reglab/statecodes huggingface dataset:
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-411 - GAIN OR LOSS - SALES OF PROPERTY › Rule 1.26-51-411 - Amount Realized on Sale of Property

Current through Register Vol. 49, No. 6, June, 2024
The amount realized from the sale or other disposition of
					 property is the sum of any money received plus the fair market value of any
					 property (other than money) received. The fair market value of property is a
					 question of fact, but only in rare and extraordinary cases does property have
					 no fair market value.
In computing the amount of gain or loss, the cost or other
					 basis of the property sold shall be adjusted for items properly chargeable to
					 the seller's capital account. Adjustments include expenditures (such as to
					 maintain effective usefulness, losses, improvements, carrying charges (such as
					 taxes) on nonproductive property, and deductions for exhaustion, wear and tear,
					 obsolescence and depletion.
Any carrying charges deducted to compute taxable income
					 will not be used to increase basis. Deductions allowable since the acquisition
					 of the property, whether or not actually claimed by the taxpayer or formally
					 allowed, will be used to adjust basis. Reduction in basis due to depletion
					 shall not exceed such a deduction computed without reference to discovery for
					 mines, oil and gas wells. The basis of stock shares must be reduced by the
					 amount of previous distributions made as returns of capital.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-411 - GAIN OR LOSS - SALES OF PROPERTY › Rule 3.26-51-411 - Loss Carryforwards

Current through Register Vol. 49, No. 6, June, 2024
For corporations, all losses shall be deducted in the year
					 in which they occur with no carryforwards except for net operating losses and
					 those provided for by ACA
					 26-51-436.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-411 - GAIN OR LOSS - SALES OF PROPERTY › Rule 1.26-51-411(e) - Sales of Real Estate or Personal Property

Current through Register Vol. 49, No. 6, June, 2024
Gain or loss on installment sales of real estate or
					 personal property will be treated as provided in Sections 453, 453A and 453B of
					 the Internal Revenue Code of 1986, as in effect on January 1, 1995. Refer to
					 1995 Treasury Regulations §1.453-4 et seq. and §1.453A-1 et seq. for guidance
					 in applying IRC Sections 453, 453A and 453B. For proper reporting of
					 installment payments, see 2.
					 26-51-404(a)(2)
					 and 3.
					 26-51-404(a)(2).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 1.26-51-412(a) - Exchange of Property for Like Property

Current through Register Vol. 49, No. 6, June, 2024
For purposes of corporation income tax, no gain or loss
					 shall be recognized in an exchange of property for like property of a similar
					 value.
If property held for productive use in a trade or business
					 or for investment is exchanged solely for property of like kind to be held
					 either for productive use in a trade or business or for investment, no gain or
					 loss is recognized. Such property does not include stock in trade or other
					 property held primarily for sale, nor stocks, bonds, notes, certificates of
					 trust, beneficial interests, other securities or evidence of
					 indebtedness.
The words "like kind" have reference to the nature or
					 character of the property and not its grade or quality. Therefore, no gain or
					 loss is realized by a taxpayer, other than a dealer, from the exchange of real
					 estate for other real estate. However, one kind or class of property may not be
					 exchanged for property of a different kind or class, such as real estate for
					 personal property.
A dealer is one who regularly buys and sells securities to
					 customers in the ordinary course of business and who treats such securities as
					 inventory.
If common or preferred stock in a corporation is exchanged
					 solely for the same category or type of stock in the same corporation, no gain
					 or loss shall be recognized.
If property is transferred to a corporation by one or more
					 parties solely in exchange for stock or securities in such corporation and,
					 immediately after the exchange, such parties are in control of the corporation,
					 no gain or loss shall be recognized. When more than one party is involved in
					 the transfer to the corporation and the amount of stock and securities received
					 by each is substantially in proportion to their interest in the property prior
					 to the exchange, no gain or loss will be recognized.
If property is exchanged for stock and cash or other
					 property, gain, but not loss, will be recognized to the extent of the cash or
					 fair market value of the other property received.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 2.26-51-412(a) - Exchange of Property for Property Not of Like Kind

Current through Register Vol. 49, No. 6, June, 2024
When property is exchanged for other property not of a like
					 kind, the property received in exchange shall be treated as the equivalent of
					 cash up to the amount of its fair market value for the purpose of determining
					 gain or loss. If no market exists in which all of the property so received can
					 be disposed of at the time of exchange for a reasonably certain and definite
					 price in cash, the exchange shall be considered a conversion of assets from one
					 form to another form and no gain or loss shall be deemed to arise. The property
					 received in exchange shall be taken into the records of the taxpayer at the
					 same cost or assessed value as the property which was exchanged, including
					 additions and minus any allowable depreciation and depletion.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 3.26-51-412(a) - Dividends Paid in the Form of Securities or Other Property

Current through Register Vol. 49, No. 6, June, 2024
Dividends paid in securities (other than the corporation's
					 own stock) or other property in which the earnings of a corporation have been
					 invested, are income to the shareholders in the amount of the market value of
					 such property. When a corporation declares a dividend payable in the stock of
					 another corporation, setting aside the stock to be distributed and notifying
					 its shareholders of its action, the income attributable to the recipients of
					 such stock is its market value at the time the dividends become payable. Scrip
					 dividends are subject to tax in the year in which the warrants are
					 issued.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 4.26-51-412(a) - Property Acquired as a Result of an Involuntary Conversion

Current through Register Vol. 49, No. 6, June, 2024
In the case of property acquired as a result of an
					 involuntary conversion, the basis of the property shall be the same as that of
					 the property so converted with the following adjustments:
a) decreased in the amount of any money
				  received by the taxpayer which was not expended;
b) increased in the amount of the gain;
				  and
c) decreased in the amount of
				  loss to the taxpayer recognized upon such conversion applicable to the year in
				  which the conversion was made. See 1.
				  26-51-404(b)(1).
In any case where the taxpayer elects to replace or restore
					 the converted property but it is not feasible to do so immediately, the
					 taxpayer may obtain permission to establish a replacement fund in which part or
					 all of the compensation received shall be held, without any deduction for the
					 payment of a mortgage. The taxpayer should apply to the Department for
					 permission to establish a replacement fund. The application should recite all
					 the facts relating to the transaction and declare that the taxpayer will
					 proceed as quickly as possible to replace or restore such property. The
					 taxpayer will be required to furnish a surety bond in an amount not to exceed
					 double the estimated additional income taxes which would be payable if no
					 replacement fund were established. The estimated additional taxes for the
					 amount of which the taxpayer is required to furnish security should be computed
					 at the rates at which the taxpayer would normally be required to pay. Only
					 surety companies will be approved as sureties. The application should be
					 executed in triplicate, so that the Department, the taxpayer and the surety or
					 depository may each have a copy.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 1.26-51-412(b) - Basis of Stock Received for Property

Current through Register Vol. 49, No. 6, June, 2024
During the initial start-up of a corporation, the stock or
					 securities of the corporation exchanged for real or personal property
					 transferred to the corporation shall be deemed to have the same value or cost
					 as the property so transferred and no gain or loss shall arise from the
					 transaction.
The cost or value of the property transferred (adjusted as
					 to depreciation and depletion) shall be entered in the records of the taxpayer
					 as the purchase price of its stock in the corporation and a record of such cost
					 must be maintained. Gain or loss in future sales of such stock shall be
					 measured by the difference between the individual cost per share determined as
					 above to the selling price of such stock.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 1.26-51-412(c) - Reorganization, Merger, and Consolidation

Current through Register Vol. 49, No. 6, June, 2024
A "merger" or "consolidation" includes:
(1) The acquisition by one corporation of a
				  majority of the voting stock and a majority of the total number of shares of
				  all other classes of stock of another corporation, or substantially all the
				  property of another corporation;
(2) A transfer by one corporation of all or a
				  part of its assets to another corporation if, immediately after the transfer,
				  the transferor or its stockholders or both are in control of the corporation to
				  which the assets are transferred;
(3) A recapitalization; or
(4) A mere change in identity, form, or place
				  of organization, however effected.
The term "a party to a reorganization" as used in ACA
					 26-51-412
					 includes a corporation resulting from a reorganization and includes both
					 corporations in the case of an acquisition by one corporation of at least a
					 majority of the voting stock of another corporation.
A person is, or two or more persons are, "in control" of a
					 corporation within the meaning of ACA
					 26-51-412
					 when owning:
(1) At least 80 percent
				  (80%) of the voting stock; and
(2)
				  At least 80 percent (80%) of the total number of shares of all other classes of
				  stock of the corporation.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 2.26-51-412(c) - Exchange of Property in a Reorganization

Current through Register Vol. 49, No. 6, June, 2024
No gain or loss shall be recognized if:
a) pursuant to a reorganization plan, stock
				  or securities in a corporation are exchanged solely for stock or securities in
				  the same corporation or in another party to the reorganization; or
b) pursuant to a reorganization plan, a party
				  to a reorganization exchanges property solely for stock or securities in
				  another party to the reorganization.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 3.26-51-412(c) - Exchange of Property in a Reorganization

Current through Register Vol. 49, No. 6, June, 2024
Pursuant to a reorganization plan, if stock or securities
					 in a corporation are exchanged for stock or securities in the same corporation
					 or in another party to the reorganization including other property or money as
					 well, any gain to the recipient shall be recognized in an amount not to exceed
					 the sum of the money and the fair market value of the other property. No loss
					 from such an exchange will be recognized.
Pursuant to a reorganization plan, if property is exchanged
					 by a party to the reorganization for stock or securities in another party to
					 the reorganization including other property or money as well, if the other
					 property or money received by the corporation is distributed by it pursuant to
					 the reorganization plan, no gain to the corporation will be recognized. If the
					 other property or money received by the corporation is not distributed by it
					 pursuant to the plan of reorganization, any gain to the corporation from the
					 exchange will be recognized in an amount not to exceed the sum of the money and
					 the fair market value of the other property so received. In either case, no
					 loss from the exchange will be recognized.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 4.26-51-412(c) - Securities Received in a Reorganization

Current through Register Vol. 49, No. 6, June, 2024
If, without any surrender of his stock or securities, a
					 shareholder of a party to a reorganization receives stock or securities in such
					 corporation or in another party to the reorganization pursuant to a
					 reorganization plan, no gain to the shareholder will be
					 recognized.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-412 - GAIN OR LOSS - EXCHANGE OF PROPERTY › Rule 5.26-51-412(c) - Securities Received in a Reorganization - Basis

Current through Register Vol. 49, No. 6, June, 2024
In the case of stock or securities acquired by a
					 shareholder in connection with the transactions described in Regulation 3.
					 26-51-412(c),
					 the cost or assessed value of the stock upon which the distribution was made
					 shall be apportioned between such stock and the stock or securities distributed
					 to the shareholder. The basis of each share will be the quotient (or result) of
					 the cost or assessed value of the old shares of stock divided by the total
					 number of the old and new shares.
When the stock distributed in a reorganization is
					 materially different from the stock upon which the distribution is made, the
					 cost or other basis of the old shares of stock shall be divided between such
					 old stock and the new stock in proportion to the respective values of each
					 class of stock, old and new, at the time the new shares of stock are
					 distributed. The basis of each share of stock will be the quotient (or result)
					 of the cost or other basis of the class with which such share belongs, divided
					 by the number of shares in the class.
When the stock upon which a distribution in reorganization
					 is made was purchased at different times and prices, and the identity of the
					 lots cannot be determined, any sale of the original stock will be charged to
					 the earliest purchases of such stock (see Reg. 2.
					 26-51-411
					 ), and any sale of the stock distributed in the reorganization will be presumed
					 to have been made from the stock distributed upon the earliest purchased
					 stock.
Where the stock upon which a distribution in reorganization
					 is made was purchased at different times and prices, and the stock distributed
					 in the reorganization cannot be identified as having been distributed upon any
					 particular lot of such stock, then any sale of the stock distributed in the
					 reorganization will be presumed to have been made from the stock distributed
					 upon the earliest purchased stock.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-413 - CORPORATE LIQUIDATIONS › Rule 1.26-51-413 - Treatment of Amounts Distributed in Liquidation

Current through Register Vol. 49, No. 6, June, 2024
Amounts distributed in complete liquidation of a
					 corporation are to be treated as full payment for all stock issued. Amounts
					 distributed in partial liquidation are to be treated as full payment for the
					 stock which was canceled or redeemed.
The gain or loss to a shareholder from a distribution in
					 liquidation is to be determined by comparing the amount of the distribution
					 with the cost or other basis of the stock. In the case of amounts distributed
					 in partial liquidation (other than a distribution pursuant to a reorganization
					 plan as described in ACA
					 26-51-412
					 ), the part of such distribution which is properly chargeable to the capital
					 account shall not be considered a distribution of earnings or profits within
					 the meaning of ACA
					 26-51-411
					 for the purpose of determining the taxability of a subsequent distribution by
					 the corporation.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-413 - CORPORATE LIQUIDATIONS › Rule 2.26-51-413 - Election of Subchapter S Corporation Status

Current through Register Vol. 49, No. 6, June, 2024
A taxpayer who has elected to be treated as an S
					 corporation for federal income tax purposes but not for state income tax
					 purposes (therefore retaining its C corporation status), must file a §338
					 election with the Department's Individual Income Tax Section stating that it
					 desires to be taxed in accordance with IRC Section 338. This is so despite the
					 fact that the taxpayer may already have a §338 election on file with the
					 IRS.
If the taxpayer has elected to be treated as an S
					 corporation for both federal and state income tax purposes, and the taxpayer
					 has also filed a §338 election with the IRS, the taxpayer need not file a
					 separate §338 election with the Department. The taxpayer will automatically
					 receive §338 treatment by the Department for state income tax purposes as
					 well.
If the taxpayer has elected to be treated as a C
					 corporation for both federal and state income tax purposes, and the taxpayer
					 has also filed a §338 election with the IRS, the taxpayer need not file a
					 separate §338 election with the Department. The taxpayer will automatically
					 receive §338 treatment by the Department for state income tax purposes as
					 well.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-416 - DEDUCTIONS - TAXES › Rule 1.26-51-416 - State Income Taxes

Current through Register Vol. 49, No. 6, June, 2024
No deduction will be allowed for Arkansas state income
					 taxes in the computation of net income. All other states' income taxes are
					 deductible.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-419 - DEDUCTIONS - CHARITABLE CONTRIBUTIONS › Rule 1.26-51-419 - Charitable Contributions

Current through Register Vol. 49, No. 6, June, 2024
Arkansas has adopted IRC Section 170 as referenced in ACA
					 26-51-419.
					 Section 170(d)(2)(B) does not allow unused contributions to increase NOL carry
					 forward. It merely decreases net taxable income by current year contributions
					 first, then any accumulated contribution carryforwards up to a 10% limitation.
					 This decreases the amount of NOL used and increases the NOL available for
					 future years.
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LIMITS ON CHARITABLE CONTRIBUTIONS
Year
Contributions
Utilized Current Year Limit
Current Year Balance
Prior Years Contribution Utilized
Year End Cumulative Carryforward
expired
1989
1,000
0
1,000
0
1,000
0
1990
1,000
0
1,000
0
2,000
0
1991
1,000
0
1,000
0
3,000
0
1992
1,000
100
900
0
3,900
0
1993
1,000
300
700
0
4,600
0
1994
1,000
0
1,000
0
4,600
1,000*
1995
1,000
1,000
0
3,500
1,100
0
Southern Arkansas Timber, Inc. started business on
					 01/01/89. Organization expenses amounted to $10,000. Amortization of
					 organization expenditures is deducted before the 10% limit is allowed. Any
					 unused charitable contributions cannot be added to NOLs when they
					 expire.
* Contribution carryover from 1989 expired at the end of
					 1994 as shown in chart.
For charitable contributions for consolidated filers, refer
					 to ACA
					 26-51-805(f).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-423 - DEDUCTIONS - EXPENSES › Rule 1.26-51-423(b) - Travel and Entertainment

Current through Register Vol. 49, No. 6, June, 2024
For tax years beginning before 01/01/95, IRC Section 274 as
					 in effect 01/01/89 shall apply. For tax years beginning on or after 01/01/95,
					 IRC Section 274 as in effect 01/01/95 shall apply.
Eighty percent (80%) of qualified expenses will be allowed
					 in tax years beginning before 01/01/95, and 50% of qualified expenses will be
					 allowed in tax years beginning on or after 01/01/95. For tax years beginning on
					 or after 01/01/97, IRC Section 274 as in effect on 01/01/97 shall apply. The
					 percentage will gradually rise beginning in 1998 as set forth below:
For taxable years beginning in
The applicable calendar year - percentage is
								-
1998 or 1999
55%
2000 or 2001
60%
2002 or 2003
65%
2004 or 2005
70%
2006 or 2007
75%
2008 or thereafter
80%
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 1.26-51-424(a)(1) - Losses

Current through Register Vol. 49, No. 6, June, 2024
Losses sustained during the tax year, not compensated for
					 by insurance or otherwise, are fully deductible. Losses must usually be
					 evidenced by closed and completed transactions. The basis for determining the
					 amount of the deduction for loss is the same as is provided in ACA 26-51411 for
					 determining the gain or loss from the sale or other disposition of property.
					 Proper adjustments must be made in each case for expenditures, receipts, losses
					 or other items properly chargeable to the capital account and for depreciation,
					 obsolescence, amortization or depletion. Moreover, the amount of the loss must
					 be reduced by the amount of any insurance or other compensation received and by
					 the salvage value, if any, of the property.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 2.26-51-424(a)(1) - Removal or Demolition of Buildings

Current through Register Vol. 49, No. 6, June, 2024
Losses due to the voluntary removal or demolition of old
					 buildings and the scrapping of old machinery or equipment incidental to renewal
					 or replacement are deductible from gross income. When a taxpayer buys real
					 estate upon which is located a building which he proceeds to raze with the
					 intent of erecting thereon another building, the taxpayer has incurred no
					 deductible loss or expense on account of the demolition of the old building.
					 The basis in the real estate will be increased by the cost of the
					 demolition.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 3.26-51-424(a)(1) - Obsolescence of Capital Assets

Current through Register Vol. 49, No. 6, June, 2024
When the usefulness of some or all of a taxpayer's capital
					 assets ends causing the taxpayer to discontinue use of, or permanently discard,
					 such assets from use in the business, the taxpayer may claim as a loss for the
					 year in which it takes such action the difference between the cost of the
					 assets (less depreciation, etc.) and the salvage value thereof. This deduction
					 does not extend to a case where the useful life of property ends solely as a
					 result of those gradual processes for which depreciation allowances may be
					 taken (wear and tear), nor does it apply to inventories or to any assets other
					 than capital assets. Moreover, this deduction applies to buildings only when
					 they are permanently abandoned and to machinery only when its intended use has
					 been permanently discontinued. Any loss to be deducted under this provision
					 must be fully explained in the taxpayer's income tax return.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 4.26-51-424(a)(1) - Shrinkage in Value of Stock

Current through Register Vol. 49, No. 6, June, 2024
Unless the lower of cost or market or mark to market
					 methods are used for tax purposes, the owner of stock in a corporation cannot
					 deduct from gross income a loss due to shrinkage in value of such stock through
					 fluctuations in the market or otherwise until the stock is sold. The allowable
					 loss is the amount realized when the stock is sold. If the stock of a
					 corporation becomes worthless, the stock's tax basis may be deducted in the tax
					 year in which the stock became worthless.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-424 - DEDUCTIONS - LOSSES › Rule 5.26-51-424(a)(1) - Farm Losses

Current through Register Vol. 49, No. 6, June, 2024
Losses incurred in the operation of farms as business
					 enterprises are deductible from gross income. If farm products are held for a
					 more favorable market, no deductions for shrinkage in weight or physical value
					 by reason of deterioration in storage shall be allowed. Shrinkage may be
					 allowed if an inventory is used to determine profits.
The total loss by frost, storm, flood or fire of a crop not
					 yet harvested is not a deductible loss in computing net income.
A farmer engaged in raising and selling livestock, such as
					 poultry, hogs, cattle, sheep, horses, etc., is not entitled to claim as a loss
					 the value of such animals raised on the farm that perish, unless an inventory
					 is used. The cost of any feed, pasture, or care which has been deducted as an
					 expense of operation shall not be included as part of the cost of the livestock
					 for the purpose of ascertaining the amount of deductible loss.
If a taxpayer owns and operates a farm in addition to being
					 engaged in another trade, business, or calling and sustains a farm related
					 loss, the amount of the farming loss sustained may be deducted from gross
					 income received from all sources, provided the farm is operated for profit and
					 not for recreation or pleasure.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-425 - DEDUCTIONS - WORTHLESS DEBTS › Rule 1.26-51-425 - Worthless Debts

Current through Register Vol. 49, No. 6, June, 2024
Where a debt is worthless, either wholly or in part, the
					 amount which is worthless and charged off or written down to a nominal amount
					 on the books of the taxpayer shall be allowed as a deduction in computing net
					 income. There shall accompany the return a statement showing the propriety of
					 any deduction claimed for bad debts. Before a taxpayer may charge off and
					 deduct a debt in part, he must ascertain and be able to demonstrate with a
					 reasonable degree of certainty the amount which is uncollectible. An amount
					 subsequently received on account of a bad debt previously charged off and
					 allowed as a deduction for income tax purposes, must be included in gross
					 income in the tax year in which received.
Bankruptcy of the debtor is generally an indication of the
					 worthlessness of at least part of an unsecured and unpreferred debt. Actual
					 determination of worthlessness in bankruptcy cases is sometimes possible before
					 and, at other times, only when settlement in bankruptcy has been made. Where a
					 taxpayer ascertained a debt to be worthless and charged it off in one tax year,
					 the fact that the debtor's bankruptcy proceedings are terminated in a later tax
					 year (confirming that the debt is worthless) will not authorize shifting the
					 deduction to such later tax year. If a taxpayer computes its income upon the
					 basis of valuing its notes or accounts receivable at their fair market value
					 when received (which may be less than their face value), the amount deductible
					 as a bad debt is limited to such original valuation.
Worthless debts arising from unpaid wages, salaries, rents
					 and similar items of taxable income will not be allowed as a deduction unless
					 such items have been entered as income in the books of the taxpayer in a prior
					 tax year or in the tax year in which the deduction was made. Only the
					 difference between the amount received in distribution of the assets of a
					 bankruptcy and the amount of the claim may be deducted as a bad debt. The
					 difference between the amount received by a creditor of a decedent in
					 distribution of the assets of the decedent's estate and the amount of the
					 creditor's claim may be considered a worthless debt. A purchaser of
					 uncollectible accounts receivable which are subsequently charged-off the
					 purchaser's books as bad debts is entitled to deduct them, the amount of the
					 deduction to be based upon the price actually paid for the accounts receivable
					 and not upon their face value.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-425 - DEDUCTIONS - WORTHLESS DEBTS › Rule 2.26-51-425 - Sale of Mortgaged or Pledged Property

Current through Register Vol. 49, No. 6, June, 2024
Where mortgaged or pledged property is sold for less than
					 the amount of the debt and the mortgagee or pledgee determines that the portion
					 of the debt remaining unsatisfied after such sale is uncollectible and charges
					 it off, such amount may be deducted as a bad debt for the tax year in which it
					 is determined to be worthless and charged-off.
Accrued interest may be included as part of the deduction
					 only when it has previously been reported as income.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-425 - DEDUCTIONS - WORTHLESS DEBTS › Rule 3.26-51-425 - Bonds and Other Similar Obligations

Current through Register Vol. 49, No. 6, June, 2024
Bonds, when determined to be worthless, may be treated as
					 bad debts to the amount actually paid for them. Bonds of an insolvent
					 corporation secured only by a mortgage from which, on foreclosure, nothing is
					 realized for the bondholders, are regarded as worthless no later than the tax
					 year of the foreclosure sale. No deduction for a bad debt is allowable in
					 computing a bondholder's income for any subsequent tax years.
A taxpayer (other than a dealer in securities) possessing
					 debts evidenced by bonds or other similar obligations, cannot deduct from gross
					 income any losses on account of market fluctuations that occur prior to
					 maturity of the debt instruments. However, when a taxpayer determines upon
					 maturity that it will recover none or only a part of the debt evidenced by the
					 bonds or other similar obligations, the taxpayer may deduct the uncollectible
					 part of such debt. In order for this deduction to be properly taken, the
					 taxpayer must include with its return an explanation or other proof which
					 substantiates the deduction.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-426 - DEDUCTIONS - RESERVE FOR BAD DEBTS OR LIABILITIES › Rule 1.26-51-426 - Bad Debt Expense

Current through Register Vol. 49, No. 6, June, 2024
A business is generally allowed to take a bad debt expense.
					 Any bank, savings and loan or any other institution chartered and supervised
					 under federal or state laws shall be allowed a bad debt expense deduction
					 computed in accordance with Internal Revenue Code Sections 582, 585, and 593,
					 as in effect on January 1, 1997. Banks with assets over $500,000,000 must use
					 the specific charge-off method for bad debts.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-427 - DEDUCTIONS - NET OPERATING LOSS (NOL) › Rule 1.26-51-427 - NOL Adjustments Beyond Statutory Limits

Current through Register Vol. 49, No. 6, June, 2024
The fact that the statutory period for assessment or refund
					 of income taxes for the year in which the loss was sustained has expired does
					 not prevent the making of adjustments necessary to correct the NOL deduction.
					 The NOL may be increased or decreased by any such adjustment.
Example:
Corporation took a nondeductible expense in 1993. This was
					 not detected until a return claiming a NOL was filed in 1997.
Tax Year 1993
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Tax Year 1997
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					 here to view image
The 1993 tax year is outside the statute of limitations and
					 cannot be assessed. However, the NOL for 1993 can be adjusted to the allowed or
					 disallowed amount.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-427 - DEDUCTIONS - NET OPERATING LOSS (NOL) › Rule 1.26-51-427(3)(C) - NOL Carryover Due to Merger

Current through Register Vol. 49, No. 6, June, 2024
In the case of a merger between two corporations that are
					 owned by the same entity and that same entity owns at least 80% of the voting
					 stock of each corporation, the formula for establishing that the assets of the
					 merged corporation (that is, the corporation going out of existence) are still
					 producing income is as follows:
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					 to view image
Rule The carryover losses will be allowed only in those
					 cases where the assets of the corporation going out of existence earn
					 sufficient profits apportionable to Arkansas under §
										26-51-701
					 et seq in the post-merger period to absorb the carryover losses claimed by the
					 surviving corporation
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-428 - DEDUCTIONS - DEPRECIATION AND EXPENSING OF PROPERTY › Rule 1.26-51-428(a) - Depreciation

Current through Register Vol. 49, No. 6, June, 2024
For property placed in service during tax years beginning
					 before 01/01/95, Sections 167, 168 and 179 of the Internal Revenue Code as in
					 effect on 01/01/91 shall apply. The Section 179 deduction is limited to
					 $10,000.
For tax years beginning on or after 01/01/95 and beginning
					 on or before 12/31/96, the deduction is limited to $17,500.
The schedule below shows the phase-in adopted under Section
					 179 as in effect on 01/01/97.
Tax Period Beginning in:
Applicable Amount
1997
$18,000
1998
$18,500
1999
$19,000
2000
$20,000
2001
$24,000
2002
$24,000
2003 & thereafter
$25,000
Any Section 179 expense disallowed because of the
					 limitation may be depreciated by regular depreciation methods appropriate for
					 that property or it may be carried forward.
Property placed in service during tax years beginning
					 before 01/01/95 will have a useful life as determined by Section 168 as in
					 effect on 01/01/91. Property placed in service during tax years 1995 and 1996
					 will have a useful life as determined by Section 168 as in effect on 01/01/95.
					 Property placed in service beginning on or after 01/01/97 will have a useful
					 life as determined by Section 168 as in effect on 01/01/97.
Any differences in basis because of depreciation
					 differences must be included in the calculation of gain or loss upon
					 disposition of the property.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-428 - DEDUCTIONS - DEPRECIATION AND EXPENSING OF PROPERTY › Rule 1.26-51-428(c) - Amortization of Intangibles

Current through Register Vol. 49, No. 6, June, 2024
For tax years beginning before 01/01/95, Section 167
					 regarding amortization of intangibles shall apply. For tax years beginning on
					 or after 01/01/95, Section 197 shall apply.
Any differences in Arkansas and federal law concerning the
					 computation of basis must be considered in calculating gain or loss upon
					 disposition of the intangibles.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FEDERAL SUBCHAPTER M › Rule 1.26-51-440 - Federal Subchapter M Adopted

Current through Register Vol. 49, No. 6, June, 2024
Subchapter M of the Internal Revenue Code as in effect on
					 01/01/97 has been adopted with the exception of its tax rates. Arkansas tax
					 rates remain in effect as set forth in ACA
					 26-51-205.
					 If a federal election is made relating to a RIC, REIT, FASIT or any other
					 corporation registered as an investment company, the same election is
					 automatically deemed to have been made for Arkansas income tax purposes.
If a corporation no longer qualifies as initially elected,
					 then it must file an Arkansas corporation income tax return and be taxed as a
					 "C" corporation.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 2.26-51-440 - Definition

Current through Register Vol. 49, No. 6, June, 2024
A new type of statutory entity called a financial asset
					 securitization investment trust (FASIT) has been created to facilitate the
					 securitization of debt obligations such as credit card receivables, home equity
					 loans, and auto loans. An entity that qualifies as a FASIT can issue
					 instruments that are treated as debt for federal income tax purposes whether or
					 not they would be so treated under normal tax principles. In addition, a FASIT
					 itself generally is not taxable, and any taxable income or net loss which it
					 has flows through to the equity owner of the FASIT. The interest on debt
					 instruments issued by FASITs is deductible.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 3.26-51-440 - Qualification Requirements

Current through Register Vol. 49, No. 6, June, 2024
To qualify for status as a FASIT, an entity must meet
					 several requirements, which are specifically set forth at IRC Sec. 860L(a)(1).
					 Any entity, including a corporation, partnership or trust may be treated as a
					 FASIT.
The ownership of a FASIT (that is, the "ownership
					 interest"), must be held directly by an "eligible corporation." IRC Sec.
					 860L(a)(1)(C). An eligible corporation is a nonexempt domestic C corporation
					 which does not qualify as a RIC, REIT, REMIC or cooperative.
Moreover, the ownership interest of a FASIT must generally
					 be entirely held by a single domestic C corporation. IRC Sec.
					 860L(a)(2).
The FASIT issues debt instruments, called "regular
					 interests," which are in the nature of bonds. These regular interests would
					 normally be purchased by investors and feature the following
					 characteristics:
a. The investor is
				  unconditionally entitled to receive a specified amount of principal;
b. Interest is paid on the
				  principal;
c. A stated term to
				  maturity of usually no more that 30 years; and
d. In some cases, a FASIT may issue a
				  high-yield interest rather than a regular interest. The tax treatment to
				  investors of a high-yield interest is different from a regular interest. IRC
				  Sec. 860L(b)(1)(B).
For an entity to qualify as a FASIT, substantially all of
					 its assets must consist of "permitted assets" as defined at IRC Sec.
					 860L(c)(1). The assets of a FASIT are considered to be owned directly by the
					 holder of the ownership interest.
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 4.26-51-440 - Taxation of FASITs

Current through Register Vol. 49, No. 6, June, 2024
A FASIT is not subject to income tax, and is not treated as
					 a trust, partnership or corporation. Instead, all of the FASIT's assets and
					 liabilities are treated as the assets and liabilities of the FASIT's owner. Any
					 income, gain, deduction, credit or loss of the FASIT is allocable directly to
					 its owner.
Any FASIT income subject to Arkansas income tax shall be
					 taxed at the corporate rates set forth in ACA
					 26-51-205.
					 No special Arkansas income tax return has been created specifically for FASITs.
					 As noted above, FASIT income passes through to the FASIT's owner. The FASIT's
					 owner is responsible for reporting any such income on the owner's return and
					 paying any Arkansas individual income tax due. Once an election to be a FASIT
					 is made, the election applies for that tax year and all subsequent years until
					 such time that the election is revoked with the consent of the IRS.
All members of an affiliated group filing a consolidated
					 return are to be treated as one taxpayer. IRC Sec. 860J(d). Specifically, the
					 provision that the taxable income of a holder of a FASIT ownership interest
					 cannot be less than the taxable income with respect to the FASIT interest
					 applies to any consolidated group of corporations of which the holder is a
					 member as if the group were a single taxpayer.
The holder of a FASIT ownership interest cannot offset
					 income or gain from the FASIT ownership interest with nonFASIT losses. IRC Sec.
					 860J.
The taxable income of a FASIT (in determining the taxable
					 income of the holder of an ownership interest) should be calculated using an
					 accrual method of accounting. IRC Sec. 860H(b)(2).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 5.26-51-440 - Taxation of Regular Interests

Current through Register Vol. 49, No. 6, June, 2024
The holder of a regular or high-yield interest in a FASIT
					 (normally an investor), is generally taxed in the same manner as a holder of
					 any other debt instrument. IRC Sec. 860H(c)(1).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 6.26-51-440 - Prohibited Transactions

Current through Register Vol. 49, No. 6, June, 2024
In order to ensure that FASITs are not used for purposes
					 other than securitization, a 100% federal excise tax is imposed on any income
					 not related to securitization (that is, income derived from prohibited
					 transactions). Prohibited transactions are specifically set forth at IRC Sec.
					 860L(e)(1)&(2).
Arkansas Administrative Code › Agency 006 - Department of Finance and Administration › Division 05 - Division of Revenues › 1998-1 - Comprehensive Corporation Income Tax Regulations › Rule 26-51-440 - FASITs › Rule 7.26-51-440 - Transfers of Assets to FASITs

Current through Register Vol. 49, No. 6, June, 2024
Where the holder of the ownership interest in a financial
					 asset securitization investment trust (FASIT) or a related person sells or
					 contributes property to the FASIT, gain is recognized immediately in an amount
					 equal to the excess (if any) of the property's value on the date of the
					 contribution over its adjusted basis on that date. This gain is recognized
					 notwithstanding any other income tax code provision, and the basis of any
					 property is increased by the amount of gain recognized. IRC Sec. 8601.
Losses on assets contributed to the FASIT are not allowed
					 upon their contribution, but may be allowed to the FASIT owner upon their
					 disposition by the FASIT.