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Chapter 11: Excise Tax

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Chapter 11: Excise Tax Contents Chapter 11: Excise Tax ........................................................................................................................... 233 Overview .............................................................................................................................................. 233 Recent Form Changes ........................................................................................................................ 234 Partnerships - Schedule J1 ................................................................................................................ 235 1. Addition - Ordinary Income (Loss) from Form 1065 ......................................................... 235 2. Addition - Income Items Specifically Allocated to Partners, Including Guaranteed Payments ......................................................................................................................................... 235 3. Addition - Any Net Loss or Expense Distributed to a Publicly Traded REIT ................... 237 4. Deduction - Expense Items Specifically Allocated to Partners......................................... 238 5. Deduction - Amount Subject to Self-employment Taxes Distributable or Paid to Each Partner or Member ........................................................................................................................ 239 6. Deduction - Amount of Contribution, Not Previously Deducted, to Qualified Pension or Benefit Plans of any Partner or Member, Including all I.R.C. 401 Plans ................................. 241 7. Deduction - Any Loss on the Sale of an Asset Sold within 12 Months after the Date of Distribution ..................................................................................................................................... 242 Single-Member LLC Filing as Individual – Schedule J2 ................................................................... 243 1. Addition - Net Profit or Loss ................................................................................................. 244 2. Addition - Capital Gains or Losses ....................................................................................... 244 3. Addition - Rental Real Estate and Royalty Income or Loss ............................................... 244 4. Addition - Profit or Loss from Farming ............................................................................... 245 5. Addition - Ordinary Gain or Loss – Depreciable Property ................................................ 245 6. Deduction – Amount Subject to Self-Employment Taxes Distributable or Paid to the Single Member................................................................................................................................ 245 Subchapter S-Corporations – Schedule J3 ...................................................................................... 246 1. Addition/Deduction - Income and Expense Items as if no “S” Election .......................... 246 2. Deduction - Any Loss on the Sale of an Asset Sold within 12 Months after the Date of Distribution ..................................................................................................................................... 246 Schedule J4 – Corporations and Other Entities .............................................................................. 246 1. Addition - Domestic Production Activities Deduction (2017) ........................................... 247 2. Addition/Deduction - Contributions .................................................................................... 248 3. Addition - Capital Gains Offset by Capital Losses .............................................................. 249 4. Deduction - Capital Loss, Deduction ................................................................................... 249 Schedule J Computation of Net Earnings Subject to Excise Tax - All Entity Types ..................... 251 1. Schedule J, Line 1 – Federal Income (Loss) ......................................................................... 252 2. Addition – Intangible Expense .............................................................................................. 252 3. Addition - Bonus Depreciation ............................................................................................. 254 4. Addition - Gain on the Sale of a Distributed Asset & Repatriated and GILTI Adjustment (2018) ............................................................................................................................................... 261 5. Addition – Tennessee Excise Tax Deducted on Federal Return ...................................... 264 6. Addition - Gross Premiums Tax ........................................................................................... 264 7. Addition - Interest Income of States and Political Subdivisions ...................................... 265 8. Addition - Depletion............................................................................................................... 267 9. Addition – Excess Fair Market Value over Book Value of Property Donated ................. 268 10. Addition – Excess Rent to/from an Affiliate .................................................................... 270 11. Addition – Net Loss or Expense Received from a Pass-through Entity Subject to the Excise Tax ........................................................................................................................................ 272 12. Amount Equal to Five Percent of IRC Section 951A Global Intangible Low-Taxed Income ............................................................................................................................................. 275 13. Business Interest Expense ................................................................................................ 275 14. Total Additions ................................................................................................................... 275 15. Deduction – Depreciation ................................................................................................. 275 16. Deduction – Excess Gain/Loss on Asset with Bonus Depreciation ............................. 276 17. Deduction – Dividends Received ..................................................................................... 276 18. Deduction – Donations to Qualified Public School Support Groups and Nonprofit Organizations.................................................................................................................................. 277 19. Deduction – Federal Expense Reduction Related to Federal Credit ........................... 278 20. Deduction - Safe Harbor Lease ........................................................................................ 281 21. Deduction – Nonbusiness Earnings ................................................................................ 282 22. Deduction – Intangible Expense Paid to an Affiliate ..................................................... 282 23. Deduction – Intangible Income ........................................................................................ 283 24. Deduction – Net Gain or Income Received from a Pass-through Entity Subject to the Excise Tax ........................................................................................................................................ 283 25. Deduction – Grants (2018) ................................................................................................ 284 26. IRC Section 951A Global Intangible Low-Taxed Income ............................................... 284 27. Business Interest Expense ................................................................................................ 285 28. Calculated Amounts .......................................................................................................... 286 Ownership of a Pass-through Entity ................................................................................................ 286 Tax Cuts and Jobs Act of 2017 (TCJA) ............................................................................................... 288 1. Interest Expense Limitation .................................................................................................. 288 2. State Grants ............................................................................................................................ 289 3. Repatriated Earnings for 2017 ............................................................................................. 289 4. Repatriated Earnings and Global Intangible Low-Taxed Income, beginning in 2018 ... 290 M-3 and M-1 Federal Schedules ....................................................................................................... 292 1. Schedule M-3 .......................................................................................................................... 293 2. Chart of Schedule J4, J Adjustments .................................................................................... 295 Like-Kind Exchanges .......................................................................................................................... 297 1. Overview ................................................................................................................................. 297 2. Federal Tax Mechanics .......................................................................................................... 297 3. Excise
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