REG 1 Module 5

Question 1

How is the owners salary treated in a S Corp?

Answer 1

You can be an employee of the business and the business will get a deduction for your salary. You pick it up as a W-2 employee, and the business then has lower profit because of the salary the paid you.

Question 2

How is the owners salary treated in a Partnership?

Answer 2

Guarded payment reduces the overall income of the partnership and then you pick it up in your income (flow through).

Question 3

How is ordinary loss treated when flowed through to the partner?

Answer 3

It is limited to the partners at risk amount = basis +/- capital gain or loss - expenses

Question 4

With regards to S Corp and their shareholders, the “at risk” rules applicable to losses:

Answer 4

Apply at the shareholder level rather than the corporate level

Question 5

True or False: Section 1245 gain is a separately stated item on Schedule K-1.

Answer 5

False