Taxes: Distributions & Special Deductions Flashcards Preview

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Flashcards in Taxes: Distributions & Special Deductions Deck (3)
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1

Taxes:
Distributions & Special Deductions
Distributions

Distributions
- corporation generates gain by distributing appreciated property
- no tax on S Corp, taxed on shareholder
- shareholder income if S corp has no E&P, distribution creates gain to shareholder if distribution > adj basis
= cash + value of property distributed
- distribution > adj basis = gain from sale of stock (most likely capital gain)
- shareholder income if S corp has E&P, distribution

2

Taxes:
Distributions & Special Deductions
Built In Gains Tax

Built In Gains Tax
- S corp is taxed if sells property with value in excess of basis as of 1st year
- 35%, limited to built in gain
- only if sold in 1st 10 years
- built-in losses can offset gains in same year
- limited to S corp TI for year

3

Taxes:
Distributions & Special Deductions
Passive Investment Income Tax

Passive Investment Income Tax
- excessive passive income > 25% gross reciepts
- IRS may waive if
- only if once was a C corp

Decks in REG Class (109):