ACCT553
Week 4 Homework
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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)
Double taxation is tax on income of a business entity and second tax on distributions made to owners. The classic example is dividends paid to an owner from a corporation.
2. What types of taxpayers are considered "with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.)
The eligible" taxpayers are the individuals or partnerships who are the original owners of shares in electing domestic small business corporation. The stock must be issued for property, common or preferred, domestically chartered and otherwise meet the tests to qualify as 1244 stock.
3. Please describe how the treatment of capital gains (losses) differs for a C Corporation as compared to an Individual. ( 5 pts.)
Individuals net their capital gains and losses together, and the result is reported on an individual form 1040. Net long term capital gains are taxed at rates currently discounted to ordinary rates. Capital losses can be deducted up to $3,000 per year against ordinary income, with carrybacks and carry forwards available for those losses. C corporations may net capital losses against capital gains only, and pay tax at standard tax rates for capital gains

4. Please describe the concept of "Depreciation recapture". ( 5 pts.)
Depreciation is the non-cash expensing of a portion of the cost of a fixed asset used in business. When that asset is sold for more than the net value of the asset, depreciation recapture may require that some of the sale proceeds are taxed as ordinary income rates.