C Corporation Case

A corporation cannot use net operating losses between C corporation years and S corporation years, with the only exception that net operating losses from C corporation years can reduce net recognized built-in gains from S corporation years.

The company should report the change in the contingency accrual as a 2009 event due change in estimate. ASC 250-10-45-17 specifies that “a change in accounting estimate shall not be accounted for by restating or retrospectively adjusting amounts reported in financial statements of prior periods.” Additionally, ASC 450-20-25-7 indicates that “all estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments”.

As ASC 450-20-25-2 states, an estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:

Net capital loss carryovers but not carrybacks are deductible against capital gains in determining a corporation 's net operating loss for the year.
True

* However, if these payments are unreasonable, then distribution is considered a ‘constructive dividend’ and is no longer deductible

Profits earned or losses incurred by the corporation. Profits retained belong to the common shareholders and the share value increases accordingly.

both a and b (Yes.  The corporate structure provides for limited liability and ease of transferring ownership.)

As per ASC 450-20-25-2, entities should accrue an estimated loss from a loss contingency by a charge to expense and a liability recorded only if both of the following conditions are met:

0 A publicly held corporation is entitled to limited liability, but the public corporation is not.

As per ASC 450-20-25-2, an estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:

1. All distributions (excluding reasonable salary) to Paula and Mary will be taxed as dividends to them. And the corporation could not deduct this part of distribution.

Due to the fact that corporations are separate legal entities from their owners, C-corporations are taxed separately requiring the filing of IRS Form 1120 each year to report its income and take advantage of any credits or deductions for which the corporation may be eligible (Internal revenue Service (IRS), 2012b). Income tax rates for corporation are tailored to corporations and as such are different from those

pk can no longer be indentified with the average cost of capital when taxes come into play. Yet, to simplify things the writers will still do this.

It is indicates company has to involve additional expenditure. Similarly, any excess in the dividend payment for capital gains over the tax credit balance will cause the company to incur the s 108 charge. This is no tax efficient to the company and increase the cost of dividend payment.

India follows the "classical system," under which corporate income is taxed both to the corporation and upon distribution to the shareholders as dividends. However, dividends received by one domestic company from another domestic company are not taxed in the hands of the recipient company to the extent it distributes the dividends to its shareholders within the time allowed for filing its tax return.