Chapter_14_Handout_Notes - S-corporations Basis same rules...

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HA 4422 Chapter 14 Separately reported items: Investment Income Transaction gains/losses Passive activities Charitable contributions Owners expenses (medical insurance) Tax credits Section 179 for partnerships and S-corporations Sole-proprietorship, Partnerships, and S-corporations Report certain items separately – not as a part of other business income Partnerships Exhibit 14-2 Basis Corporations Special rules: Capital losses only offset capital gains No preferential cap gain rates Dividends received deduction – table 14-1 Charitable contributions are deductible up to 10% of taxable income (before charitable contribution deduction) Carry forward excess 5 years. Generally not subject to passive activity rules but: If Personal Service Corporation – can’t use PAL against personal service corporation income or portfolio income. If Closely Held Corporation (5 or fewer own 50% or more) – can’t use PAL against portfolio income. Rare to have basis issues with a C-corporation
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Unformatted text preview: S-corporations Basis same rules as Partnership But no basis for corporate liabilities Conduit losses Loss not allowed if Greater than basis Greater than at-risk (basis less share of non-recourse loans in basis) Passive (can only use against passive income) Entity Distributions Sole proprietorship – no effect Partnership: Tax-free to extent of basis Gain when distributions > basis If property distributions > basis in partnership, reduce basis of property Corporation Distributions are dividends Generally, taxable to shareholder, not deductible by corporation No effect on basis Dividends: Taxable to extent of current and accumulated earnings and profits If in excess of earnings and profits – reduce basis in stock and no tax, capital gain to the extent exceeds basis S-Corporation Distribution in excess of basis = capital gain Income-splitting Children as employees Wages must be reasonable to be deductible Family entities...
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This note was uploaded on 02/20/2009 for the course H ADM 422 taught by Professor Lhensley during the Fall '08 term at Cornell.

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Chapter_14_Handout_Notes - S-corporations Basis same rules...

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