1. Describe when a shareholder should recognize income and losses for an S Corporation form of operation.
2. Explain how we navigate through the process of determining the basis for an S Corporation.
3. How do we determine a shareholder's share of items within an S Corporation to include separately stated items and none separately stated?
4. What are some of the limitations on losses and deductions that one would need to understand and be able to address within an S Corporation?
5. Describe the general process for creating a basis so that current losses can be deducted from it?
6. Describe the distribution process and rules that apply under state law that should be understood. Please separate for those with earnings, and those without.
7. How do we use the accumulated adjustments account for S Corporation distributions?
8. How do earnings and profits affect distributions and adjustments for S Corp's?
Professional Development Question
You may use one or a combination of the following when completing this exercise:
1. Online research
2. Real-life experiences
3. Interview or professional experts
4. Textbook materials
Write a 1-2 page paper that discusses how one would determine the basis of investment in an S Corporation, as well as how losses are handled generally. Students should also include adiscussion on what passive gains and losses are as well as non passive, and how each come intoplay with regard to S Corporations. Students should include an example of how distributions are done under an S Corporation election, and how the accumulated adjustment account is leveraged in this process.