Tax benefits of NOLs can be lost due to the impact of the AMT

Article Abstract:

Corporate tax liability is taxable income multiplied by the appropriate tax rate, minus credits. Regular tax liability is the basis for computing the alternative minimum tax (AMT). AMT is the excess of the tentative minimum tax (TMT) over the the regular tax liability for the taxable year. Corporate TMT is 20% of the amount by which the alternative minimum taxable income (AMTI), exceeds the exemption. Adjustments can increase or decrease AMTI, and items that must be adjusted include: depreciation; long-term contracts; and the AMT net operating loss (NOL) deduction. Reductions in regular tax resulting in increases in AMT leads to an increase in overall tax liability. Tax planners must eliminate the AMT while minimizing regular tax. In situations where the AMT NOL would be absorbed by the AMTI, it is advised to forgo the carryback to avoid imposition of the AMT.

Analysis, Loss deductions, Minimum tax, Carryback losses

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Corporate liquidations offer many tax savings opportunities to corporations and shareholders

Article Abstract:

The existence of installment obligations and recapture provisions may generate income from a corporate liquidation. A corporation will not recognize, under Section 336(a), a loss or a gain on the liquidating distribution of the property. A plan for total liquidation can be adopted by the corporation or the company can sell all or any part of its assets and, covered by Section 377, not report a gain or a loss for the sale when the corporation distributes all of the assets in less than one year of the plan's ratification.

Securities law, Liquidation

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How to determine when the incorporation of a proprietorship is necessary or advantageous

Article Abstract:

Tax brackets that can be utilized by corporations and proprietorships must not by itself determine whether the partnership has to incorporate. The expected character and amount of the income of the business must be evaluated. Also, the tax liability that could result when the business is handled as a corporation, by considering the corporation's history from its start to its liquidation, must in addition be evaluated. Non-tax elements, like liability limitations and personal preference, should be considered.

Economic aspects, Corporate taxes, Corporations, Incorporation

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