S corps

Question 1

What is the tax status of S corps?

Answer 1

They are not subject to income tax

Question 2

What are some separately stated income items for S corps

Answer 2

Any items of income, loss, deduction, or credit -> these items are passed through the pro rata to the shareholders

Question 3

How is income taxed in a S corp?

Answer 3

What it is earned, not distributed , unless the distribution exceed the owner’s basis

Question 4

What happens to an S corps basis after a distribution?

Answer 4

The distributions lowers it

Question 5

What happens when basis exceeds distribution?

Answer 5

Taxable income is limited to taxable income

Question 6

What are some upward adjustments for a shareholder’s tax basis in a S Corp?

Answer 6

any stock purchases and capital contributions

1) Taxable income
2) separately stated income items
3) depletion in excess of property basis

Question 7

What are some downward adjustments for a shareholder’s basis in a S corp?

Answer 7

Loss from operation
Separately stated loss items
Non taxable distributions ( ROC)
nondeductible loss items

Question 8

What is a taxpayer’s loss deduction from a S corp limited to?

Answer 8

the taxpayer’s basis in the S corp + any loans

Question 9

List the order of distributions of cash and property

Answer 9

1. AAA (non taxable distribution) 2. Dividends ( to the extent of any accumulated earnings and profit)
2. ROC
3. Capital gain

Question 10

What is the fine for failing to file on time?

Answer 10

195