S Corporations From Formation to Termination
Please see below for additional instructions and information regarding this program.
S Corporations are commonplace and are used to achieve a variety of tax and business objectives. Understanding exactly what an S corporation is and how it functions from a tax perspective is essential to effective business and tax planning. In this course you will learn the fundamentals of S corporation formation, operation, and termination.
•The Nature of an S Corporation
•S Corporation Qualifications
•Making the S Election
•Termination of S Corporation Status
•Distributions from S Corporations
•S Corporation Taxable Years
•Form 1120S – The S Corporation Return
- Topics For Today 00:01:39
- What is an S Corporation? 00:02:30
- Dwight D. Eisenhower 00:04:00
- Advantages of S Corporations 00:08:07
- Loss Pass-Through 00:08:12
- Cheating on FICA 00:09:11
- Income Splitting 00:11:48
- No Accumulated Earnings Tax 00:12:35
- Cash Method 00:13:32
- No Double Taxation (Generally) 00:15:12
- Eligibility for S Corporation Status 00:17:35
- S Corporation Type and Number of Shareholders 00:18:21
- S Corporation Eligible Shareholders 00:20:00
- Trusts as Shareholders 00:21:58
- S Corporation Non-Eligible Shareholders 00:22:56
- Certain LLCs Can Be Eligible S Corporations 00:23:45
- Certain LLCs Can Be Eligible S Corporations (cont’d) 00:24:45
- S Corporation limited to One Class of Stock 00:26:56
- Making the Election 00:29:45
- Time For Making the S Selection 00:30:05
- Time For Making the S Selection (cont’d) 00:31:16
- S Corporation Year Begins 00:31:40
- S Corporation Year Begins (cont’d) 00:33:44
- Shareholder’s Consent 00:35:34
- How to Make the S Corporation Election 00:37:01
- S Corporation Termination 00:37:33
- S Corporation Termination (cont’d) 00:38:32
- S Selection Revocation (Voluntary Termination) 00:40:35
- S Corporation Involuntary Termination 00:41:59
- S Corporation Involuntary Termination (cont’d) 00:45:47
- Passive Investment Income 00:46:20
- Allocation Between Taxable Years When S Election Terminated 00:48:15
- Allocation Between Taxable Years When S Election Terminated (cont’d) 00:49:06
- Allocation Between Taxable Years When S Election Terminated (cont’d) 00:50:51
- S Corporation New Election After Termination 00:52:07
- S Corporation Post-Termination Transition Period 00:53:36
- Three Possible S Corporation Taxes 00:56:23
- Possible Tax 1: B-I-G Tax 00:56:57
- Possible Tax 2: LIFO Inventories 00:59:36
- Possible Tax 3: 01:00:35
- Reporting S Corporation Income and Loss 01:002:06
- Form 1120S - Schedule K-1 01:02:35
- S Corporation Non-Separately Stated Items 01:03:48
- S Corporation Separately Stated Items 01:05:28
- How Allocation of Pass-Through is Accomplished 01:06:17
- 1377 Election to Treat as Two Tax Years 01:07:51
- How Allocation of Pass-Through is Accomplished (cont’d) 01:08:53
- Shareholder Compensation 01:09:39
- S Corporation Reasonable Compensation 01:10:42
- Criteria for Reasonable Compensation 01:11:41
- Adverse Consequences of Understanding Compensation 01:14:12
- Shareholder Basis and Distribution 01:17:40
- Importance of Basis 01:18:26
- Adjustment to Basis 01:19:27
- S Corporation Shareholder Basis in Stock 01:20:11
- Ordering of Loss Items 01:20:40
- Regulation Selection 1.1367-1(f) 01:21:13
- Basis of Indebtedness 01:22:45
- S Corporation Shareholder Basis in Debt 01:23:35
- S Corporation Shareholder Basis in Debt (cont’d) 01:24:07
- Sources of Distribution 01:28:00
- Distributions Made By S Corporation with AE&P 01:30:46
- Distributions Made By S Corporation with AE&P (cont’d) 01:32:32
- S Corporation Tax Year 01:33:47
- S Corporation Taxable Year Choices 01:34:07
- 444 Election 01:36:24
- S Corporation Section 444 Required Payments 01:36:41
- Natural Business Year 01:37:38
- 25% Gross Receipts Test 01:37:47
- Seasonal Business Test 01:38:42
- S Corporation Business Purpose Fiscal Years 01:39:04
- ITRS Approved Facts and Circumstances 01:39:22
- Thank you 01:40:24
- Presentation Closing 01:40:29
- 1377 Election 00:51:01, 01:07:51
- 444 Election 01:36:28
- 501(c)(3) 00:20:59
- Accumulated Earnings Tax 00:12:41
- C Corporation 00:12:39, 00:34:19
- Disregarded Entity 00:21:18
- Electing Small Business Trusts (ESBT) 00:22:40
- Federal Insurance Contributions Act (FICA) 00::09:11
- Form 1120S 01:02:40
- Form 2553 00:25:20, 00:35:45, 00:37:05
- Form 8832 00:24:59
- Grantor Trust 00:22:12
- Limited liability company (LLC) 00:23:49
- Nonprofit Corporation 00:03:14
- Pro Rata Method 00:49:15
- Qualified Subchapter S Trust 00:22:38
- S Corporation 00:01:13
- Shareholder 00:18:24, 00:35:39
- Sole Proprietor 00:06:52
- Subchapter S corporation (S-CORP) 00:07:33
- Testamentary Trust 00:22:32
- Voting Trust 00:22:03
1377 Election: A 1377(a)(2) election allows the shareholder who terminated his or her interest in the S-corporation to recognize only the pro rata share of items attributable to the portion of the year though the termination date.
444 Election: A partnership, can elect under section 444 to use a tax year other than its required tax year. Certain restrictions apply to the election. The section 444 election does not apply to any partnership that establishes a business purpose for a different period.
501(c)(3): A 501(c)(3) organization is a corporation, trust, unincorporated association, or other type of organization that is exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is the most common type of the 29 types of 501(c) nonprofit organizations in the United States. (en.wikipedia.com)
Accumulated Earnings Tax : An accumulated earnings tax is a tax imposed by the federal government on companies with retained earnings deemed to be unreasonable and in excess of what is considered ordinary. Essentially, this tax encourages companies to issue dividends, rather than retain their earnings.
C Corporations : A C corporation, under United States federal income tax law, refers to any corporation that is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately. Most major companies are treated as C corporations for U.S. federal income tax purposes.
Disregarded Entity: A disregarded entity refers to a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner. A single-member LLC ( “SMLLC”), for example, is considered to be a disregarded entity. (www.pntax.com)
Electing Small Business Trusts (ESBT): Electing small business trusts (ESBT) are frequently used as an estate planning tool. These trusts allow holders of subchapter S stock to transfer ownership and income to multiple beneficiaries. The assets held in the trust are limited to subchapter S stock as well as non-subchapter S property.
Federal Insurance Contributions Act (FICA): The Federal Insurance Contributions Act is a United States federal payroll contribution directed towards both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.
Form 1120S: Form 1120S is a tax document used to report the income, losses, and dividends of S corporation shareholders. A corporation or other entity must file Form 1120S if (a) it elected to be an S corporation by filing Form 2553, (b) the IRS accepted the election, and (c) the election remains in effect.
Form 2553: IRS Form 2553, “Election By a Small Business Corporation,” is required to be filed with the IRS to switch a C Corporation to S Corporation status for purposes of federal taxation.
Form 8832: Form 8832 is the Entity Classification Election form from the IRS. It is filed to elect a tax status other than the default status for your entity. For example, an LLC can elect to be taxed as a C Corporation.
Grantor trust: A grantor trust is a trust in which the individual who creates the trust is the owner of the assets and property for income and estate tax purposes. Grantors' trust rules are rules applied to different types of trusts. All grantor trusts are revocable living trusts, while the grantor is alive.
Limited liability company (LLC): An LLC is a corporate structure where members cannot be held accountable for the company’s debts or liabilities. This can shield business owners from losing their entire life savings if, for example, someone were to sue the company. Can be a single member (much like a sole proprietor) or a multi-member. It shares certain traits of both corporations as well as partnerships or sole proprietorships. It is not a corporation.
Nonprofit Corporation: A nonprofit organization, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is an organization dedicated to furthering a particular social cause or advocating for a shared point of view.
Pro Rata Method: Pro rata refers to a proportional allocation. Under this approach, amounts are assigned based on each participant's proportional share of the whole. In accounting, this means revenues, expenses, assets, liabilities, or other items are proportionally allocated among participants.
Qualified Subchapter S Trust (QSST): A Qualified Subchapter S Trust, commonly referred to as a QSST Election, or a Q-Sub election, is a Qualified Subchapter S Subsidiary Election made on behalf of a trust that retains ownership as the shareholder of an S corporation, a corporation in the United States which votes to be taxed.
S Corporation: An S corporation, for United States federal income tax, is a closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes.
Shareholder: A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation.
Sole Proprietor: A business that legally has no separate existence from its owner. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.
Subchapter S corporation (S-CORP): A form of corporation (that meets specific IRS requirements) and has the benefit of being taxed as a partnership versus being subject to the “double taxation” of dividends with public companies.
Testamentary Trust: A testamentary trust is a trust which arises upon the death of the testator, and which is specified in his or her will. A will may contain more than one testamentary trust and may address all or any portion of the estate.
Voting Trust: A voting trust is an arrangement whereby the shares in a company of one or more shareholders and the voting rights attached thereto are legally transferred to a trustee, usually for a specified period of time. In some voting trusts, the trustee may also be granted additional powers.
Chuck Borek is a practicing attorney and founder of the Borek Group, LLC. Chuck is also a CPA, and his background includes five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was editor-in-chief of the Law Review. He has been teaching professionally since 1989, including four years as an Associate Professor of Accounting and two years as a Visiting Assistant Professor of Law. He ha... View Full Profile
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