AC553 - Week 7 - Deduction of required payments are not...

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Yazan Herbawi AC553 Assignment – Week 7 Chapter 23 Question 2: In order to qualify for an S Corporation status, a company needs to be relatively small in size, have no more 100 shareholders, issue one class of stock, and not fall under any of the non-eligible businesses as dictated by Code Sec. 1361(b)(2). In addition the corporation must be domestic and all shareholders must be eligible under Code Sec. 1361(b)(1). Question 13: S Corporations are required to adopt a calendar year for tax purposes, or “any other tax year for which it establishes a business purpose to the satisfaction of the Internal Revenue Service” (CCH Federal Taxation, para 21,105, 2009). However, if an S Corporation elects a different tax year, it is required to make payments equal to the amount deferred by using a different tax year.
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Unformatted text preview: Deduction of required payments are not allowed for neither the corporation nor its shareholders. Question 38: The portion of corporate debt transferred to the shareholder as a result of his investment increase his adjusted basis of his capital account. A shareholder’s basis includes his basis in the company’s stock and the company’s debts. When distributions are made, stock basis is reduced first, but not below zero. Any excess distribution will reduce the shareholder’s basis in the company’s debt. Problem 51: The latest date to apply is the 15 th day of the third month following the tax year-end. In this case, Damion must apply before September 8, 2008. Problem 63: The amount of less deductible is calculated as follows: 300,000 x 1/3 x 30% = $30,000...
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