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Flashcards in REG 24 Deck (16):

What will terminate an S corps Status

Section 1362(d)(3)
Passive income exceeds 25% of gross receipts for 3 consecutive years
Has accumulated earnings and profits from being a C Corp


After S corp terminates status, how long have to wait before become S corp again without IRS consent.

5 years, however if it's december 31, 2015, it's january 2021, meaning it's the first taxable year after the five years have passed

Can also get consent


maximum number of s corp shareholders

100, family counts as 1, with spouse counts as 1 (does this mean kids 1 -
Have to look this up


Can a C corp hold S corporation stock?
Can a resident alien?

Yes, but a non-resident alien cannot


What is form 2553 used for?
When must it be filed?
Who must consent?

To be taxed under Subchapter S is made on Form 2553
"Election by Small business Corporation to Tax Corporate Income Directly to Shareholders)
Must be filed during current year or by March 15
All shareholders current or in past year


What does 179 do to owners basis of S corp?

It reduces it!!! Watch out for positive numbers or not noticing that basis is reduced by certain things - capital losses, charitable contributions, etc.


Does it make any difference that charitable contributions are only partially deductible on an owners tax return as far as basis in an S corp?



100% of separately stated items added into basis?



TAx exempt income added to basis of scorp owner



BAsis of a property formula for property received as gift on which gift tax is paid?

Donors basis plus OMG ridiculous - it's the portion of the gift tax attributable to the appreciation, but you use the 14K limitation, forget it

Gotta draw the line somewhere, just remember it's not the full gift tax


What is the basis of property received in an exchange?

Surprisingly, it's not the FMV of the services received, but the FMV of the property received (unless you can't determine that an then it's the services)


What is the basis of inherited property?

FMV at date of death or alternative valuation date (6 months from date of death or date of sale or distribution if earlier).


Do you capitalize costs of renting equipment to build a storage facility?

Yes you do, falls under UNICAP


UNICAP covers not only goods produced for inventory and retailers inventory, but property produced for business use like buildings or storage facilities.

May have to allocate indirect costs under UNICAP.

Recover costs through depreciation.


Are marketing costs capitalized under UNICAP

NO, just non-manufacturing overhead.


What overhead is capitalized under UNICAP?

JUST manufacturing not SGA.