1. S Corporations—Tax Model
2. S Corporations—Treatment of Tax and Nontax Matters
3. S Corporations--Eligibility and Election
4. S Corporations—Revoking S Status
5. S Corporations—Tax Years and Accounting Methods
6. Basis Accounts—Overview
7. Basis Accounts—Outside Basis and At-Risk Basis
8. Basis Accounts—Accumulated Adjustment Account.
9. Basis Accounts—Other Adjustment Account and Previously Taxed Income Account
10. Basis Accounts—Shareholder Loans to S Corporations
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Chapter 21, Exhibit Contents A
11. Effect of Operating Results on Basis—Example
12. Distributions—Effect on S Corporation
13. Distributions—Effect on Shareholder
14. Distributions—Example
15. Penalty Taxes—Code Sec. 1374 Tax on Built-In Gains
16. Code Sec. 1374 Tax—Example
17. Penalty Taxes—Code Sec. 1375 Tax on Excess Net Passive Income
18. Code Sec. 1375 Tax on Excess Net Passive Income—Example
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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
.
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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
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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.
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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. possession
Section 179 deduction
Recovery items (e.g., tax refunds, recovery of bad debts)
Tax-exempt income and related expense
Tax credits
Deductions disallowed in computing S corporation income
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Chapter 21, Exhibit 1d
