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S Corp (Effect of S Corporation Election on shareholders (Taxability of…
S Corp
Effect of S Corporation Election on shareholders
Computing shareholder Basis in S corp stock
Accumulated Adjustments Account (AAA）
Taxability of distributions to shareholders
With No C Corp E&P
With C Corp E&P
Pass-through of income and/or losses to shareholder (K-1)
pass-through of losses:deduct up to basis +direct loans
Fringe benefits
Deductible
Nondeductible
Eligibility
Eligible shareholders
Shareholder limit: no more than 100
Qualified corporation
One class of stock: Common stock
Effect of S Corp Election on Corporation
No tax on corp
Certain Corporation-level taxes
Built-in gains tax
Tax on passive investment income
LIFO Recapture tax
S Corp tax year:GR 12/31 is required year-end
S Corp
Formation
First form a C, and then make an election on Form 2553
Property contributions to an S Corp
Nontaxable if:
contribute property, not serivce
solely in exchange of stock
After transfer, shareholders 80% ownership
Otherwise, taxable
Electing S Corp status
When election takes effect : by 3/15
New shareholders: consent of a new shareholder is not required
Liquidation of an S Corporation
To S Corp
To shareholders
Terminating the election