Week 7 Discussion Question (ACC 565)

· 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.

Answer:

Reference(s):

· From the e-Activity (see below), 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.

Answer:

Reference(s):

e-Activity:

· Go to the Tax Almanac Website, located at  http://www.taxalmanac.org/index.php/Tax_Research_Resources , or use the Internet to research S corporation distributions and taxation. Be prepared to discuss.