Advising owner-shareholders can prove invaluable in meeting guidelines for distinguishing compensation from distributions.
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Topics
Distributions & Shareholder Basis
Interaction of S shareholders’ loss limitations
Shareholder basis and other applicable loss limitations must be applied in a specified order, with differing rules.
The ‘one class of stock’ requirement: An interesting letter ruling
While it might stand to reason that if there is only one shareholder, then there can be only one class of stock, that is not necessarily what the Code and regulations provide.
Trusts as S corporation shareholders
Generally, a trust cannot hold stock of an S corporation; however, grantor trusts, testamentary trusts, voting trusts, ESBTs, and QSSTs are permissible S corporation shareholders (Sec. 1361(c)(2)).
Making tax-free distributions to the extent of AAA
AAA and AE&P calculations are key to determining stock basis and, thus, the taxability of shareholder distributions.
S corporation shareholder recomputation of basis
stock and debt basis under Sec. 1366(d)(1). Failing to properly track basis may require a recomputation of the shareholder’s basis.
Compensatory split-dollar life insurance benefits are compensation
Economic benefits from a compensatory split-dollar
life insurance arrangement are not property distributions.
Taxpayer not a shareholder of not-for-profit corporation
The president and a director of a not-for-profit is not its beneficial owner and cannot be a shareholder of it.
Current developments in S corporations
This annual update on S corporations covers cases, regulations, and IRS rulings that have been issued in the last year, including the rules for eligible terminated S corporations.
Current developments in S corporations
This update on recent developments in taxation relating to S corporations includes cases and rulings on eligible shareholders, electing small business trusts, inadvertent S election terminations, and other issues, as well as changes made by the TCJA.
Capital contribution of reduced basis S corporation debt
The passthrough of S corporation losses to the extent of the shareholder’s basis in his or her stock and debt can be beneficial, but the resulting reduced basis debt may lead to taxable income on repayment of the debt.
Amended returns satisfy statement-of-inconsistency requirement
A taxpayer’s amended returns sufficiently apprised the IRS of inconsistencies between the amended returns and the returns filed by the bankruptcy trustee of his wholly owned S corporation.
Loan guarantee does not increase S corp. shareholder’s debt basis
This item discusses how a back-to-back loan is a viable option for shareholders who want to increase their debt basis in an S corporation.
Sec. 336(e) elections for S corp. targets: Get a step-up without a letter ruling
Individuals, partnerships, or other noncorporate entities that could not benefit from a Sec. 338(h)(10) election may be able to qualify for a Sec. 336(e) election.
Intercompany transactions do not increase debt basis in S corporation
Loans among related entities were not bona fide
indebtedness that would give rise to debt basis in an S corporation for the shareholder.
Structuring loans for S corp. shareholder basis planning opportunities
An understanding of S corporation basis rules enables practitioners to assist clients in taking advantage of planning opportunities aimed at maximizing deductible passthrough losses.
Current developments in S corporations
The AICPA S Corporation Taxation Technical Resource Panel offers a summary of recent court decisions and IRS guidance.
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.
Calculating Basis in Debt
Direct shareholder loans to an S corporation can be very important tools for tax planning.
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.
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
