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REG > S-Corp > Flashcards

S-Corp Flashcards

1
Q

who is eligible for an S- Corp

A 
US Citizen
Bankruptcy estates
A Single member LLC can become an S-Corp
Testamentary Trusts
Revocable Trusts as part of an estate
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2
Q

What are some of the characteristics of an S-Corp

A 
less than 100 member
husband and wide are considered 1 
5 generations of a family
It is limited Liability
Can only have 1 kind of stock -
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3
Q

How many must agree to become a S-Corp and then to dissolve

A

100% to become

50% to dissolve

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4
Q

What happens if you violate the rules of an S Corp

A
  • you become ac-corp
  • if more than 100 member or if someone is a foreign resident
  • Then you can elect to be a S-corp for 5 years
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5
Q

Who is ineligible to be a S-Corp

A
  • nonresident aliens
  • C-corps
  • Partenerships
  • Multiple member LLC
  • LLP
  • Foreign Trusts
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6
Q

What is the S-corps tax year

A

calendar year

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7
Q

Are shareholder liable for the debt?

A

nope

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8
Q

Can Shareholder be employees

A

YES

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9
Q

Can C-Corps own stock in S- Corp? Can S-Corp own stock in a C-Corp?

A

C-CANT own stock in a S-CORP

S CAN own C-Corp stock

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10
Q

Can a S-Corp be a partner in a partnership?

A

YES

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11
Q

Can A S-Corp own 100% of the stock of an S-Corp subsidiary

A

YES

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12
Q

When must a company elect to be an S-Corp

A

By 3/15 - if not then they aren’t an S-Corp until the following calendar year

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13
Q

How can the IRS involuntarily terminate the S-Corp status

A

If any of the eligibility rules are broken

-If passive income is greater than 25% of gross receipts for 3 years in a row

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14
Q

Charitable contributions are what?

A

Separately stated item

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15
Q

Interest income

A

separately Stated

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16
Q

Dividend income from investments

A

Separately Stated

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17
Q

Rental Activities

A

Separately Stated

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18
Q

Section 179 Deductions

A

Separately Stated

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19
Q

Capital Gains and Losses

A

Separately Stated

20
Q

Tax Credits

A

Separately stated

21
Q

Foreign Taxes

A

Separately Stated

22
Q

What are AAA

A

These are taxed earnings that have not been distributed.

23
Q

Can AAA be negative

A

Yes - unlike shareholder basis

24
Q

When can you use AAA and when can you not

A

If an S-Corp has never been a c-corp then they won’t have any AAA

It is only when a c-corp becomes a S-Corp - and the have E&P. If no E&P - no need for AAA

25
Q

How much loss can you deduct from a S-Corp

A

You can only deduct a loss to the extent of your basis

The remaining loss can be carried forward indefinitely until the shareholder has enough basis to use it

26
Q

what can both an LLC and a S-corp do

A
  • both can use incentive stock options
  • both avoid double taxation
  • both have limited liability protection
27
Q

What is the benefit of a s-corp and capital losses

A

With an s-corp you can claim the capital losses ( up to 3K) on your 1040. Net capital losses are carried forward to be used to offset capital gains

28
Q

How much passive income can you have before you violate S-corp status

A

25% of income from passive investments of gross receipts for 3 consecutive years

29
Q

Can a S-Corp’s owners include estates or trusts

A

yes - as long as they are US citizens or residents

30
Q

When can and can not a S-Corp claim a BIG tax

A

they must have been a c-corp first and at the time of switching from C-corp to S-corp - they have a gain in the value (Basis 4, FMV 10) BIG would be 35% of 6

31
Q

What are the at-risk rules

A

losses are limited to the investor’s amount at risk.

It is the amount of the shareholder’s investment plus any portion of entity liability that the shareholder will be liable in case of default

32
Q

Can a S-corp have passive and active income

A

Yes! not more than 25% for the last 3 years average, but can have both

33
Q

Can a S - Corp be owned by a bankruptcy estate

A

Yes they can

34
Q

The sole shareholder of an S corporation contributed equipment with a fair market value of $20,000 and a basis of $6,000 subject to $12,000 liability. What amount is the gain, if any, that the shareholder must recognize?

A

The shareholder has contributed equipment subject to a $12,000 liability, which is greater than the shareholder’s adjusted basis in the equipment, and therefore the shareholder must recognize a gain in the amount of $6,000, which is the excess of the liability over the adjusted basis in the property.

35
Q

What are the rules on health insurance premiums and fringe benefits

A

The are deductible in computing the entity’s ordinary income

If it is paid for by the entity for an employee who is also a 2% shareholder it is include din the employees gross income

If less than 1% it is NOT included in their gross income

36
Q

Is a shareholder’s basis increased by income from either taxable interest and non taxable interest

A

Yes to both. tax exempt increases you basis, but is not taxable

Taxable interest increase your basis and is taxable

37
Q

would collectibles gains or losses be separately stated

A

Yes - they would be because the get special tax treatment

38
Q

can an S corp be an estate

A

Yes

39
Q

Can an s corp have one class of stock with different voting rights

A

yes

40
Q

Can an S corp have a share holder that is a grantor trust

A

yes

41
Q

What do you do if you are an S corp that switches to a c corp

A

You annualize the income and then divide it by the number of days . You then multiply by the number of days you were a c-corp and the number of days you were a s corp

42
Q

What are the rules for a partnership and a s corp

A

A partnership as a shareholder disqualifies S corp

A S corp can become a partner in a partnership

43
Q

What is the rate that A S Corp uses to calculate BIG

A

It is based on the gain at the date of election of S corp at the highest corp tax rate

44
Q

When you take a salary does it affect your basis in an s corp

A

No - it does not!

only distributions do

45
Q

How do you allocate income or loss during year when ownership percentages change

A

You base it on a per share per day basis

46
Q

when you elect to revoke S corp status what are the dates

A

Must be more than 50% must vote for it

If an effective date is not specified - status goes to the beginning of the year if done before 3/15

If done after - it is starts Jan the next year

47
Q

What if you have income an d a loss - how do you calculate basis

A

your basis is first increased by ordinary income. Then it is decreased NEXT by distribution. If the tax basis at this point is at zero = the capital loss does not further reduce taxes.

So if you have a cash distribution that exceed this amount - it would pass through to you individual tax return

REG (31 decks)

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