S Corporation Income Taxation

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.

QSSTs and ESBTs: No Longer Mutually Exclusive

Under Letter Ruling 201122003, if a current ESBT allows for separate and independent trust shares under the trust document, a trust may be treated as both an ESBT and a QSST. This ruling opens the door for additional planning for gifts of S corporation stock to younger generations.

Sec. 179D and Passthrough Entities

The Sec. 179D deduction available for building designers has unexpected consequences for design firms structured as passthrough entities.

Current Developments in S Corporations (Part I)

This two-part article discusses in the S corporation area. Part I covers new tax laws, court cases, regulations, revenue procedures, and rulings on various S corporation administrative and operating provisions.

Separately Identifiable Intangible Assets: Tax Opportunities and Traps

Treating self-created customer-based intangibles as assets separate from goodwill can result in more favorable tax treatment for these intangibles. This article examines the rules regarding the separate treatment of self-created customer-based intangibles and the situations in which separate treatment may be beneficial.

S Corporation Shareholder Compensation: How Much Is Enough?

This article looks at recent court decisions regarding S corporation shareholder reasonable compensation that provide helpful guidance on how an adviser can determine what is reasonable compensation.

Changing Level of Participation in an S Corporation for Tax Planning Purposes

A shareholder materially participates in an S corporation if the shareholder or the shareholder’s spouse is involved in the corporation’s trade or business on a regular, continuous, and substantial basis. This column discusses three tests that practitioners are likely to encounter when dealing with S corporation shareholders.

S Corporation Reasonable Compensation

A recent district court decision highlights the employment tax risks to S corporations that are found to have paid unreasonably low compensation to shareholder-employees while making distributions to the same individuals.

Distributing Property to S Corporation Shareholders

This item discusses the factors to consider for an S corporation distributing property to its shareholders.

Increased Opportunities for Sec. 338(h)(10) Elections

The Small Business Jobs Act changes the S corporation built-in gains (BIG) tax for tax years (and only for tax years) beginning in 2011. This article discusses the increased opportunities this affords buyers to elect to treat purchases of S corporation stock as asset purchases without triggering BIG tax.

Built-In Gains Recognition Period Temporarily Reduced for 2011 Transactions

The Small Business Jobs Act of 2010 includes an additional temporary reduction of the recognition period for built-in gains tax under Sec. 1374.

Classification of Business Entities That Are Not Corporations

An organization with two or more owners that is an entity separate from the owners and that is not a corporation is an eligible entity that can be classified as a corporation or a partnership. The regulations provide a set of default rules that establish the classification of an eligible entity if no classification election is made.

Increasing Passive Activity Loss Deductions with Self-Charged Interest

Generally, portfolio income cannot be used to offset passive activity losses, but there is a special rule for self-charged interest. This column examines the conditions under which such interest income is considered passive activity income.

S Corporations with Earnings and Profits

S corporations that have accumulated C corporation earnings and profits have both problems and opportunities. This article discusses the opportunities and explores solutions to the problems.

Elections Available to S Corporations with Significant Ownership Changes

This item examines why shareholders are typically motivated to request various S corporation elections and addresses why tax advisers should raise the question of the election at the time of ownership change and not at a later date.

Current Developments in S Corporations (Part II)

This article discusses S corporation eligibility, elections, and termination issues from the period July 2009–July 2010.
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