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S corporations: income, basis and distributions

SEE 2 Chapter 10 · IRS outline 1E3, 1E4, 1E5, 1E7

Okafor Plumbing, Inc. is now an S corporation, and Daniel is delighted to find no self-employment tax on his K-1. He'd like his salary to be $12,000, please, and the rest as distributions. He also lent the company $20,000, had a bad year and wants to deduct a loss that's bigger than his investment. Theo opens Form 7203. Nadia sits down next to him with a very patient look on her face.

In this chapter

1. S corporation income and separately stated items
2. Reasonable pay and the 2% shareholder
3. Stock basis
4. Debt basis and losses
5. Distributions and the AAA
6. Debt discharge in an S corporation

This chapter has 6 lessons and 50 practice MCQs with explanations, plus flashcards and a recall sheet.

What this chapter covers

• Per-share per-day allocation
• reasonable compensation and 2% shareholders
• stock and debt basis
• Form 7203
• AAA and distributions
• debt discharge

Chapter 9: S corporations: qualifying, electing and terminating · Chapter 11: Business income, inventory and at-risk