Tax Accounting Notes
Chapter C:5
Other Corporate Tax Levies
Learning Objectives
After studying this chapter, the student should be able to:
1. Calculate the corporation’s alternative minimum tax liability (if any).
2. Determine whether a corporation is a personal holding company (PHC).
3. Calculate the corporation’s PHC tax.
4. Determine whether a corporation is liable for the accumulated earnings tax.
5. Calculate the amount of the corporation’s accumulated earnings tax.
6. Explain how a corporation can avoid the personal holding company tax.
7. Explain how a corporation can avoid the accumulated earnings tax.
8. Understand the financial statement implications of the alternative minimum tax credit.
Areas of Greater Significance
Calculation of the corporate alternative minimum tax should be emphasized. In addition, students need to know how to avoid the imposition of penalty taxes like the PHC and AET.
Areas of Lesser Significance
In the interest of time, the instructor may determine that the following areas are best covered by student reading rather than class discussion:
1. Details relating to the calculation of the personal holding company tax and accumulated earnings tax.
2. Tax compliance considerations for the accumulated earnings tax and the personal holding company tax.
Highlights of Recent Tax Law Changes
The PHC and AET tax rate are now tied to the highest rate for a dividend which is 15% through 2012.
Taxable income (the starting point for calculating AMTI) is net of the U.S. production activities deduction. For that purpose the deduction is 6% (in 2008 and 2009, 9% in 2010) times the lesser of qualified production activities income or taxable income before the deduction. For AMTI purposes, the computation is based on the lesser of qualified production activities income or AMTI before the deduction.
The U.S.
Other Corporate Tax Levies
Learning Objectives
After studying this chapter, the student should be able to:
1. Calculate the corporation’s alternative minimum tax liability (if any).
2. Determine whether a corporation is a personal holding company (PHC).
3. Calculate the corporation’s PHC tax.
4. Determine whether a corporation is liable for the accumulated earnings tax.
5. Calculate the amount of the corporation’s accumulated earnings tax.
6. Explain how a corporation can avoid the personal holding company tax.
7. Explain how a corporation can avoid the accumulated earnings tax.
8. Understand the financial statement implications of the alternative minimum tax credit.
Areas of Greater Significance
Calculation of the corporate alternative minimum tax should be emphasized. In addition, students need to know how to avoid the imposition of penalty taxes like the PHC and AET.
Areas of Lesser Significance
In the interest of time, the instructor may determine that the following areas are best covered by student reading rather than class discussion:
1. Details relating to the calculation of the personal holding company tax and accumulated earnings tax.
2. Tax compliance considerations for the accumulated earnings tax and the personal holding company tax.
Highlights of Recent Tax Law Changes
The PHC and AET tax rate are now tied to the highest rate for a dividend which is 15% through 2012.
Taxable income (the starting point for calculating AMTI) is net of the U.S. production activities deduction. For that purpose the deduction is 6% (in 2008 and 2009, 9% in 2010) times the lesser of qualified production activities income or taxable income before the deduction. For AMTI purposes, the computation is based on the lesser of qualified production activities income or AMTI before the deduction.
The U.S.