S-Corp, Partnerships Flashcards
If a C corporation elects S corporation status and the fair market value of an asset exceeds its basis, what is the built in gains tax?
the difference between FMV and basis at time of S corp election is a net unrealized built-in gain subject to built-in gains tax if the asset is sold within five years
Who are relatives that can count as 1 shareholder in S Corp?
great-grandparents, grandparents, parents, children, brothers and sisters, grandchildren, great-grandchildren, aunts, uncles, cousins, and the respective spouses are family members
Can all of S-Corp loss be passed through for a shareholder to deduct?
NO…deductible Loss limited to shareholder’s basis. So 1 shareholder might get to deduct more loss than another one if they have higher basis.
Which of these are in ordinary income?
Sales Rent expense Entertainment expense Interest income Contributions to qualifying charities Section 179 expense Depreciation expense
Sales
Rent expense
1/2 entertainment
depreciation
Partnership outside basis and Capital accounts.
Which uses adjusted basis-liabilities assumed. Which uses FMV-liabilities assumed by partnership
outside === adjusted basis
capital accounts ===FMV
both include the value of services contributed. But those service gains will be taxed as income to the contributor.
Partnership
A contributed property FMV 100000 tax basis 60000. The partnership later sold the property for 160000. How is gain allocated to contributing partner who has 1/3 interest?
Contributed built in gain is allocated to the partner who contributed the property when the partnership makes a sale. The remainder of gain is dispersed based on partnership interests.
Contributing partner gain… 100000-60000 = 40000 built in gain. 160000-60000 = 100000 partnership gain less 40000 builti in gain = 60000 gain to allocate.
1/3(60000) + 40000 = 60000 gain to contributing partner
Gulde’s tax basis in Chyme Partnership was $26,000 at the time Gulde received a liquidating distribution of $12,000 cash and land with an adjusted basis to Chyme of $10,000 and a fair market value of $30,000. Chyme did not have unrealized receivables, appreciated inventory, or properties that had been contributed by its partners. What was the amount of Gulde’s basis in the land?
Liquidating means partnership interest must go to zero. If partner doesn’t get enough cash or land to do so, then property distributed can take on a higher adjusted basis to the partner than it had for the partnership.
26000-12000-10000=4000 basis left.
So land must take on adj basis of 14000 to push basis to zero
The adjusted basis of Jody’s partnership interest was $50,000 immediately before Jody received a current distribution of $20,000 cash and property with an adjusted basis to the partnership of $40,000 and a fair market value of $35,000.
Any taxable gain?
NO. Only cash distribution can result in gain. First, take out cash. 50000-20000=30000 basis still left. Next, take out land 30000-30000=0 basis. Land will have 30000 basis to Jody instead of 40000.
Which entity(s) have restrictions on who can be an owner?
Partnership
C Corp
S Corp
Only S Corp.
100 or fewer shareholders. Family count as 1
Corp & partnership can’t be shareholder of s corp
US Citizens or permanent resident. No nonresident aliens.
Shareholders: individuals, estates and certain types of tax-exempt entities and trusts
A partnership terminates when ______% of the interests change hands within a 12 month period
50%
In a nonliquidating partnership distribution, adjusted basis of land is equal to lesser of ______ or ______
In a liquidating distribution, adjusted basis of land to partner is equal to
lesser of partner’s remaining o/b after cash distributions OR partnership’s basis in the property
partner’s remaining basis after cash distributions. Whatever it takes to get basis to zero
How much ownership should employee-shareholder have to report fringe benefit in his income. E.g. s-corp pays his health insurance.
shareholder must own more than 2%. If owns less, he would not have to report fringe benefit in his income.
