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Tax Slayer 2011

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Tax Slayer 2011

Tax slayer 2011 Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. Tax slayer 2011 Employee-owners. Tax slayer 2011 Other rules. Tax slayer 2011 Other rules. Tax slayer 2011 Property Exchanged for StockNonqualified preferred stock. Tax slayer 2011 Liabilities. Tax slayer 2011 Election to reduce basis. Tax slayer 2011 Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. Tax slayer 2011 S. Tax slayer 2011 Real Property Interest Accounting MethodsSection 481(a) adjustment. Tax slayer 2011 Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. Tax slayer 2011 Business formed before 1997. Tax slayer 2011   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. Tax slayer 2011 Business formed after 1996. Tax slayer 2011   The following businesses formed after 1996 are taxed as corporations. Tax slayer 2011 A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. Tax slayer 2011 A business formed under a state law that refers to it as a joint-stock company or joint-stock association. Tax slayer 2011 An insurance company. Tax slayer 2011 Certain banks. Tax slayer 2011 A business wholly owned by a state or local government. Tax slayer 2011 A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Tax slayer 2011 Certain foreign businesses. Tax slayer 2011 Any other business that elects to be taxed as a corporation. Tax slayer 2011 For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. Tax slayer 2011 For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. Tax slayer 2011 S corporations. Tax slayer 2011   Some corporations may meet the qualifications for electing to be S corporations. Tax slayer 2011 For information on S corporations, see the instructions for Form 1120S, U. Tax slayer 2011 S. Tax slayer 2011 Income Tax Return for an S Corporation. Tax slayer 2011 Personal service corporations. Tax slayer 2011   A corporation is a personal service corporation if it meets all of the following requirements. Tax slayer 2011 Its principal activity during the “testing period” is performing personal services (defined later). Tax slayer 2011 Generally, the testing period for any tax year is the prior tax year. Tax slayer 2011 If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. Tax slayer 2011 Its employee-owners substantially perform the services in (1), above. Tax slayer 2011 This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. Tax slayer 2011 Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. Tax slayer 2011 Personal services. Tax slayer 2011   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. Tax slayer 2011 Employee-owners. Tax slayer 2011   A person is an employee-owner of a personal service corporation if both of the following apply. Tax slayer 2011 He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. Tax slayer 2011 He or she owns any stock in the corporation at any time during the testing period. Tax slayer 2011 Other rules. Tax slayer 2011   For other rules that apply to personal service corporations see Accounting Periods, later. Tax slayer 2011 Closely held corporations. Tax slayer 2011   A corporation is closely held if all of the following apply. Tax slayer 2011 It is not a personal service corporation. Tax slayer 2011 At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. Tax slayer 2011 “Individual” includes certain trusts and private foundations. Tax slayer 2011 Other rules. Tax slayer 2011   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. Tax slayer 2011 Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. Tax slayer 2011 This rule applies both to individuals and to groups who transfer property to a corporation. Tax slayer 2011 It also applies whether the corporation is being formed or is already operating. Tax slayer 2011 It does not apply in the following situations. Tax slayer 2011 The corporation is an investment company. Tax slayer 2011 You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. Tax slayer 2011 The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. Tax slayer 2011 Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. Tax slayer 2011 For more information, see section 1. Tax slayer 2011 351-3 of the Regulations. Tax slayer 2011 Control of a corporation. Tax slayer 2011   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. Tax slayer 2011 Example 1. Tax slayer 2011 You and Bill Jones buy property for $100,000. Tax slayer 2011 You both organize a corporation when the property has a fair market value of $300,000. Tax slayer 2011 You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. Tax slayer 2011 No gain is recognized by you, Bill, or the corporation. Tax slayer 2011 Example 2. Tax slayer 2011 You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. Tax slayer 2011 This represents only 75% of each class of stock of the corporation. Tax slayer 2011 The other 25% was already issued to someone else. Tax slayer 2011 You and Bill recognize a taxable gain of $200,000 on the transaction. Tax slayer 2011 Services rendered. Tax slayer 2011   The term property does not include services rendered or to be rendered to the issuing corporation. Tax slayer 2011 The value of stock received for services is income to the recipient. Tax slayer 2011 Example. Tax slayer 2011 You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Tax slayer 2011 Right after the exchange, you own 85% of the outstanding stock. Tax slayer 2011 No gain is recognized on the exchange of property. Tax slayer 2011 However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. Tax slayer 2011 Property of relatively small value. Tax slayer 2011   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Tax slayer 2011   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. Tax slayer 2011 Stock received in disproportion to property transferred. Tax slayer 2011   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. Tax slayer 2011 If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. Tax slayer 2011 It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. Tax slayer 2011 Money or other property received. Tax slayer 2011   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. Tax slayer 2011 You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Tax slayer 2011 The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. Tax slayer 2011 If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. Tax slayer 2011 See chapter 3 of Publication 544. Tax slayer 2011 No loss is recognized. Tax slayer 2011 Nonqualified preferred stock. Tax slayer 2011   Nonqualified preferred stock is treated as property other than stock. Tax slayer 2011 Generally, it is preferred stock with any of the following features. Tax slayer 2011 The holder has the right to require the issuer or a related person to redeem or buy the stock. Tax slayer 2011 The issuer or a related person is required to redeem or buy the stock. Tax slayer 2011 The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. Tax slayer 2011 The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. Tax slayer 2011 For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. Tax slayer 2011 Liabilities. Tax slayer 2011   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. Tax slayer 2011 There are two exceptions to this treatment. Tax slayer 2011 If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. Tax slayer 2011 However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. Tax slayer 2011 If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. Tax slayer 2011 For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. Tax slayer 2011 Example. Tax slayer 2011 You transfer property to a corporation for stock. Tax slayer 2011 Immediately after the transfer, you control the corporation. Tax slayer 2011 You also receive $10,000 in the exchange. Tax slayer 2011 Your adjusted basis in the transferred property is $20,000. Tax slayer 2011 The stock you receive has a fair market value (FMV) of $16,000. Tax slayer 2011 The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. Tax slayer 2011 Gain is realized as follows. Tax slayer 2011 FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. Tax slayer 2011 The recognized gain is limited to $10,000, the cash received. Tax slayer 2011 Loss on exchange. Tax slayer 2011   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. Tax slayer 2011 For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Tax slayer 2011 Basis of stock or other property received. Tax slayer 2011   The basis of the stock you receive is generally the adjusted basis of the property you transfer. Tax slayer 2011 Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. Tax slayer 2011 Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. Tax slayer 2011 Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. Tax slayer 2011    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. Tax slayer 2011 This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. Tax slayer 2011 The basis of any other property you receive is its fair market value on the date of the trade. Tax slayer 2011 Basis of property transferred. Tax slayer 2011   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. Tax slayer 2011 However, the increase for the gain recognized may be limited. Tax slayer 2011 For more information, see section 362 of the Internal Revenue Code. Tax slayer 2011 Election to reduce basis. Tax slayer 2011   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. Tax slayer 2011 The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. Tax slayer 2011 However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. Tax slayer 2011 R. Tax slayer 2011 B. Tax slayer 2011 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. Tax slayer 2011    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. Tax slayer 2011 Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. Tax slayer 2011 Paid-in capital. Tax slayer 2011   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. Tax slayer 2011 These contributions are not taxable to the corporation. Tax slayer 2011 Basis. Tax slayer 2011   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. Tax slayer 2011 However, the increase for the gain recognized may be limited. Tax slayer 2011 For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. Tax slayer 2011   The basis of property contributed to capital by a person other than a shareholder is zero. Tax slayer 2011   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. Tax slayer 2011 If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. Tax slayer 2011 Depreciable property. Tax slayer 2011 Amortizable property. Tax slayer 2011 Property subject to cost depletion but not to percentage depletion. Tax slayer 2011 All other remaining properties. Tax slayer 2011   Reduce the basis of property in each category to zero before going on to the next category. Tax slayer 2011   There may be more than one piece of property in each category. Tax slayer 2011 Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. Tax slayer 2011 The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. Tax slayer 2011 Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. Tax slayer 2011 A corporation generally must make estimated tax payments as it earns or receives income during its tax year. Tax slayer 2011 After the end of the year, the corporation must file an income tax return. Tax slayer 2011 This section will help you determine when and how to pay and file corporate income taxes. Tax slayer 2011 For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. Tax slayer 2011 The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. Tax slayer 2011 For more information, visit www. Tax slayer 2011 irs. Tax slayer 2011 gov/newsroom/article/0,,id=108362. Tax slayer 2011 00. Tax slayer 2011 Income Tax Return This section will help you determine when and how to report a corporation's income tax. Tax slayer 2011 Who must file. Tax slayer 2011   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Tax slayer 2011 Which form to file. Tax slayer 2011   A corporation generally must file Form 1120, U. Tax slayer 2011 S. Tax slayer 2011 Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. Tax slayer 2011 Certain organizations and entities must file special returns. Tax slayer 2011 For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. Tax slayer 2011 Electronic filing. Tax slayer 2011   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. Tax slayer 2011 Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. Tax slayer 2011 However, in certain instances, these corporations can request a waiver. Tax slayer 2011 For more information regarding electronic filing, visit www. Tax slayer 2011 irs. Tax slayer 2011 gov/efile. Tax slayer 2011 When to file. Tax slayer 2011   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. Tax slayer 2011 A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. Tax slayer 2011 A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. Tax slayer 2011 Example 1. Tax slayer 2011 A corporation's tax year ends December 31. Tax slayer 2011 It must file its income tax return by March 15th. Tax slayer 2011 Example 2. Tax slayer 2011 A corporation's tax year ends June 30. Tax slayer 2011 It must file its income tax return by September 15th. Tax slayer 2011   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. Tax slayer 2011 Extension of time to file. Tax slayer 2011   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. Tax slayer 2011 The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. Tax slayer 2011   Form 7004 does not extend the time for paying the tax due on the return. Tax slayer 2011 Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. Tax slayer 2011 The interest is figured from the original due date of the return to the date of payment. Tax slayer 2011   For more information, see the instructions for Form 7004. Tax slayer 2011 How to pay your taxes. Tax slayer 2011   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. Tax slayer 2011 Electronic Federal Tax Payment System (EFTPS). Tax slayer 2011   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). Tax slayer 2011 For more information on EFTPS and enrollment, visit www. Tax slayer 2011 eftps. Tax slayer 2011 gov or call 1-800-555-4477. Tax slayer 2011 Also see Publication 966, The Secure Way to Pay Your Federal Taxes. Tax slayer 2011 Note. Tax slayer 2011 Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. Tax slayer 2011 Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Tax slayer 2011 Do not attach an explanation when the corporation's return is filed. Tax slayer 2011 See the instructions for your income tax return. Tax slayer 2011 Late filing of return. Tax slayer 2011    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. Tax slayer 2011 If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. Tax slayer 2011 The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. Tax slayer 2011 The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. Tax slayer 2011 Late payment of tax. Tax slayer 2011    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Tax slayer 2011 The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. Tax slayer 2011 Trust fund recovery penalty. Tax slayer 2011   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Tax slayer 2011 The penalty is the full amount of the unpaid trust fund tax. Tax slayer 2011 This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. Tax slayer 2011   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. Tax slayer 2011   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. Tax slayer 2011 A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. Tax slayer 2011   Willfully means voluntarily, consciously, and intentionally. Tax slayer 2011 A responsible person acts willfully if the person knows the required actions are not taking place. Tax slayer 2011   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. Tax slayer 2011 Other penalties. Tax slayer 2011   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. Tax slayer 2011 See sections 6662, 6662A, and 6663 of the Internal Revenue Code. Tax slayer 2011 Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Tax slayer 2011 If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. Tax slayer 2011 This section will explain how to avoid this penalty. Tax slayer 2011 When to pay estimated tax. Tax slayer 2011   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Tax slayer 2011 Example 1. Tax slayer 2011 Your corporation's tax year ends December 31. Tax slayer 2011 Installment payments are due on April 15, June 15, September 15, and December 15. Tax slayer 2011 Example 2. Tax slayer 2011 Your corporation's tax year ends June 30. Tax slayer 2011 Installment payments are due on October 15, December 15, March 15, and June 15. Tax slayer 2011   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. Tax slayer 2011 How to figure each required installment. Tax slayer 2011   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. Tax slayer 2011 You will generally use one of the following two methods to figure each required installment. Tax slayer 2011 You should use the method that yields the smallest installment payments. Tax slayer 2011 Note. Tax slayer 2011 In these discussions, “return” generally refers to the corporation's original return. Tax slayer 2011 However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Tax slayer 2011 Method 1. Tax slayer 2011   Each required installment is 25% of the income tax the corporation will show on its return for the current year. Tax slayer 2011 Method 2. Tax slayer 2011   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. Tax slayer 2011   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). Tax slayer 2011 Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. Tax slayer 2011   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. Tax slayer 2011 Other methods. Tax slayer 2011   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. Tax slayer 2011 The annualized income installment method. Tax slayer 2011 The adjusted seasonal installment method. Tax slayer 2011 Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. Tax slayer 2011 Refiguring required installments. Tax slayer 2011   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. Tax slayer 2011 An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. Tax slayer 2011 Underpayment penalty. Tax slayer 2011   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. Tax slayer 2011 The penalty is figured separately for each installment due date. Tax slayer 2011 The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. Tax slayer 2011 This is true even if the corporation is due a refund when its return is filed. Tax slayer 2011 Form 2220. Tax slayer 2011   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. Tax slayer 2011   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. Tax slayer 2011 The amount of the underpayment. Tax slayer 2011 The period during which the underpayment was due and unpaid. Tax slayer 2011 The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. Tax slayer 2011   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. Tax slayer 2011 However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. Tax slayer 2011 The annualized income installment method was used to figure any required installment. Tax slayer 2011 The adjusted seasonal installment method was used to figure any required installment. Tax slayer 2011 The corporation is a large corporation figuring its first required installment based on the prior year's tax. Tax slayer 2011 How to pay estimated tax. Tax slayer 2011   A corporation is generally required to use EFTPS to pay its taxes. Tax slayer 2011 See Electronic Federal Tax Payment System (EFTPS), earlier. Tax slayer 2011 Also see the Instructions for Form 1120-W. Tax slayer 2011 Quick refund of overpayments. Tax slayer 2011   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Tax slayer 2011 Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. Tax slayer 2011 A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. Tax slayer 2011 Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. Tax slayer 2011 File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. Tax slayer 2011 Do not file Form 4466 before the end of the corporation's tax year. Tax slayer 2011 An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. Tax slayer 2011 The IRS will act on the form within 45 days from the date you file it. Tax slayer 2011 U. Tax slayer 2011 S. Tax slayer 2011 Real Property Interest If a domestic corporation acquires a U. Tax slayer 2011 S. Tax slayer 2011 real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. Tax slayer 2011 The amount paid includes cash, the fair market value of other property, and any assumed liability. Tax slayer 2011 If a domestic corporation distributes a U. Tax slayer 2011 S. Tax slayer 2011 real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. Tax slayer 2011 A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. Tax slayer 2011 For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. Tax slayer 2011 S. Tax slayer 2011 Withholding Tax Return for Dispositions by Foreign Persons of U. Tax slayer 2011 S. Tax slayer 2011 Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. Tax slayer 2011 S. Tax slayer 2011 Real Property Interests. Tax slayer 2011 Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Tax slayer 2011 Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. Tax slayer 2011 In all cases, the method used must clearly show taxable income. Tax slayer 2011 Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. Tax slayer 2011 Accrual method. Tax slayer 2011   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. Tax slayer 2011 A corporation engaged in farming operations also must use the accrual method. Tax slayer 2011   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. Tax slayer 2011 However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. Tax slayer 2011   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. Tax slayer 2011   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. Tax slayer 2011   There are exceptions to the economic performance rule for certain items, including recurring expenses. Tax slayer 2011 See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. Tax slayer 2011 Nonaccrual experience method. Tax slayer 2011   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. Tax slayer 2011   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. Tax slayer 2011 Percentage of completion method. Tax slayer 2011   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. Tax slayer 2011 Mark-to-market accounting method. Tax slayer 2011   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Tax slayer 2011 Under this method any security held by a dealer as inventory must be included in inventory at its FMV. Tax slayer 2011 Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. Tax slayer 2011 Any gain or loss must be taken into account in determining gross income. Tax slayer 2011 The gain or loss taken into account is treated as ordinary gain or loss. Tax slayer 2011   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. Tax slayer 2011 Change in accounting method. Tax slayer 2011   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). Tax slayer 2011 The corporation must file Form 3115, Application for Change in Accounting Method. Tax slayer 2011 For more information, see Form 3115 and Publication 538. Tax slayer 2011 Section 481(a) adjustment. Tax slayer 2011   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. Tax slayer 2011 The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. Tax slayer 2011 However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. Tax slayer 2011 The corporation must complete the appropriate lines of Form 3115 to make the election. Tax slayer 2011 See the Instructions for Form 3115. Tax slayer 2011 Accounting Periods A corporation must figure its taxable income on the basis of a tax year. Tax slayer 2011 A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Tax slayer 2011 Generally, corporations can use either a calendar year or a fiscal year as its tax year. Tax slayer 2011 Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. Tax slayer 2011 For more information, see Publication 538. Tax slayer 2011 Personal service corporation. Tax slayer 2011   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. Tax slayer 2011 See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. Tax slayer 2011 Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. Tax slayer 2011   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. Tax slayer 2011 See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. Tax slayer 2011 Change of tax year. Tax slayer 2011   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. Tax slayer 2011 However, under certain conditions, a corporation can change its tax year without getting the consent. Tax slayer 2011 For more information, see Form 1128 and Publication 538. Tax slayer 2011 Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Tax slayer 2011 Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Tax slayer 2011 Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. Tax slayer 2011 The corporation should keep copies of all filed returns. Tax slayer 2011 They help in preparing future and amended returns and in the calculation of earnings and profits. Tax slayer 2011 Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. Tax slayer 2011 However, the following special provisions apply only to corporations. Tax slayer 2011 Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. Tax slayer 2011 However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Tax slayer 2011 Any costs not deducted can be amortized. Tax slayer 2011 Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Tax slayer 2011 Organizational costs are the direct costs of creating the corporation. Tax slayer 2011 For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. Tax slayer 2011 Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. Tax slayer 2011 Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. Tax slayer 2011 Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Tax slayer 2011 If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. Tax slayer 2011 These rules also deny the deduction of losses on the sale or exchange of property between related persons. Tax slayer 2011 Related persons. Tax slayer 2011   For purposes of this rule, the following persons are related to a corporation. Tax slayer 2011 Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). Tax slayer 2011 An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Tax slayer 2011 A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Tax slayer 2011 An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Tax slayer 2011 A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Tax slayer 2011 Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. Tax slayer 2011 Ownership of stock. Tax slayer 2011   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. Tax slayer 2011 Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. Tax slayer 2011 An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Tax slayer 2011 Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. Tax slayer 2011 Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. Tax slayer 2011 To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. Tax slayer 2011 But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. Tax slayer 2011 Reallocation of income and deductions. Tax slayer 2011   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. Tax slayer 2011 Complete liquidations. Tax slayer 2011   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. Tax slayer 2011 More information. Tax slayer 2011   For more information about the related person rules, see Publication 544. Tax slayer 2011 Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. Tax slayer 2011 If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. Tax slayer 2011 Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. Tax slayer 2011 A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. Tax slayer 2011 A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. Tax slayer 2011 For more information regarding the election, see Form 8902. Tax slayer 2011 Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. Tax slayer 2011 The deduction is allowed for the year in which the property is placed in service. Tax slayer 2011 A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. Tax slayer 2011 For more information, see section 179C of the Internal Revenue Code and the related Regulations. Tax slayer 2011 Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). Tax slayer 2011 A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. Tax slayer 2011 For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. Tax slayer 2011 Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. Tax slayer 2011 In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. Tax slayer 2011 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. Tax slayer 2011 The deduction is limited to $1. Tax slayer 2011 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. Tax slayer 2011 Other rules and limitations apply. Tax slayer 2011 The corporation must reduce the basis of any property by any deduction taken. Tax slayer 2011 The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. Tax slayer 2011 For more information, see section 179D of the Internal Revenue Code. Tax slayer 2011 Also see Notice 2006-52, 2006-26 I. Tax slayer 2011 R. Tax slayer 2011 B. Tax slayer 2011 1175, clarified and amplified by Notice 2008-40, 2008-14 I. Tax slayer 2011 R. Tax slayer 2011 B. Tax slayer 2011 725, and any successor. Tax slayer 2011 Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. Tax slayer 2011 These items are known as corporate preference items and they include the following. Tax slayer 2011 Gain on the disposition of section 1250 property. Tax slayer 2011 For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Tax slayer 2011 Percentage depletion for iron ore and coal (including lignite). Tax slayer 2011 For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. Tax slayer 2011 Amortization of pollution control facilities. Tax slayer 2011 For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. Tax slayer 2011 Mineral exploration and development costs. Tax slayer 2011 For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. Tax slayer 2011 For more information on corporate preference items, see section 291 of the Internal Revenue Code. Tax slayer 2011 Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. Tax slayer 2011 This section discusses the general rules that apply. Tax slayer 2011 The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. Tax slayer 2011 For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. Tax slayer 2011 Dividends from domestic corporations. Tax slayer 2011   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. Tax slayer 2011 If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. Tax slayer 2011 Ownership. Tax slayer 2011   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. Tax slayer 2011 Small business investment companies. Tax slayer 2011   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. Tax slayer 2011 Dividends from regulated investment companies. Tax slayer 2011   Regulated investment company dividends received are subject to certain limits. Tax slayer 2011 Capital gain dividends received from a regulated investment company do not qualify for the deduction. Tax slayer 2011 For more information, see section 854 of the Internal Revenue Code. Tax slayer 2011 No deduction allowed for certain dividends. Tax slayer 2011   Corporations cannot take a deduction for dividends received from the following entities. Tax slayer 2011 A real estate investment trust (REIT). Tax slayer 2011 A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. Tax slayer 2011 A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Tax slayer 2011 Ex-dividend means the holder has no rights to the dividend. Tax slayer 2011 A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. Tax slayer 2011 Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Tax slayer 2011 Dividends on deposits. Tax slayer 2011   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. Tax slayer 2011 They do not qualify for this deduction. Tax slayer 2011 Limit on deduction for dividends. Tax slayer 2011   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). Tax slayer 2011 Figuring the limit. Tax slayer 2011   In figuring the limit, determine taxable income without the following items. Tax slayer 2011 The net operating loss deduction. Tax slayer 2011 The domestic production activities deduction. Tax slayer 2011 The deduction for dividends received. Tax slayer 2011 Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). Tax slayer 2011 Any capital loss carryback to the tax year. Tax slayer 2011 Effect of net operating loss. Tax slayer 2011   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. Tax slayer 2011 To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. Tax slayer 2011 Example 1. Tax slayer 2011 A corporation loses $25,000 from operations. Tax slayer 2011 It receives $100,000 in dividends from a 20%-owned corporation. Tax slayer 2011 Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. Tax slayer 2011 If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Tax slayer 2011 Therefore, the 80% of taxable income limit does not apply. Tax slayer 2011 The corporation can deduct the full $80,000. Tax slayer 2011 Example 2. Tax slayer 2011 Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Tax slayer 2011 Its taxable income is $85,000 before the deduction for dividends received. Tax slayer 2011 After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. Tax slayer 2011 Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). Tax slayer 2011 Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. Tax slayer 2011 The nontaxed part is any dividends-received deduction allowable for the dividends. Tax slayer 2011 Extraordinary dividend. Tax slayer 2011   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. Tax slayer 2011 The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. Tax slayer 2011 Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. Tax slayer 2011 Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. Tax slayer 2011 Disqualified preferred stock. Tax slayer 2011   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. Tax slayer 2011   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. Tax slayer 2011 The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. Tax slayer 2011 The issue price of the stock exceeds its liquidation rights or stated redemption price. Tax slayer 2011 The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. Tax slayer 2011   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. Tax slayer 2011 More information. Tax slayer 2011   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. Tax slayer 2011 Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. Tax slayer 2011 A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Tax slayer 2011 A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. Tax slayer 2011 Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. Tax slayer 2011 Foregone interest. Tax slayer 2011   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Tax slayer 2011 See Below-market loans, in chapter 4 of Publication 535 for more information. Tax slayer 2011 Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. Tax slayer 2011 The contribution is deductible if made to, or for the use of, a qualified organization. Tax slayer 2011 For more information on qualified organizations, see Publication 526, Charitable Contributions. Tax slayer 2011 Also see, Exempt Organizations Select Check (EO Select Check) at www. Tax slayer 2011 irs. Tax slayer 2011 gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. Tax slayer 2011 Note. Tax slayer 2011 You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. Tax slayer 2011 Cash method corporation. Tax slayer 2011   A corporation using the cash method of accounting deducts contributions in the tax year paid. Tax slayer 2011 Accrual method corporation. Tax slayer 2011   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Tax slayer 2011 Make the choice by reporting the contribution on the corporation's return for the tax year. Tax slayer 2011 A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. Tax slayer 2011 The declaration must include the date the resolution was adopted. Tax slayer 2011 Limitations on deduction. Tax slayer 2011   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Tax slayer 2011 Figure taxable income for this purpose without the following. Tax slayer 2011 The deduction for charitable contributions. Tax slayer 2011 The dividends-received deduction. Tax slayer 2011 The deduction allowed under section 249 of the Internal Revenue Code. Tax slayer 2011 The domestic production activities deduction. Tax slayer 2011 Any net operating loss carryback to the tax year. Tax slayer 2011 Any capital loss carryback to the tax year. Tax slayer 2011 Farmers and ranchers. Tax slayer 2011    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. Tax slayer 2011 Carryover of excess contributions. Tax slayer 2011   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. Tax slayer 2011 You lose any excess not used within that period. Tax slayer 2011 For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. Tax slayer 2011 Any excess not used in 2015 is lost. Tax slayer 2011 Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). Tax slayer 2011 You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. Tax slayer 2011 Cash contributions. Tax slayer 2011   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. Tax slayer 2011 The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. Tax slayer 2011 Keep the record of the contribution with the other corporate records. Tax slayer 2011 Do not attach the records to the corporation's return. Tax slayer 2011 For more information on cash contributions, see Publication 526. Tax slayer 2011 Gifts of $250 or more. Tax slayer 2011   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. Tax slayer 2011 The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. Tax slayer 2011 The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. Tax slayer 2011 Keep the acknowledgement with other corporate records. Tax slayer 2011 Do not attach the acknowledgement to the return. Tax slayer 2011 Contributions of property other than cash. Tax slayer 2011   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. Tax slayer 2011 In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. Tax slayer 2011   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. Tax slayer 2011 For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. Tax slayer 2011   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. Tax slayer 2011 A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. Tax slayer 2011 The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. Tax slayer 2011   See Form 8283 for more information. Tax slayer 2011 Qualified conservation contributions. Tax slayer 2011   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. Tax slayer 2011 For more information, see section 170(h) of the Internal Revenue Code. Tax slayer 2011 Contributions of used vehicles. Tax slayer 2011   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. Tax slayer 2011 The deduction is limited, and other special rules apply. Tax slayer 2011 For more information, see Publication 526. Tax slayer 2011 Reduction for contributions of certain property. Tax slayer 2011   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. Tax slayer 2011   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. Tax slayer 2011 Larger deduction. Tax slayer 2011   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. Tax slayer 2011 This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. Tax slayer 2011 Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. Tax slayer 2011 The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. Tax slayer 2011 Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. Tax slayer 2011 Contributions to organizations conducting lobbying activities. Tax slayer 2011   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. Tax slayer 2011 More information. Tax slayer 2011   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. Tax slayer 2011 Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. Tax slayer 2011 In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Tax slayer 2011 Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. Tax slayer 2011 A capital loss is carried to other years in the following order. Tax slayer 2011 3 years prior to the loss year. Tax slayer 2011 2 years prior to the loss year. Tax slayer 2011 1 year prior to the loss year. Tax slayer 2011 Any loss remaining is carried forward for 5 years. Tax slayer 2011 When you carry a net capital loss to another tax year, treat it as a short-term loss. Tax slayer 2011 It does not retain its original identity as long term or short term. Tax slayer 2011 Example. Tax slayer 2011 A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. Tax slayer 2011 The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. Tax slayer 2011 The corporation treats this $6,000 as a short-term loss when carried back or forward. Tax slayer 2011 The corporation carries the $6,000 short-term loss back 3 years. Tax slayer 2011 In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. Tax slayer 2011 It subtracts the $6,000 short-term loss first from the net short-term gain. Tax slayer 2011 This results in a net capital gain for year 1 of $7,000. Tax slayer 2011 This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. Tax slayer 2011 S corporation status. Tax slayer 2011   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. Tax slayer 2011 Rules for carryover and carryback. Tax slayer 2011   When carrying a capital loss from one year to another, the following rules apply. Tax slayer 2011 When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. Tax slayer 2011 In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. Tax slayer 2011 If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. Tax slayer 2011 You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. Tax slayer 2011 Refunds. Tax slayer 2011   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. Tax slayer 2011 If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. Tax slayer 2011 S. Tax slayer 2011 Corporation Income Tax Return, to apply for a refund. Tax slayer 2011 Form 1139. Tax slayer 2011    A corporation can get a refund faster by using Form 1139. Tax slayer 2011 It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. Tax slayer 2011 Form 1120X. Tax slayer 2011   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. Tax slayer 2011 The corporation must file the Form 1120X within 3 years of the due date, includin
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Revoked? Reinstated? Learn More

Most tax-exempt organizations are required to file an annual return or notice with the Internal Revenue Service. (See Annual Return Filing Exceptions for a list of organizations that are not required to file.) Section 6033(j) of the Internal Revenue Code automatically revokes the exemption of any organization that fails to satisfy its filing requirement for three consecutive years. The automatic revocation of exemption is effective as of the due date of the third required annual filing or notice. Organizations on the Automatic Revocation of Exemption List (Auto-Revocation List) previously recognized as exempt under section 501(c)(3) of the Internal Revenue Code are no longer eligible to receive tax-deductible contributions under Code section 170.

Contributors and grantors can rely on the Exempt Organizations Select Check (Pub 78 data) page to determine organization deductibility and foundation status, even if the organization no longer appears in the Statistics of Income (SOI) Tax Stats - EO BMF. See Revenue Procedure 2011-33.

Publication of an organization’s name on the Auto-Revocation List serves as notice to donors and others that the organization is no longer eligible to receive tax-deductible contributions under section 170 and that donors and others may not rely on an IRS determination letter dated before the effective date of revocation or on a prior listing in either Exempt Organizations Select Check (Pub. 78 data) or the IRS Business Master File extract for purposes of claiming tax-deductible contributions. Because the list is an official IRS record of organizations that lost their exempt status for failing to file for three consecutive years, an organization whose exempt status is reinstated remains on the list. If, however, you think your organization was erroneously listed as revoked, see our frequently asked questions.

Because of system limitations, the name field may capture only the first few words of a long organizational name. For example, if the organization's full name is XXXXX YYYYY ZZZZZ University, Alumni Association Chapter 214, the name field may only display XXXXX YYYYY ZZZZZ University. You can check Exempt Organizations Select Check (Pub. 78 data) to ensure that an organization is still eligible to receive tax deductible contributions. For best search results, be sure to enter the exact legal name of the organization.
 

 


AUTOMATIC REVOCATION OF EXEMPTION LIST

 

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Page Last Reviewed or Updated: 05-Nov-2013

The Tax Slayer 2011

Tax slayer 2011 Internal Revenue Bulletin:  2011-12  March 21, 2011  Rev. Tax slayer 2011 Proc. Tax slayer 2011 2011-21 Table of Contents SECTION 1. Tax slayer 2011 PURPOSE SECTION 2. Tax slayer 2011 BACKGROUND SECTION 3. Tax slayer 2011 SCOPE SECTION 4. Tax slayer 2011 APPLICATION SECTION 5. Tax slayer 2011 EFFECTIVE DATE SECTION 6. Tax slayer 2011 EFFECT ON OTHER DOCUMENTS SECTION 7. Tax slayer 2011 DRAFTING INFORMATION SECTION 1. Tax slayer 2011 PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2011, including separate tables of limitations on depreciation deductions for trucks and vans; (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2011, including a separate table of inclusion amounts for lessees of trucks and vans; and (3) revised tables of depreciation limitations and lessee inclusion amounts for passenger automobiles that were first placed in service or first leased by the taxpayer, respectively, during 2010 and to which the 50 percent additional first year depreciation deduction under § 168(k)(1)(A) of the Internal Revenue Code or the 100 percent additional first year depreciation deduction under § 168(k)(5) applies. Tax slayer 2011 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7). Tax slayer 2011 SECTION 2. Tax slayer 2011 BACKGROUND . Tax slayer 2011 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Tax slayer 2011 For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Tax slayer 2011 The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Tax slayer 2011 This change reflects the higher rate of price inflation for trucks and vans since 1988. Tax slayer 2011 . Tax slayer 2011 02 Section 2022(a) of the Small Business Jobs Act of 2010, Pub. Tax slayer 2011 L. Tax slayer 2011 No. Tax slayer 2011 111-240, 124 Stat. Tax slayer 2011 2504 (September 27, 2010), extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2)) acquired by the taxpayer after December 31, 2007, and before January 1, 2011, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2011. Tax slayer 2011 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Tax slayer 2011 L. Tax slayer 2011 No. Tax slayer 2011 111-312, 124 Stat. Tax slayer 2011 3296 (Dec. Tax slayer 2011 17, 2010) (the “Act”) further extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Tax slayer 2011 Section 401(b) of the Act further amended § 168(k) by adding § 168(k)(5). Tax slayer 2011 It allows a 100 percent additional first year depreciation deduction for qualified property acquired by a taxpayer after September 8, 2010, and before January 1, 2012, if the taxpayer places the property in service generally before January 1, 2012. Tax slayer 2011 Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Tax slayer 2011 . Tax slayer 2011 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Tax slayer 2011 Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Tax slayer 2011 Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv). Tax slayer 2011 Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Tax slayer 2011 This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2011 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Tax slayer 2011 . Tax slayer 2011 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Tax slayer 2011 The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Tax slayer 2011 Under § 1. Tax slayer 2011 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Tax slayer 2011 One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Tax slayer 2011 Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Tax slayer 2011 SECTION 3. Tax slayer 2011 SCOPE . Tax slayer 2011 01 The limitations on depreciation deductions in section 4. Tax slayer 2011 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2011, and continue to apply for each taxable year that the passenger automobile remains in service. Tax slayer 2011 . Tax slayer 2011 02 The tables in section 4. Tax slayer 2011 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2011. Tax slayer 2011 Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Tax slayer 2011 See Rev. Tax slayer 2011 Proc. Tax slayer 2011 2006-18, 2006-1 C. Tax slayer 2011 B. Tax slayer 2011 645, for passenger automobiles first leased during calendar year 2006; Rev. Tax slayer 2011 Proc. Tax slayer 2011 2007-30, 2007-1 C. Tax slayer 2011 B. Tax slayer 2011 1104, for passenger automobiles first leased during calendar year 2007; Rev. Tax slayer 2011 Proc. Tax slayer 2011 2008-22, 2008-1 C. Tax slayer 2011 B. Tax slayer 2011 658, for passenger automobiles first leased during calendar year 2008; Rev. Tax slayer 2011 Proc. Tax slayer 2011 2009-24, 2009-1 C. Tax slayer 2011 B. Tax slayer 2011 885, for passenger automobiles first leased during calendar year 2009; and Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18, 2010-1 C. Tax slayer 2011 B. Tax slayer 2011 427, as amplified and modified by section 4. Tax slayer 2011 03 of this revenue procedure, for passenger automobiles first leased during calendar year 2010. Tax slayer 2011 SECTION 4. Tax slayer 2011 APPLICATION . Tax slayer 2011 01 Limitations on Depreciation Deductions for Certain Automobiles. Tax slayer 2011 (1) Amount of the inflation adjustment. Tax slayer 2011 (a) Passenger automobiles (other than trucks or vans). Tax slayer 2011 Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Tax slayer 2011 Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Tax slayer 2011 The new car component of the CPI was 115. Tax slayer 2011 2 for October 1987 and 137. Tax slayer 2011 880 for October 2010. Tax slayer 2011 The October 2010 index exceeded the October 1987 index by 22. Tax slayer 2011 680. Tax slayer 2011 Therefore, the automobile price inflation adjustment for 2011 for passenger automobiles (other than trucks and vans) is 19. Tax slayer 2011 69 percent (22. Tax slayer 2011 680/115. Tax slayer 2011 2 x 100%). Tax slayer 2011 The dollar limitations in § 280F(a) are multiplied by a factor of 0. Tax slayer 2011 1969, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2011. Tax slayer 2011 This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2011. Tax slayer 2011 (b) Trucks and vans. Tax slayer 2011 To determine the dollar limitations for trucks and vans first placed in service during calendar year 2011, the Service uses the new truck component of the CPI instead of the new car component. Tax slayer 2011 The new truck component of the CPI was 112. Tax slayer 2011 4 for October 1987 and 142. Tax slayer 2011 556 for October 2010. Tax slayer 2011 The October 2010 index exceeded the October 1987 index by 30. Tax slayer 2011 156. Tax slayer 2011 Therefore, the automobile price inflation adjustment for 2011 for trucks and vans is 26. Tax slayer 2011 83 percent (30. Tax slayer 2011 156/112. Tax slayer 2011 4 x 100%). Tax slayer 2011 The dollar limitations in § 280F(a) are multiplied by a factor of 0. Tax slayer 2011 2683, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Tax slayer 2011 This adjustment applies to all trucks and vans that are first placed in service in calendar year 2011. Tax slayer 2011 (2) Amount of the limitation. Tax slayer 2011 Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2011. Tax slayer 2011 Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction applies. Tax slayer 2011 Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction does not apply. Tax slayer 2011 The Service intends to issue additional guidance addressing the interaction between the 100 percent additional first year depreciation deduction and § 280F(a) for the taxable years subsequent to the first taxable year. Tax slayer 2011 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Tax slayer 2011 02 Inclusions in Income of Lessees of Passenger Automobiles. Tax slayer 2011 A taxpayer must follow the procedures in § 1. Tax slayer 2011 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2011. Tax slayer 2011 In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Tax slayer 2011 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $18,500 $19,000 3 8 11 13 16 19,000 19,500 4 9 13 15 18 19,500 20,000 4 10 15 17 20 20,000 20,500 5 11 16 19 23 20,500 21,000 5 12 18 21 25 21,000 21,500 6 13 19 24 26 21,500 22,000 6 14 21 26 29 22,000 23,000 7 16 23 29 32 23,000 24,000 8 18 27 32 37 24,000 25,000 9 20 30 36 42 25,000 26,000 10 23 33 40 46 26,000 27,000 11 25 36 44 51 27,000 28,000 12 27 40 48 55 28,000 29,000 13 29 43 52 60 29,000 30,000 14 31 47 55 65 30,000 31,000 15 34 49 60 69 31,000 32,000 16 36 53 63 73 32,000 33,000 17 38 56 68 77 33,000 34,000 18 40 60 71 82 34,000 35,000 19 42 63 75 87 35,000 36,000 20 45 66 79 91 36,000 37,000 21 47 69 83 96 37,000 38,000 22 49 73 87 100 38,000 39,000 23 51 76 91 105 39,000 40,000 24 53 80 94 110 40,000 41,000 25 56 82 99 114 41,000 42,000 26 58 86 102 119 42,000 43,000 27 60 89 107 123 43,000 44,000 28 62 93 110 128 44,000 45,000 29 64 96 114 133 45,000 46,000 30 67 98 119 137 46,000 47,000 31 69 102 122 141 47,000 48,000 32 71 105 127 145 48,000 49,000 33 73 109 130 150 49,000 50,000 34 76 111 134 155 50,000 51,000 35 78 115 138 159 51,000 52,000 36 80 118 142 164 52,000 53,000 37 82 122 146 168 53,000 54,000 38 84 125 150 173 54,000 55,000 39 87 128 153 178 55,000 56,000 40 89 131 158 182 56,000 57,000 41 91 135 161 187 57,000 58,000 42 93 138 166 191 58,000 59,000 43 95 142 169 196 59,000 60,000 44 98 144 174 200 60,000 62,000 46 101 149 179 207 62,000 64,000 48 105 156 187 216 64,000 66,000 50 109 163 195 225 66,000 68,000 52 114 169 203 234 68,000 70,000 54 118 176 211 243 70,000 72,000 56 123 182 218 253 72,000 74,000 58 127 189 226 262 74,000 76,000 60 132 195 234 270 76,000 78,000 62 136 202 242 279 78,000 80,000 64 140 209 250 288 80,000 85,000 67 148 220 264 304 85,000 90,000 72 159 237 283 327 90,000 95,000 77 170 253 303 350 95,000 100,000 82 181 269 323 372 100,000 110,000 90 198 293 352 406 110,000 120,000 100 220 326 391 452 120,000 130,000 110 242 359 430 497 130,000 140,000 120 264 392 469 543 140,000 150,000 130 286 424 509 588 150,000 160,000 140 308 457 548 633 160,000 170,000 150 330 490 587 679 170,000 180,000 160 352 523 626 724 180,000 190,000 170 374 555 666 769 190,000 200,000 180 396 588 705 815 200,000 210,000 190 418 621 744 860 210,000 220,000 200 440 654 784 904 220,000 230,000 210 462 687 823 950 230,000 240,000 220 484 719 863 995 240,000 And up 230 506 752 902 1,040 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 3 7 9 12 13 19,500 20,000 3 8 11 14 15 20,000 20,500 4 9 13 15 18 20,500 21,000 4 10 15 17 20 21,000 21,500 5 11 16 20 22 21,500 22,000 5 12 18 22 24 22,000 23,000 6 14 20 24 29 23,000 24,000 7 16 24 28 32 24,000 25,000 8 18 27 32 37 25,000 26,000 9 20 31 36 41 26,000 27,000 10 23 33 40 46 27,000 28,000 11 25 37 43 51 28,000 29,000 12 27 40 48 55 29,000 30,000 13 29 43 52 60 30,000 31,000 14 31 47 56 64 31,000 32,000 15 34 49 60 69 32,000 33,000 16 36 53 63 74 33,000 34,000 17 38 56 68 78 34,000 35,000 18 40 60 71 83 35,000 36,000 19 43 62 76 87 36,000 37,000 20 45 66 79 92 37,000 38,000 21 47 69 83 97 38,000 39,000 22 49 73 87 101 39,000 40,000 23 51 76 91 105 40,000 41,000 24 54 79 95 109 41,000 42,000 25 56 82 99 114 42,000 43,000 26 58 86 103 118 43,000 44,000 27 60 89 107 123 44,000 45,000 28 62 93 110 128 45,000 46,000 29 65 95 115 132 46,000 47,000 30 67 99 118 137 47,000 48,000 31 69 102 123 141 48,000 49,000 32 71 106 126 146 49,000 50,000 33 73 109 130 151 50,000 51,000 34 76 112 134 155 51,000 52,000 35 78 115 138 160 52,000 53,000 36 80 118 143 164 53,000 54,000 37 82 122 146 169 54,000 55,000 38 84 125 150 173 55,000 56,000 39 87 128 154 177 56,000 57,000 40 89 131 158 182 57,000 58,000 41 91 135 162 186 58,000 59,000 42 93 138 166 191 59,000 60,000 43 95 142 169 196 60,000 62,000 45 99 146 175 203 62,000 64,000 47 103 153 183 212 64,000 66,000 49 107 160 191 221 66,000 68,000 51 112 166 199 229 68,000 70,000 53 116 173 206 239 70,000 72,000 55 121 179 214 248 72,000 74,000 57 125 186 222 257 74,000 76,000 59 129 192 231 266 76,000 78,000 61 134 198 239 275 78,000 80,000 63 138 205 246 285 80,000 85,000 66 146 217 260 300 85,000 90,000 71 157 233 280 322 90,000 95,000 76 168 250 299 345 95,000 100,000 81 179 266 319 368 100,000 110,000 89 196 290 348 402 110,000 120,000 99 218 323 387 447 120,000 130,000 109 240 355 427 493 130,000 140,000 119 262 388 466 538 140,000 150,000 129 284 421 505 583 150,000 160,000 139 306 454 544 629 160,000 170,000 149 328 487 583 674 170,000 180,000 159 350 519 623 719 180,000 190,000 169 372 552 662 765 190,000 200,000 179 394 585 701 810 200,000 210,000 189 416 618 740 856 210,000 220,000 199 438 651 779 901 220,000 230,000 209 460 683 819 946 230,000 240,000 219 482 716 858 992 240,000 And up 229 504 749 897 1,037 . Tax slayer 2011 03 Revised Amounts for Passenger Automobiles Placed in Service During 2010. Tax slayer 2011 (1) Calculation of the Revised Amount. Tax slayer 2011 The revised depreciation limits provided in this section 4. Tax slayer 2011 03 were calculated by increasing the existing limitations on the first year allowance in Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18 by $8,000 as provided in § 168(k)(2)(F)(i). Tax slayer 2011 (2) Amount of the Revised Limitation. Tax slayer 2011 For passenger automobiles (that are not trucks or vans) placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 7 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. Tax slayer 2011 For trucks or vans placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 8 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. Tax slayer 2011 If the § 168(k) additional first year depreciation deduction does not apply to a passenger automobile placed in service by the taxpayer in calendar year 2010, the depreciation limitations for each taxable year in Tables 1 and 2 of Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18 apply. Tax slayer 2011 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 7 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Tax slayer 2011 PROC. Tax slayer 2011 2011-21 TABLE 8 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 (3) Modification to lease inclusion amounts for 2010. Tax slayer 2011 The lease inclusion amounts in Tables 3 and 4 of Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18 are modified by striking the first four lines of the inclusion amounts in each table. Tax slayer 2011 Consequently, Table 3 of Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18 applies to passenger automobiles (other than trucks and vans) that are first leased by the taxpayer in calendar year 2010 with a fair market value over $18,500, and Table 4 of Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18 applies to trucks and vans that are first leased by the taxpayer in calendar year 2010 with a fair market value over $19,000. Tax slayer 2011 SECTION 5. Tax slayer 2011 EFFECTIVE DATE This revenue procedure, with the exception of section 4. Tax slayer 2011 03, applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2011. Tax slayer 2011 Section 4. Tax slayer 2011 03 of this revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. Tax slayer 2011 SECTION 6. Tax slayer 2011 EFFECT ON OTHER DOCUMENTS Rev. Tax slayer 2011 Proc. Tax slayer 2011 2010-18 is amplified and modified. Tax slayer 2011 SECTION 7. Tax slayer 2011 DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Tax slayer 2011 Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Tax slayer 2011 For further information regarding this revenue procedure, contact Mr. Tax slayer 2011 Harvey at (202) 622-4930 (not a toll-free call). Tax slayer 2011 Prev  Up  Next   Home   More Internal Revenue Bulletins