Taxpaying and Flow-Through Entities
Different types of entities-such as individuals, partnerships, Subchapter S corporations, not-for-profits, and corporations-in the federal income tax system are split into two distinct groups: taxpaying entities and flow-through entities. Taxpaying entities must pay income taxes on their taxable income; however, flow-through entities can limit taxation by transferring their income (flowing through) to a taxpaying entity such as an owner and/or an investor. In both cases, income must still be calculated for the purpose of eventual taxation. Select one of the following entities: individuals, partnerships, Subchapter S corporations, not-for-profits, or corporations. Consider the following questions: How do taxpaying and flow-through entities compute income? What is the definition of income by the IRS?
With these thoughts mind
An explanation of the entity you selected and its determination of income. Analyze the difference between income for the IRS and income for accounting as it relates to the entity you selected.