2011_CCH_Comp_Topics_Ch21 - 1. S CorporationsTax Model 2. S

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Unformatted text preview: 1. S CorporationsTax Model 2. S CorporationsTreatment of Tax and Nontax Matters 3. S Corporations--Eligibility and Election 4. S CorporationsRevoking S Status 5. S CorporationsTax Years and Accounting Methods 6. Basis AccountsOverview 7. Basis AccountsOutside Basis and At-Risk Basis 8. Basis AccountsAccumulated Adjustment Account. 9. Basis AccountsOther Adjustment Account and Previously Taxed Income Account 10. Basis AccountsShareholder Loans to S Corporations CCH Federal Taxation Comprehensive Topics 2 of 63 Chapter 21, Exhibit Contents A 11. Effect of Operating Results on BasisExample 12. DistributionsEffect on S Corporation 13. DistributionsEffect on Shareholder 14. DistributionsExample 15. Penalty TaxesCode Sec. 1374 Tax on Built-In Gains 16. Code Sec. 1374 TaxExample 17. Penalty TaxesCode Sec. 1375 Tax on Excess Net Passive Income 18. Code Sec. 1375 Tax on Excess Net Passive IncomeExample CCH Federal Taxation Comprehensive Topics 3 of 63 Chapter 21, Exhibit Contents B Code Sec. 702(a)(8) income Definition. As with partnerships, items that are always subject to ordinary treatment are lumped together in an amount called Code Sec. 702(a)(8) income or loss. Shareholders recognize Code Sec. 702(a)(8) income even if no cash is actually distributed. Accordingly, shareholders are generally not taxed on distributions . CCH Federal Taxation Comprehensive Topics 4 of 63 Chapter 21, Exhibit 1a Computation. Code Sec. 702(a)(8) is generally operating income or loss computed as follows: Ordinary Income From Whatever Source Derived (including Code Sec. 1245 recapture) Less: Exclusions Less: Cost of Goods Sold (resulting in gross income from business operations) Less: Operating Expenses CCH Federal Taxation Comprehensive Topics 5 of 63 Chapter 21, Exhibit 1b Separately Stated Items Rationale. Each shareholder of an S corporation reports his or her share of corporate net income based on stock ownership. Any income, loss, deduction, or credit which could uniquely affect the tax liability of a shareholder is separately stated in the K-1 to the shareholder. CCH Federal Taxation Comprehensive Topics 6 of 63 Chapter 21, Exhibit 1c Separately stated items include:  Passive income and losses from rental and other non-operating activities  Investment income and related expenses (e.g., dividends, investment interest, ad valorem tax on stock, investment counseling fees, etc.)  Code Sec. 1231 gain and loss  Capital gains and losses  Dividends eligible for a dividends-received deduction  Charitable contributions  Taxes paid to a foreign country or to a U.S. possessionTaxes paid to a foreign country or to a U....
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This note was uploaded on 04/16/2011 for the course ACCT 553 taught by Professor Seda during the Spring '10 term at Keller Graduate School of Management.

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2011_CCH_Comp_Topics_Ch21 - 1. S CorporationsTax Model 2. S

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