Discussion 1 and 2
Discussion 1
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.
Analyze the major advantages and disadvantages of using the plan you created on tax planning in the first part of this discussion for future years.
Discussion 2
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.
Per the text, Last In, First Out (LIFO) recapture tax and built-in gains tax are applied to S corporations at the corporate level. Create a tax-planning strategy to prevent the S corporation from the payment of these taxes.