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S Corporation Answer Book, Eighth Edition

S Corporation Answer Book, Eighth Edition

By Michael Kosnitzky , Keith Blum, Sydney S. Traum
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Maximize S Corporation advantages and minimize taxes. This quick-reference manual enables you to avoid tax traps, make a QSub election, capitalize on the permissible differences in stock rights to facilitate estate planning and ownership transfers, determine allocation of income, losses, and deductions in the termination year of the S corporation; with full citations to the controlling rules, regulations, and court decisions to save you hours of research. By Judith Rood Traum and Sydney S. Traum

S Corporation Answer Book, Eighth Edition lets you help clients take full advantage of their S corporation status and minimize their taxes. This quick-reference manual leads you directly to authoritative information on every aspect of the S corporation, enabling you to

  • Arm the S corporation against the potential tax traps hidden in the Small Business Tax Protection Act.
  • Maximize the tax benefits of S corporation status.
  • Make a qualified Subchapter S Subsidiary (QSub) election.
  • Identify transactions that will trigger the built-in gains tax.
  • Avoid added tax liability or loss of S corporation status from passive investment income.
  • Capitalize on the permissible differences in stock rights to facilitate estate planning and ownership transfers.
  • Determine allocation of income, losses, and deductions in the termination year of the S corporation.

Plus, there are citations to the controlling rules, regulations, and court decisions that will save you hours of research.

Last Updated 12/05/2018
Update Frequency Updated twice annually
Product Line Wolters Kluwer Legal & Regulatory U.S.
ISBN 9781454845133
SKU 10046219-7777
Table of Contents

List of Questions

Chapter 1

Qualifying as an S Corporation


Basic Considerations


Ownership and Business Considerations


Capital Structure


Organization and Contributions to Capital


Foreign Operations

Chapter 2

Elections and Consents


Manner and Time of Election




Withdrawal and Amendment




Private Letter Rulings

Chapter 3

Taxable-Year Rules


Taxable-Year Options


Taxable-Year Election Mechanics


Maintenance and Termination of the Section 444 Election

Chapter 4

Terminations and Revocations


Basic Considerations






Accounting for a Termination or Revocation


Post-Termination Estimated Tax

Chapter 5

Reorganizations of S Corporations


Basic Considerations


Mergers and Consolidations


Divisions, Acquisitions, and Sales


Other Transactions

Chapter 6

Protecting the S Corporation Election; Invalid Elections


Threats to the Election


Protective Measures


Invalid Elections

Chapter 7

Passive Investment Income


Basic Considerations


Gross Receipts


Income Characterization


Corporate Planning

Chapter 8

S Corporations' Taxable Income and Losses; Taxation of the S Corporation


Fundamental Principles


Tax on Excess Passive Investment Income


Long-Term Capital Gains—Historical Perspective


Built-in Gains


Investment Tax Credit Recapture


Last-In, First-Out (LIFO) Recapture


Estimated Tax Payments

Chapter 9

Taxation of S Corporation Shareholders—Basic Pass-Through and Allocation Principles


Pass-Through of Income, Losses, and Other Items


Changes in Ownership


Other Concerns

Chapter 10

Limitations on Shareholder Losses and Deductions


Basis Limitations


Interrelationship of Subchapter S and Code Section 1244


At-Risk Rules


Passive Activity Loss (PAL) Rules—Overview


PAL Rules—Definition of Activity


PAL Rules—Material Participation


PAL Rules—Disallowed Losses and Credits


PAL Rules—Rental Activities


PAL Rules—Dispositions of Property or Interests in Property


PAL Rules—Effective Dates and Transitional Rules

Chapter 11

Shareholders' Basis in S Corporation Stock and Loans


Determining Basis


Structuring Loans to Increase Basis


Contributions to Capital—A Planning Tool

Chapter 12

S Corporation Distributions to Shareholders


Fundamental Concepts


Corporations Without E&P


Corporations with E&P


Post-Termination Distribution


Unintended Dividends

Chapter 13

Compensation; Fringe and Retirement Benefits




Fringe Benefits


Retirement Plans


Life Insurance

Chapter 14

Tax Administration of S Corporations




S Corporation Audits Generally


Subchapter S Items


Statute of Limitations and Other Matters


Tax Return Issues

Chapter 15

Estate Planning and Administration


Pre-Death Considerations


Post-Death Considerations

Chapter 16

State Taxation

Chapter 17

Choice of Entity


Forms of Entities and Definitions


Taxation of Different Entities


Distinguishing Characteristics


Choosing the Form to Use


Switching Forms of Entity

Chapter 18

2017 Tax Reform


Summary of Changes


The (20%) Passthrough Business Income Deduction


Deemed Repatriation


Qualified Beneficiary ESBTs


Global Intangible Low-Taxed Income


Limitation on Deduction of Business Interest


S Corporation Conversion to C Corporation


Bonus Depreciation (For Both New and Used Property)


Availability of Cash Method Accounting


Reduced Income Tax Rates


Carried Interest


Significant Developments Regarding Tax Reform


Appendix A: Questions and Answers about Reporting Related to Section 965 on 2017 Tax Returns


Appendix B: Publication 5292—How to Calculate Section 965 Amounts and Elections Available to Taxpayers For use in Preparing 2017 Returns


Appendix C: H.R. 1-10: Part II—Deduction for Qualified Business Income of Pass-Through Entities



Internal Revenue Code Sections


Treasury Regulations Sections


Administrative Announcements





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