Ch15 TAXATION OF CORPORATE INCOME（课件）- 《财政金融英文版》同步教学（人民大学版）

TAXATION OF CORPORATE INCOME C h a p t e r 15 Corporations A corporation is a business that is legally established under state laws that grant it an identity separate from that of its owners. Law views the corporation as if it were a person: Granted right to engage in litigation, own property in its name, incur debts Also treated as a person from point of view of taxation Owners are shareholders, or stockholders. Stockholders have limited liability for debts; their liability limited to amount of funds invested. Measuring Business Income Annual business income measured by subtracting business costs from business receipts over a one-year period Business income includes normal profit (opportunity costs of owner-supplied inputs) and economic profit (surplus of revenues over opportunity cost of all inputs) Equity of a corporation is difference between value of assets and value of outstanding debt Portion of profit paid out to stockholders called dividends Portion kept by corporation called retained earnings Economic Depreciation Measures the decrease in market value of durable physical capital used by firms in the productive process as that capital is “used up” Capital equipment used up in the sense that it wears out and becomes obsolete over time Depreciation sometimes called a “capital consumption allowance” Its inclusion in cost provides means for firm to accumulate a fund so as to recover capital cost and replace assets (machines, buildings) as they wear out, become obsolete Accelerated Depreciation Accelerated depreciation allows a firm to deduct more than the actual economic depreciation from its income each year Expensing a capital asset is deduction of full purchase price of an asset in the year of its acquisition Straight-line depreciation is deduction of the same fraction of the cost of an asset each year over its useful economic life Depreciation and Inflation Depreciation based on historic cost, or acquisition price of the asset During inflation, depreciat