Staff Training Part 6: S & C Corporations

Author: Greg White

We’ll introduce the Federal tax treatment of corporations. This will include the “flow-through” nature of S corporations and the double tax treatment of C corporations. We’ll also cover the special eligibility requirements that apply to S corporations and how to fix inadvertent slip-ups by your clients.

Publication Date: June 2021

Designed For
Designed for tax professionals involved in federal tax planning or tax return preparation.

Topics Covered

• Taxation comparison: S corporations vs. C corporations
• Form 1120”S
• Form 1120
• Form 1099”DIV
• Biggest Differences: S Corp vs. C Corp
• The Problem with C Corps Double Tax
• Qualification for S Corp Status
• Traps: Second Class of Stock
• Mowery v. Commissioner: TC Memo 2018”105
• Form 2553: Electing to Be an S Corp
• Fixing Late Elections
• Mistakes Were Made: §1362(F)
• Reasonable Compensation: The Stakes
• Recharacterization: IRS Needs Some Payment
• How Do We Calculate "Reasonable Comp?
• David E. Watson, PC
• Methods to Determine Reasonable Compensation
• Talented People and S Corps
• Lessons Learned S Corps and Payroll Taxes
• Benefits and "Reasonable Compensation"
• Adjusted Basis: S Corp Stock
• Alf: Computing Basis and S Corp Stock
• Stock Basis: Distributions First
• When Do Loans Increase Shareholder Basis?
• Fringe Benefits
• Social Security Benefits
• Looking Ahead: Social Security Down the Road
• Computation: Social Security Benefits

Learning Objectives

• Identify mistakes that can lead to disqualification of S corporation status
• Recognize how to fix mistakes that resulted in the disqualification of S corporation status
• Compute the range of reasonable compensation for S corporation shareholders
• Recognize which forms to use in various client scenarios
• Identify the current tax rates
• Differentiate between C and S Corps
• Describe which types of entities is eligible to be treated as an S Corp
• Identify a second class of stock
• Describe reasonable compensation and S Corps
• Identify a common taxable noncash benefit
• Identify a common noncash fringe benefit that is not taxable
• Identify the first step in calculating the cost of lost social security benefits
• Recognize when a C or S Corp pays tax
• Identify a type of retirement plan where contributions are based upon compensation
• Recognize which form is used to elect S Corp status
• Identify a reason why an S Corp shareholder must keep track of their stock basis
• Identify correct statements regarding fringe benefits and taxability
• Describe a characteristic that would prevent an entity from electing to be treated as an S Corp

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (4 hours)

Program Prerequisites
None

Advance Preparation
None