Taxes: Income & Basis

Question 1

Taxes:
Income & Basis
Operating Rules

Answer 1

Operating Rules

• S Corp: year end consistent with shareholders
• Calendar year-end is general default
• may elect another if no more than 3 months of deferral

Question 2

Taxes:
Income & Basis
Reporting Operations

Answer 2

Reporting Operations

• may use cash basis unless tax shelter
• reports TI and separately stated items on K-1
• not entitled to most corporate deductions
• don’t pay AMT, PHC, or ACE
• S corp’s use tax elections

Question 3

Taxes:
Income & Basis
Flow-Through to Shareholders

Answer 3

Flow-Through to Shareholders
- if interest changes during year, calc on daily basis
= (annual income / days in year)days prior to changeinterest

Question 4

Taxes:
Income & Basis
Adj Basis

Answer 4

Adj Basis
\+ contributions of capital
\+ share of income
- distributions to shareholder
- share of loss

Question 5

Taxes:
Income & Basis
Loss Limitations

Answer 5

Loss Limitations

1. limited to adj basis of stock
2. adj basis of loans to corp can be used after adj basis of stock is exhausted
3. “at risk” limitations
4. passive loss limits also limit deductions
   - unused losses are carried forward indefinately