2011_CCH_Comp_Topics_Ch21 - 1. 2. 3. 4. 5. 6. 7. 8.Basi

2011_CCH_Comp_Topics_Ch21 - 1. 2. 3. 4. 5. 6. 7. 8.Basi

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  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 CCH Federal Taxation Comprehensive Topics 2 of 63 Chapter 21, Exhibit Contents A
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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 CCH Federal Taxation Comprehensive Topics 3 of 63 Chapter 21, Exhibit Contents B
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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
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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
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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
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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 CCH Federal Taxation Comprehensive Topics 7 of 63 Chapter 21, Exhibit 1d
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