Per the text and IRC, losses and deductions of
an S corporation pass through to the shareholders of the corporation and are
limited to the shareholders’ basis in the S corporation. Suggest a plan for a
client to increase the deductible pass through loss and deductions over the
initial investment from a new wholly owned S corporation.
From the e-Activity, differentiate between the treatment
of S corporation distributions from corporations having no earnings and
profits, and corporations having accumulated earnings and profits. Suggest the
most significant reason for the difference in the treatment of distributions.
Justify your response.
e-Activity: Go to the Tax Almanac Website, located at http://www.taxalmanac.org/index.php/Tax_Research_Resources,
or use the Internet and Strayer databases to research S corporation
distributions and taxation. Be prepared to discuss.