Video: Corporations: Entity/Owner Transactions, Including Contributions, Loans and Distributions Overview

In this lesson, get ready to unpack the intricate dealings between corporations and their shareholders, with Nick Palazzolo, CPA, leading the charge. He covers the essentials of entity/owner transactions including contributions, loans, and various kinds of distributions. Nick breaks down complex tax implications for different types of contributions – think land versus services versus cash – and he doesn't shy away from the challenging but crucial task of calculating an owner's basis in the corporation for tax purposes. Jargon like realized and recognized gains or losses becomes clear as he dissects these concepts for both shareholders and corporations, laying out scenarios you might encounter on exam day. The discussion further delves into the nuances of non-liquidating distributions and how these impact shareholder taxation, with a special focus on reconciling an owner's beginning and ending basis in a corporation. Dive in to demystify these transactions and gain a solid understanding of their significance.

"Examprep.ai helped me pass all 4 CPA exams on the first try. I highly recommend. I especially like the feedback and ratings the software provides so I know where to focus my time."

Daniel H., CPA

"I can't recommend ExamPrep.ai enough. Nick's lessons turned concepts I struggled with into strengths. I was able to pass FAR right before other exams expired!"

Andrew K, CPA

"I just want to say thank you for the great lesson videos. I couldn't stay awake through lectures of another course. After watching all your FAR lessons I was finally able to pass!"

Alyssa M., CPA Candidate

Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

Cite this lesson

Link to this page

[[ citeExample ]]

Copy to clipboard

Copy URL to clipboard

Copy HTML to clipboard

Welcome to another great lesson here. Today, we're gonna go through corporations and all of the transactions that happen between the entity, the corporation, and its owners, the shareholders. These are gonna include contributions, distributions, loans. What happens if a shareholder contributes money, takes money out? What about a liquidating or non-liquidating distribution? What about if the shareholder gives instead of cash as a contribution, they give their services, they give land, they give a building. All of these have different tax implications, but no worries, we will go through them. Make sure you know what to do if you see any of them. Let's dive into our learning objectives and see what we have. Now, first off, we're gonna wanna calculate an entity's owner's basis in the corporation for tax purposes. Basis is absolutely critical, as we've seen throughout many lessons. You wanna make sure you understand what is the basis. Now, in a simple situation, you put money into Microsoft or Apple or Tesla or Google or any of these companies, and guess what? You just simply put $10,000 in as cash. That's your basis, very simple. However, we'll see with corporations, there's a lot more to it, especially if you're a larger shareholder, if you're a 25% shareholder or 50% shareholder, there's a lot of other implications. You personally would not contribute land, likely, I mean, unless you got a lot of credibility in the business world and a lot of assets that we don't know about, in which case, props to you for still going for the CPA license. We're gonna see a lot of these different situations. Again, it could also be a smaller corporation. So let's say you have a corporation yourself, there's two other shareholders, makes $100,000 a year, that's a lot smaller

Unlock the full video transcript and subtitles support with a free account!

Get more from this lesson

Create an account Get started free. No credit card required.

Formation and liquidation of business entities

Module: 3 Concepts, 39 Videos

Business Structures Overview

2:10

Introduction to Business Structures

12:05

Entities Formed Without Filing

6:23

Sole Proprietorship Business Structure