Corporate Tax Rates

•Corporate tax rates in the United States are progressive
- Marginal rates from 15% to 39%, depending on taxable income.
- US corporate tax rate structure has 8 brackets
- There are a number of “tax bubbles” – these occur when tax rate schedules recapture savings from prior brackets.
•For corporations with large income (more than $18.33 million) the rate is a flat 35%
•Qualified personal service corps taxed at flat 35%
- Architects, CPA’s, consultants, etc

Corporate Capital Gains

•A corporation can choose from two alternative tax treatments on capital gains
- Tax at ordinary income
- Elect to pay an alternative tax (35%) on net long-term capital gain
•Essentially equivalent to maximum regular corporate tax, no tax benefit to LTCG.
•Bottom line: there is no difference in tax on ordinary vs capital income

Dividends Received Deduction.

•Corporations are allowed a deduction for a percentage of the dividends received from other corporations
- Attempt to alleviate triple taxation
Dividends received deduction is allowed based upon ownership


Organizational Expenditures & Start Up Costs
•Organizational expenditures pertain to LLC’s, corporations and partnerships.
•Start up costs can be incurred by any organization, including a sole proprietorship and entities mentioned above.
•Examples of these type of costs include

- Investigatory costs to look at a business before deciding whether or not to pursue it

- Legal/accounting services incidental to organization, costs of a temporary board of directors and state incorporation fees.
- Those incurred prior to opening – such as advertising expenses, employee training costs, etc.
•Also investigatory expenses – those incurred to decide whether to actually pursue the business opportunity at hand.

Amortization of Organizational Expenditure & Start Up Costs

•Organizational expenditures and start up costs are capitalized and then amortized over 180 months.
•However, firms can elect to deduct up to $5,000 of organization costs in the year the firm begins business
- $5,000 amount is reduced $1 for each $1 that organizational expenses exceed $50,000 



















Last modified: Tuesday, August 14, 2018, 8:39 AM