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c22 - INSTRUCTORS MANUAL Chapter 22 S Corporations Learning...

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Chapter 22 S Corporations INSTRUCTOR’S MANUAL Learning Objectives 1. Describe the requirements and process to elect S corporation status. 2. Explain the events that terminate the S corporation election. 3. Describe operating issues relating to S corporation accounting periods and methods, and explain income and loss allocations and separately stated items. 4. Explain stock-basis calculations, loss limitations, determination of self-employment income, and fringe benefit rules that apply to S corporation shareholders. 5. Apply the tax rules for S corporation operating distributions and liquidating distributions. 6. Describe the taxes that apply to S corporations, estimated tax requirements, and tax return filing requirements. Teaching Suggestions Throughout this chapter, we highlight the tax similarities between S corporations and C corporations and between S corporations and partnerships, while focusing on the unique rules that apply to S corporations. This chapter provides a great opportunity to review corporate and partnership tax rules and to re-visit entity selection. In teaching this chapter, the time that you spend in class will vary based on how much depth you want to cover on the more complex topics that are unique to S corporations such as the built-in gains tax, excess net passive income tax, LIFO recapture tax, and the post-termination transition period loss deductions and distributions. The remaining topics in the chapter either are less technical (e.g., S corporation qualification requirements) or have a lot of overlap with material covered in the prior C corporation chapters (e.g., corporate formations) or partnership chapters (e.g., basis computation). Key points that you may wish to make sure students are clear on: Liabilities are not included in the shareholder’s stock basis. A shareholder’s stock basis may not be negative. Shareholder loans to the corporation may create debt basis that can absorb losses but do not protect distributions from taxation. Allocations of business income to shareholders are not subject to FICA or self employment tax. The S corporation designation is a tax designation only—not a legal designation. The tax rules for many items are more complex for S corporations that were formerly C corporations with earnings and profits.
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Assignment Matrix Learning Objectives Text Feature Difficulty LO1 LO2 LO3 LO4 LO5 LO6 Research Planning Tax Forms DQ22-1 10 min. Easy X DQ22-2 10 min. Easy X DQ22-3 5 min. Easy X DQ22-4 5 min. Easy X DQ22-5 5 min. Easy X DQ22-6 5 min. Easy X DQ22-7 5 min. Easy X DQ22-8 5 min. Medium X DQ22-9 5 min. Easy X DQ22-10 5 min. Easy X DQ22-11 10 min. Medium X DQ22-12 10 min. Medium X DQ22-13 10 min. Easy X DQ22-14 5 min. Medium X DQ22-15 5 min. Easy X DQ22-16 10 min. Medium X DQ22-17 10 min. Easy X DQ22-18 10 min. Easy X DQ22-19 5 min. Easy X DQ22-20 10 min. Easy X DQ22-21 10 min. Medium X DQ22-22 10 min. Easy X DQ22-23 10 min. Medium X DQ22-24 10 min. Medium X DQ22-25 10 min. Medium X DQ22-26 10 min. Easy X DQ22-27 10 min. Easy X DQ22-28 10 min. Medium X DQ22-29 10 min. Easy X DQ22-30 10 min. Medium X DQ22-31 10 min.
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