1 / 17

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Income Tax Planning

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Income Tax Planning. Session 5 Corporations and LLCs. Session Details. C Corporation. C Corporation. Personal Service Corporation. C corporation ONLY

elvina
Télécharger la présentation

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Income Tax Planning

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMIncome Tax Planning Session 5Corporations and LLCs

  2. Session Details

  3. C Corporation

  4. C Corporation

  5. Personal Service Corporation • C corporation ONLY • Substantially all of the stock held by employees, retired employees, or their estates • Substantially all of the services performed in listed fields • Mnemonic: CALL AAA for HELP • Benefit of graduated corporate tax rates denied • Flat 35% tax rate

  6. S Corporation

  7. S Corporation Election • Must be a domestic corporation • No more than 100 shareholders allowed • Only one class of stock • Shareholders must be U.S. citizens or residents • All shareholders must be individuals or a certain type of trust • All shareholders must elect S status (Form 2553) • Majority of outstanding stock to revoke S status

  8. Section 1244 Stock • First $1 million of stock issued after incorporation • Issued to an individual, or partnership • Held by original owner • Tax treatment • Up to $50,000/$100,000 annual loss treated as ordinary loss • Excess loss is capital loss • Capital gain treatment is sold for gain

  9. LLCs Limited Liability Company • Statutory entity • Partnership taxation • Limited liability for members • Dissolution upon death, retirement, or resignation • Management structure determined by LLC’s operating agreement • Single member LLC is treated as a disregarded entity

  10. Check-the-Box Regulations • One owner—default taxation as sole proprietorship • 2 or more owners—default taxation as partnership • May elect to be treated as a corporation under the Regulations

  11. Review Question 1 One tax advantage of a C corporation is • the ability to have income taxed at lower rates. • the ability to distribute income to shareholders tax free. • the ability to contribute, tax free, appreciated securities in exchange for stock of an investment company.

  12. Review Question 2 S corporation shareholders have the ability to deduct losses to the extent of • their original contribution of capital to the business. • their adjusted basis in the stock, adjusted for corporate loans personally guaranteed. • their adjusted basis in the stock, adjusted for money they have directly loaned to the corporation.

  13. Review Question 3 Which of the following are characteristics of a C corporation? • The number of shareholders is limited. • The bankruptcy of shareholders has no effect on the business form. • Shareholder liability is limited. • Capital structure is dependent upon the resources of the shareholders. • I and II only • I and IV only • II and III only • II and IV only • III and IV only

  14. Review Question 4 Bill Giles, an engineer, is contemplating forming a C corporation for his practice. He will be the sole employee of the corporation. Which of the following statements accurately describe the income tax consequences of such an arrangement? • The corporation would be considered a Personal Service Corporation. • The corporation would not be considered a Personal Service Corporation. • The net income of the corporation will be subject to graduated tax rates. • The net income of the corporation will be taxed at Bill’s individual tax rates. • The net income of the corporation will be subject to a flat 35% tax rate. • I and IV only • I and V only • II and III only • II and IV only • II and V only

  15. Review Question 5 Which of the following statements are true regarding an S corporation? • Shareholders have limited liability. • The number of shareholders is limited to 100. • The death of an owner requires reorganization of the corporation. • The corporation is a conduit for items of income, deductions, and tax credits. • III only • I and IV only • II and III only • I, II, and IV only • II, III, and IV only

  16. Review Question 6 John Matthews, a married taxpayer filing a joint return, sold Section 1244 stock during the current year. Which of the following correctly identify the tax treatment of the sale? • Up to $50,000 of loss is treated as an ordinary loss. • Up to $100,000 of loss is treated as an ordinary loss. • Any loss in excess of the maximum annual ordinary loss is treated as a capital loss. • A gain on a sale is considered ordinary income. • I and III only • II and III only • II and IV only • I, III, and IV only • II, III, and IV only

  17. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMIncome Tax Planning Session 5End of Slides

More Related