Reading: Corporate Income Taxes
Corporate
Tax Rates
•Corporate
tax rates in the United States are progressive
- Marginal rates from 15% to 39%, depending on taxable income.
- US corporate tax rate structure has 8 brackets
- There are a number of “tax bubbles” – these occur when tax rate schedules recapture savings from prior brackets.
- Marginal rates from 15% to 39%, depending on taxable income.
- US corporate tax rate structure has 8 brackets
- There are a number of “tax bubbles” – these occur when tax rate schedules recapture savings from prior brackets.
•For
corporations with large income (more than $18.33 million) the rate is a flat
35%
•Qualified
personal service corps taxed at flat 35%
- Architects, CPA’s, consultants, etc
- Architects, CPA’s, consultants, etc
Corporate
Capital Gains
•A
corporation can choose from two alternative tax treatments on capital gains
- Tax at ordinary income
- Elect to pay an alternative tax (35%) on net long-term capital gain
- Tax at ordinary income
- Elect to pay an alternative tax (35%) on net long-term capital gain
•Essentially
equivalent to maximum regular corporate tax, no tax benefit to LTCG.
•Bottom
line: there is no difference in tax on ordinary vs capital income
Dividends
Received Deduction.
•Corporations
are allowed a deduction for a percentage of the dividends received from other
corporations
- Attempt to alleviate triple taxation
Dividends
received deduction is allowed based upon ownership- Attempt to alleviate triple taxation
Organizational
Expenditures & Start Up Costs
•Organizational
expenditures pertain to LLC’s, corporations and partnerships.
•Start
up costs can be incurred by any organization, including a sole proprietorship
and entities mentioned above.
•Examples
of these type of costs include
- Investigatory costs to look at a business before deciding whether or not to pursue it
- Legal/accounting services incidental to organization, costs of a temporary board of directors and state incorporation fees.
- Those incurred prior to opening – such as advertising expenses, employee training costs, etc.
- Investigatory costs to look at a business before deciding whether or not to pursue it
- Legal/accounting services incidental to organization, costs of a temporary board of directors and state incorporation fees.
- Those incurred prior to opening – such as advertising expenses, employee training costs, etc.
•Also
investigatory expenses – those incurred to decide whether to actually pursue
the business opportunity at hand.
Amortization
of Organizational Expenditure & Start Up Costs
•Organizational
expenditures and start up costs are capitalized and then amortized over 180
months.
•However,
firms can elect to deduct up to $5,000 of organization costs in the year the
firm begins business
- $5,000 amount is reduced $1 for each $1 that organizational expenses exceed $50,000
- $5,000 amount is reduced $1 for each $1 that organizational expenses exceed $50,000
Last modified: Tuesday, August 14, 2018, 8:39 AM