R5 - S Corps

Question 1

Required Yr

Answer 1

12/31

Question 2

BIG Calc

Answer 2

BIG = FMV - Basis at the time of conversion.

Question 3

BIG Tax (Built-in Gain)

Answer 3

When two of the following occur:

• When S-Corp was C-Corp before; AND
• When FMV > Basis of assets on election date (appreciated assets).

Question 4

BIG Tax Exempt IF

Answer 4

• Never a C-Corp.
• Transfer does not occur within 5 yrs of S election.
• Appreciation of Asset occurred after election.

Question 5

BIG Tax Calc

Answer 5

21% of lesser of:

• Recognized BIG for CY OR
• Taxable income of S Corp if it were a C Corp

Question 6

Passive Investment Income Tax

Answer 6

Taxed (21% rate) on current income if:

• S Corp has accum E and P from PY when they were a C-Corp, never distributed AND
• Passive investment income >25% of Gross Receipts

Question 7

QBI

Answer 7

20% pass through SHs

Question 8

Losses

Answer 8

• Deductible up to basis + direct loans (debt basis); remaining losses are suspended until basis is recovered.
• Debt basis is recovered first, then stock basis.

Question 9

At risk amounts

Answer 9

- Stock and debt basis (recourse)
Increased by: 
- Contributions 
- Loans to Corps (recourse)
- Allocable undistributed income

Question 10

AAA

Answer 10

• Prior S Corp income which can be withdrawn tax-free first. (K-1 Income).
• AAA is zero at start, but increases with time
• Increases by income and gains
• Decreases by Distribution, losses, and nondeductible items.

Question 11

Loss Limitations

Answer 11

Basis + Direct SH Loans - Distributions

Question 12

Distributions = Always been an S Corp

Answer 12

To the extent of basis = Not subj to tax

>Basis = Cap Gain

Question 13

Distributions = With C-Corp E and P

Answer 13

1. To the extent of AAA = Not subj to tax; reduces basis
2. To the extent of C Corp E and P = Taxable Div; no basis reduction
3. To the extent of basis = Not subj to tax; reduces basis
4. > Basis = Taxed as LTCG

Question 14

Liquidation of an S Corp - Consequences

Answer 14

For an S Corp:
Gain (Loss) is recognized on distribution of property.
FMV - Basis in Asset = Taxable Gain(Loss)
* Must be calculated first as this increases Stock Basis.

For SHs:
Cash + FMV Prop + Amt realized - Liab assumed - Stock Basis = Taxable Gain

Question 15

50% Test for S Corp Election Revokation

Answer 15

Total of SH Filing Consent to Revoke / Total # of SHs

Question 16

Election

Answer 16

All SHs must sign form 2553