C12-Chp-12-1B-SCorp-Passthru-Loss-Basis-Dist

# C12-Chp-12-1B-SCorp-Passthru-Loss-Basis-Dist - Chapter 12B....

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Chapter 12B. S Corporations C10-Chp-12B-1-SCorp-Passthru-Loss-Basis-Dist .ppt Edited 2010-0221 Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright 2010. Howard Godfrey.

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The student should be able to: 7. Calculate a shareholder's share of ordinary income or loss & separately stated items. 8. Determine the limits on a shareholder's deduction of S corporation losses. 9. Calculate a shareholder's basis in his or her S corporation's stock and debt. 10. Determine the taxability of distributions to its shareholders. 11. Explain the procedures for filing an S corporation tax return. 12. Determine the estimated tax payments required of an S corporation and its shareholders.
3 Lets get a preview of what we will be computing, and why it is important to keep Basis of stock and AAA. See next slide.

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Joe owns 100% of S corp. His basis is \$18,000. Joe takes a current distribution of \$25,000. How much total income is recognized by Joe? Dist. AAA Basis Income Dist./Balances \$25,000 \$2,000 \$3,000 \$18,000 Distribution Distribution Distribution Cap. Gain Answer if a C corp? E&P=\$3,000, AAA-N/A
Joe owns 100% of S corp. His basis is \$18,000. Joe takes a current distribution of \$25,000. How much total income is recognized by Joe? Dist. AAA Basis Income Dist./Balances \$25,000 \$2,000 \$3,000 \$18,000 Distribution (\$2,000) (\$2,000) (\$2,000) Distribution (\$3,000) (\$3,000) \$3,000 \$20,000 \$0 \$0 \$16,000 Distribution (\$16,000) (\$16,000) Cap. Gain \$4,000 \$4,000 Answer if a C corp? E&P=\$3,000, AAA-N/A

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7. Calculate a shareholder's allocable share of ordinary income or loss and separately stated items.
7 Bow Corp, an S corp, has 3 equal stockholders. For the year ended December 31, 2010, Bow had taxable income of \$300,000, and municipal interest of \$20,000. Bow made cash distributions totaling \$120,000 during 2010. For 2010, what amount from Bow should be included in each stockholder's gross income? a. \$40,000 b. \$60,000 c. \$100,000 d. \$140,000 CPA May, 1987

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8 Bow Corp, an S corp, has 3 equal stockholders. For the year ended December 31, 2010, Bow had taxable income of \$300,000, and municipal interest of \$20,000. Bow made cash distributions totaling \$120,000 during 2010. For 2010, what amount from Bow should be included in each stockholder's gross income? a. \$40,000 b. \$60,000 c. \$100,000 d. \$140,000 CPA May, 1987
Income Allocation Procedures. Shareholders report their allocable share of ordinary income and loss and separately stated items in the tax year in which the S corporation's tax year ends. These allocation rules are known as the "per day/per share" method. Special allocations are not allowed.

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## This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C12-Chp-12-1B-SCorp-Passthru-Loss-Basis-Dist - Chapter 12B....

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