Running head: ASPECTS OF C CORPORATION 1

Aspects of C Corporation

Dollie Moore

South University Online

ASPECTS OF C CORPORATION 2

Aspects of C Corporation

Cuckoo Corporation is a C corporation. When are C corporations required to make

estimated tax payments? How are these payments calculated?

C corporations are required to make their payments quarterly if the estimated tax for the

year is expected to be $500 or more. These payments are due the 4th, 6th, 9th, and 12th months on

the 15th day of the corporations tax year. The payments are calculated as 25% of the estimated

tax for the year. For example: If the estimated tax is $100,000, 25% would be $25,000 payment

made per quarter.

Following expenditures are made by Cuckoo Corporation. Analyze and justify whether the

following expenditures are organizational expenditures, startup expenditures, or neither.

Examples of qualifying organization costs for setting up a corporation include:

Accounting fees to set up the corporation's books, costs of organization meetings, costs of

temporary directors, legal fees to draft the corporate charter, bylaws, minutes of organization

meetings, terms of original stock certificates, and state incorporation fees (Villano, 2017, para.

8).

Legal expenses incurred for drafting the corporate charter and bylaws. Start-

up costs
Expenses incurred in printing stock certificates.

Neither
Expenses of temporary board of directors' organizational meetings.

Organizational costs
Employee salaries incurred during the training period before opening for business.

Start-up costs
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State incorporation fee.

Start-up costs

Cuckoo Corporation purchases commercial realty on November 13, 1994 for $650,000.

Straight-line depreciation of $287,492 is claimed before the property is sold on February

22, 2012 for $850,000. What are the tax consequences of the sale of realty if Cuckoo

Corporation is?

A C corporation? The main reason to become a C corporation is income splitting. Use Schedule

C of your individual tax return to declare your sales and subtract your business expenses. The tax

you pay at the individual level is income tax and self-employment tax. As a C corporation, the

tax you pay will be less.

A sole proprietorship? You are the business as the sole proprietor. And as owner you must

claim the income, and the taxes you pay will be higher.

In 2012, Cuckoo Corporation, a calendar year C corporation, has a $75,000 charitable

contribution carryover from a gift made in 2007. Cuckoo is contemplating a gift of land to

a qualified charity in either 2012 or 2013. Cuckoo purchased the land as an investment five

years ago for $100,000 (current fair market value is $250,000). Before considering any

charitable deduction, Cuckoo projects taxable income of $1 million for 2012 and $1.2

million for 2013. Recommend whether Cuckoo should make the gift of the land to charity

in 2012 or in 2013? Justify.

The land gift should be deferred until 2013, which would allow for a full deduction in

2012 of the carryover contribution of $75,000. If the land were to be gifted in 2012, there would

be a lose of any otherwise allowable deduction as to the $75,000 carryover amount. This is
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because current year gifts are applied before carryover amounts against the taxable income

limitation, using up the taxable income limitation for 2012 by the land gift. A gift of appreciated

land held for more than one year as an investment results in a charitable deduction equal to the

land's fair market value (subject to the taxable income limitation).

Assuming a gift of the land in 2013:

2012 taxable income limitation: 10% $1 million = $100,000.

2013 charitable contribution deduction: $75,000 (carryover from 2009 gift).

2013 taxable income limitation: 10% 1.2 million = $120,000.

2013 charitable contribution deduction: $120,000 (gift of land; excess contribution of

$130,000 is carried forward for up to 5 years).

Assuming a gift of the land in 2014

2012 taxable income limitation: 10% $1 million = $100,000.

2012 charitable contribution deduction: $100,000 (gift of land; excess contribution of

$150,000 is carried forward for up to 5 years). Carryover from 2009 gift ($75,000)

disappears, as 2012 is the last year of the carryover period.

2013 taxable income limitation: 10% 1.2 million = $120,000.

2013 charitable contribution deduction: $120,000 (carryover from 2012 gift; remaining

$30,000 of carryover from 2012 gift carries over to 2014).

Reference
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Villano L. (2017, February 7). Start-up Costs and Organization Costs. Retrieved from:

http://loopholelewy.com/loopholelewy/02-business-deductions/startup-costs-01-startup-and-

organization-costs.htm