35

Changes without IRS Consent 35

Accounting Methods. 36

Methods Available. 36

Cash Method. 36

Limitation. 36

Accrual Method. 37

Economic Performance Rule. 37

Special Methods. 37

Combination (Hybrid) Method. 37

Accounting for Long-term Contracts. 38

Changing the Accounting Method. 38

Inventories. 38

Identification Methods. 39

Specific Identification Method. 39

FIFO Method. 39

LIFO Method. 39

Valuation Methods. 40

Cost Method. 40

Uniform Capitalization (UNICAP) Rules - '263A.. 40

Lower of Cost or Market Method. 41

Multiple Corporations. 41

Controlled Group Rules. 41

Definition. 42

Parent-Subsidiary Groups. 42

Brother-Sister Groups. 42

Consolidated Returns. 42

Definition. 43

Corporate Liquidations & Distributions. 43

The Old General Utilities Doctrine. 43

Loss Limitations. 44

Chapter 1 - Section 2 Review Questions. 45

Answers & Explanations. 47

Chapter 1 - Section 1 Review Questions Feedback. 47

Chapter 1 - Section 2 Review Questions Feedback. 50

Glossary. 53

Keywords & Phrases. a

CPE Exam Answer Sheet c

Final Examination. d