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If the AAA is not exhausted by the end of the post-termination transition period, it disappears. Any distributions thereafter are taxed under the usual C corporation rules. The grace period applies only to cash distributions. Operational Rules ¶21,501 Cash Method of Accounting A significant advantage of an S corporation over a C corporation is that the S corporation is eligible to use the cash method of accounting. C corporations with gross receipts of more than $5 million are prohibited from using the cash method of accounting. ¶21,505 Tax Administration Provisions The tax treatment of items of S corporation income, loss, deductions, and credits generally is determined at the corporate level in a unified proceeding rather than in separate proceedings with shareholders. The audit provisions are generally similar to the audit provisions made applicable to partnerships. ¶21,575 Tax Planning The S corporation can be an advantageous tool where an enterprise is expected to incur losses during the earliest stages of its activities. The losses can be passed through to the shareholders to the extent of their bases. Further, an S corporation sometimes can be used effectively to shift income from high to low tax bracket taxpayers. This must occur by transfers at the shareholder level. Also, the S corporation may be a replacement for the limited partnership in those circumstances where the economic results will be essentially the same when conducting the business or investment through either form of ownership. ANSWER TO KEYSTONE PROBLEM—CHAPTER 21 (¶21,185.) There is no best form of organization for all businesses. The form of organization must be tailored to the specific needs and desires of the owners. The corporate form does provide for limited liability and thus has a significant advantage over the partnership form of organization. The passthrough of gains and losses by a partnership and S corporation election can provide advantages over adoption of the regular corporation. The ability of a partnership to change the profit and loss ratio among the partners with relative ease can be beneficial while shareholders in the corporate form of organization must divide profits according to stock ownership.