2. Chapter 11 Entity Choice: The C Corporate Taxpayer

3. Computing Corporate Taxable Income  Page 1 of the Form 1120 resembles a financial income statement or a Schedule C in a personal tax return (Ch 10).  Use chapters 6, 7, 8 and 9 for general rules on business income.  Deduct only 50% of meals and entertainment expenses.  Deduct charitable contributions up to 10% of taxable income BEFORE charity and before dividends-received deduction (but after any NOL carryforward).

4. Dividends-received Deduction  Dividends Received Deduction is a “Special” Deduction on corporate tax return—computed as follows: Ownership Deduction  < 20% of stock 70% DRD  20% -- < 80% 80% DRD  >= 80% 100% DRD  Reason for DRD? Mitigate “triple” taxation.

5. The Domestic Production Activities Deduction  Section 199 Deduction = 9% of income from “domestic production activities.”  Limited to 9% of taxable income.  May not exceed 50% of domestic wages.  Net effect is to reduce maximum corporate tax rate on domestic production from 35% to 31.85% (91% of 35%).  Is that a sufficient incentive?