Assignments

1. Assignments • For Next Class: • Read Chapter 4, pages 4-1 through 4-13

2. 3 Chapter The Corporate Income Tax

3. Estimated Taxes

4. Due Dates • [IRC §6655(c)(2)] Corporations owing tax > $500 must make estimated tax payments as follows: • 25% of the required amount must be paid in by the 15th day of the 4th month of fiscal year • 50% of the required amount must be paid in by the 15th day of the 6th month of fiscal year • 75% of the required amount must be paid in by the 15th day of the 9th month of fiscal year • 100% of the required amount must be paid in by the 15th day of the 12th month of fiscal year

5. Required Payments • The required amount is: • For large corporations (taxable income > $1 million for any of three preceding years), 100% of the tax due for the year but can use prior year tax for the 1st payment [IRC §6655(d)(2)] • For corporations that are not large corporations, 100% of the lesser of the tax due for the year or the tax shown on the prior year tax return [IRC §6655(d)(1)] • Annualized income method or adjusted seasonal income method can be used if lower [IRC §6655(e)]

6. Penalties • Penalty at the rate in IRC §6621 is imposed on the amount of the underpayment for the period of the underpayment [IRC §6655(a)]

7. Controlled Groups of Corporations

8. Controlled Groups of Corporations • Purpose of Limitations: To prevent groups of corporations owned by the same parties from splitting income and getting the benefit of multiple progressive tax rate brackets and other amounts

9. Controlled Groups of Corporations • [IRC §1561(a)] Tax benefits must be allocated amount members of controlled groups: • Lower tax rate brackets [IRC §11(b)(1)] • Accumulated earnings credit [IRC §535(c)(2)&(3)] • Alternative minimum tax exemption [IRC §55(d)(1)] • Environmental tax amount [IRC §59A] • Taxpayers can execute an apportionment plan that specifically indicates how these amounts are divided among the controlled group, otherwise they are divided equally [Reg. §1.1561-3]

10. Controlled Groups • Problem C3-53

11. Controlled Groups of Corporations • [IRC §1563(b)(1)] Controlled group tests are applied on December 31st of the tax year • Group includes all members on December 31st that were members for at least one-half of the number of days of the tax year that precede December 31st [IRC §1563(b)(2)] • Group includes all corporations that were not members on December 31st that were members for at least one-half of the number of days of the tax year that precede December 31st [IRC §1563(b)(3)]

12. Controlled Groups of Corporations • Three types of controlled groups: • Brother-sister • Parent-subsidiary • Combined group

13. Brother-Sister Controlled Groups • 2004 Jobs Act changed the definition of brother-sister corporation but retained the old definition for some purposes • IRC §1563(a)(2) contains the new “50%-only” definition for Title 26, Subtitle A, Chapter 6, Part II • IRC §1563(f)(5) is the old “80%-50%” definition which applies for purposes other than Title 26, Subtitle A, Chapter 6, Part II, unless a Code section specifically provides otherwise • Constructive stock ownership rules apply[IRC §1563(d)(2) and (e)]

14. Brother-Sister Controlled Groups

15. Brother-Sister Controlled Groups

16. Brother-Sister Controlled Groups