Corporate Taxation
Corporate taxation covers the tax rules for C corporations, which are taxed as separate entities at a flat 21% federal rate under current law.
Explanation
C corporations compute taxable income similarly to individuals but with key differences: no standard deduction, a dividends received deduction (DRD), and different rules for charitable contribution limits and net operating loss carryovers. Corporations face double taxation — income is taxed at the corporate level and again when distributed as dividends to shareholders. Key topics include the DRD (50%, 65%, or 100% depending on ownership), accumulated earnings tax, personal holding company tax, and the Section 291 ordinary income recapture rules.
Key Points
- •Flat 21% federal corporate tax rate
- •Dividends received deduction: 50% (<20% ownership), 65% (20-80%), 100% (≥80%)
- •Double taxation: corporate income tax plus shareholder dividend tax
Exam Tip
The charitable contribution deduction for corporations is limited to 10% of taxable income (computed before the deduction itself and certain other items).
Frequently Asked Questions
Related Topics
S Corporation Taxation
An S corporation is a pass-through entity that elects S status under Subchapter S, passing income, losses, and credits through to shareholders while generally avoiding entity-level tax.
Net Operating Losses (NOLs)
A net operating loss (NOL) occurs when a taxpayer's allowable deductions exceed gross income, and the excess can be carried forward to offset taxable income in future years.
Test your knowledge
Practice scenario-based questions on this topic with detailed explanations.