S Corporation Income Taxation

Current Developments in S Corporations

During the period of this S corporation tax update, some major changes that directly affect S corporations took place. This article also presents tax planning ideas for S corporations and their shareholders.

Santa Clara Valley Housing Group: An S Corporation Abusive Tax Shelter

Consideration of tax shelter case about whether warrants issued by an S corporation are a prohibited second class of stock reveals that the entire tax shelter is an arrangement that is a second class of stock.

S Corporation Shareholder Basis From Bona Fide Indebtedness

The IRS issued proposed regulations on the subject of when an S corporation shareholder can increase his or her basis in the S corporation’s stock based on loans to the corporation.

Reporting Life Insurance Transactions by S Corporations

There is room for disagreement, if not confusion, over how to report transactions involving life insurance on the tax returns of S corporations.

Operating a QSub

A qualified subchapter S subsidiary (QSub) is a subsidiary corporation 100% owned by an S corporation that has made a valid QSub election for the subsidiary.

Contributions Increase Shareholders’ S Corporation Basis

The Tax Court held that shareholders in two related S corporations could increase their basis in one of the corporations by contributing assets to it that they had received in a distribution from the other corporation.

Now Is the Time: Converting a C Corporation to an S Corporation or LLC

The current uncertain economic environment may present an opportunity to exit C status and its attendant double taxation at an acceptable current tax cost.

Proposed Regs. on Basis for S Corporation Shareholders From Bona Fide Indebtedness

The IRS issued proposed regulations on when an S corporation shareholder can increase basis in the S corporation’s stock based on loans to the corporation.

The Research Credit and Deduction for Passthrough Entities

Passthrough entities may be overlooking the research tax credit because they are not aware that they are engaged in eligible activities, do not think their activities are qualified, or do not believe they can meet the various requirements.

Reporting Dilemma: Personal Use of Rental Properties

Properly apportioning real estate expenses between personal and rental use presents several challenges.

Partially Taxable Asset Acquisitions from S Corporations

Selling shareholders of an S corporation commonly seek a partially tax-deferred rollover of equity. This item describes the differing results between a transaction accomplished through a Sec. 351 transfer and one structured as part sale/part contribution.

Obtaining a Waiver of an Invalid S Election

The IRS has authority to waive the effect of an invalid election of S corporation status. This article discusses different methods of relief.

Roth IRAs Cannot Be S Corporation Shareholders, Ninth Circuit Holds

The Ninth Circuit, affirming the Tax Court, held that a corporation whose sole shareholder was a Roth IRA was not a valid S corporation.

The S Corporation Built-In Gains Tax: Commonly Encountered Issues

This article examines five issues corporations commonly encounter in complying with the built-in gains tax.

Eighth Circuit Affirms S Corporation Shareholder’s Compensation Was Not Reasonable

The Eighth Circuit affirmed a lower court’s decision that an S corporation shareholder’s $24,000 salary was not reasonable compensation.

Providing Fringe Benefits to S Corporation Employees

In an S corporation, employee fringe benefits paid on behalf of a 2% shareholder are subject to special rules.

Tax Issues and the 2010 S Corporation Shareholder Decedent

A tax practitioner working with the estate of an S corporation shareholder who died in 2010 must contend with numerous issues. This article points out some of the issues and discusses some of the choices that can be considered.

Current Developments in S Corporations (Part II)

This article provides an annual update of recent IRS rulings, guidance, and other developments concerning S corporations. It discusses S corporation eligibility, elections, termination issues, second class of stock, and trusts owning S corporation stock.

Regs. Extend Religious and Family Member FICA, FUTA Exceptions to Disregarded Entities

Temporary and proposed regulations extend the religious and family member FICA and FUTA tax exceptions to disregarded entities.

Final Regs Clarify Excise, Employment Tax Treatment of Disregarded Entities

The IRS issued final regulations clarifying the treatment of disregarded entities with respect to employment and certain excise taxes.
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