S Corporation Income Taxation

The importance of tracking AAA and E&P in transactions involving S corps.

Tracking these accounts is important if an S corporation enters into certain transactions such as redemptions, liquidations, reorganizations, or corporate separations.

Boston Bruins can deduct full cost of meals for team’s away games

The Tax Court held that the owners of the Boston Bruins could deduct the full cost of their team’s pregame meals for away games as a de minimis fringe benefit.

Losses disallowed where S corp. not indebted to shareholder

The Tax Court held that an S corporation shareholder could not claim losses from several wholly owned S corporations due to insufficient basis.

Tax Court upholds non-safe-harbor reverse like-kind exchange

The Tax Court’s decision in Estate of Bartell alleviates uncertainty about structuring a reverse like-kind exchange intended to qualify for nonrecognition treatment.

S corporation owner-employees: Who controls income?

Clients who wish to have income from services be treated as income of their corporations should have revise independent contractor agreements so that payments are made to their corporations.

Ordinary loss deductions under Sec. 165(g)(3) in the S corp. context

This item discusses whether S corporations should be entitled to an ordinary loss under Sec. 165(g)(3) as a matter of law.

Disposing of passive activities

Disposing of property related to a passive activity does not resolve all matters related to the property.

Failure to Use S Corporation Correctly Results in Self-Employment Tax

Income earned by financial adviser was his, not the income of his wholly owned S corporation, and was therefore subject to self-employment tax.

Royalties on Pharmaceutical Technology Taxable as Ordinary Income, Tax Court Holds

Tax Court held that royalties received by an S corporation under a license agreement are taxable as ordinary income to the S corporation’s individual shareholder.

Avoiding Conversion to the Accrual Accounting Method by Electing S Status

A corporation may have to use the accrual method if it is required to maintain inventory records.

Asset Acquisition Target Ineligible for Success-Based Fee Safe Harbor

Recent Chief Counsel Advice provides helpful insight to taxpayers planning or negotiating merger and acquisition transactions.

Top 10 Easy Ways That Trusts Cause Loss of S Corporation Status

This item presents 10 ways that S corporations can lose their S election status, most of them involving trusts.

Documenting Deductible Transaction Costs for Acquisitive Transactions

This item discusses the ability of a target in a Sec. 338(h)(10) transaction to use the safe-harbor election provided by Rev. Proc. 2011-29.

Ordinary Deduction for Worthless QSub Stock

Restructuring an existing QSub in an attempt to qualify for an ordinary deduction is prohibited and might result in an unfavorable deferral of loss.

Changes to the BIG Recognition Period of Sec. 1374(d)(7)

The potential effect of the built-in-gain tax is often a significant consideration during pending acquisitions involving an S corporation.

Life Insurance and S Corporations: Unique Rules Present Opportunity and Peril

This column outlines the special considerations and issues related to life insurance policies for S Corporations.

Calculating Basis in Debt

Direct shareholder loans to an S corporation can be very important tools for tax planning.

Should S Corporations Get Ordinary Loss Treatment for Losses on Subsidiary Stock?

The question of whether an S corporation should be treated the same as a C corporation when its subsidiary corporation is insolvent has not been definitively answered.

Is It Rent? That Depends on the Lease

A recent Tax Court decision sheds light on the importance of lease terms to determine what is rent and how Sec. 467 may apply to advance rents.

Tax Considerations for Cancellation-of-Debt Income

This item provides an overview of the U.S. income tax implications of cancellation-of-debt income that results from bankruptcy or insolvency, with a focus on the differences in the tax treatment for C corporations, S corporations, and partnerships.
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