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Keller Acct 553 Homework


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Week 4 Homework
Please provide your answer to each question in the space provided below.
When finished, submit to the DropBox.

Chapter 14 1. Please describe the concept of "double taxation" and discuss which entity(ies) are subject to this type of taxation. (5 pts)
Corporations other than S Corps are considered double taxed. The corp is taxed on income and then if the earnings are paid out to shareholders that money is taxable income to the shareholder. If any of it was deductible then perhaps it wouldn’t be double taxation but this is not the case. However, for taxpayers in the 10% tax bracket they are not taxed on the dividend income.

2. What type of taxpayers are considered "eligible" taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.)
A taxpayer is considered eligible if; the individual sustaining the loss who was issued stock by a small business or corp and,
An individual who is a partner in a partnership at the exact time that the stock was acquired from the issuance of a small business. The stock must have been continually held from date of issuance in order to claim a deduction under section 1244. A corporation, any trust or estate is not entitled to such deductions.

3. Please describe how the treatment of capital gains(losses) differ for a C Corporation as compared to an Individual. ( 5 pts.)

A main difference is that for Corps, no special treatment is given for LT Capital Gains. There is also no deduction for capital losses that exceed capital gains for corps. The process is still similar for individuals in that the losses can be netted against the gains(not ordinary income), but anything above that for the corp is just taken as a loss.

4. Please describe the concept of "Depreciation recapture". ( 5

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