Flashcards in Chapter 3 Deck (15)
What kind of liability do shareholders of S-corps have?
Limited liability because it's set up formally.
How many times are S-corps taxed?
Once, when the money is earned.
Are distributions from an S-corp taxable?
No because the money is taxed when earned.
How is an S-corp formed?
100% consent by the shareholders.
How is an S-corp terminated?
Greater than 50% vote or a violation of the rules.
How is the allocation of income computed for an S-corp?
On an average daily basis.
What is "at-risk"?
The initial amount contributed plus any amount loaned to the S-corp.
What happens if basis is below zero?
Basis can't go below zero and the loss is suspended and carried forward.
When would health insurance premiums paid by an S-corp be included in the shareholder's income?
When the shareholder is more than a 2% shareholder.
What is the tax rate for an S corp that pays tax on built in gains?
The highest corporate income tax rate.
When must an S corp election be made?
Within 2 1/2 months of the beginning of the fiscal period.
Who may be shareholders of an S corp?
Individuals, estates, and certain trusts.
How many classes of stock can an S corp have?
Only one class of stock.
What is the accumulated adjustment account?
Tthe entity’s earnings that have already passed through to shareholders but have not yet been distributed