Video: S Corporation Income and Separately Stated Items

In this lesson, Nick Palazzolo, CPA, breaks down the complexities of S Corporation income, emphasizing the distinction between separately stated items and those that are not separately stated. Using the example of Creative Studio Inc., Nick explains how to determine the net business income for an S Corporation's tax return, illustrating the process by categorizing business transactions. He highlights why certain items, such as interest income, are considered separate and the impact they have when calculating the company's ordinary income. Wrapping it up, Nick reminds everyone of the importance of diligent practice with practice questions and simulations to master the concepts covered.

"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

All right, example here on S-Corp income and separately stated items. Creative Studio Inc. an accrual basis calendar year S-Corp has been an S-Corp since inception and is not subject to the uniform capitalization rules. In the current year, Creative Studio recorded the following. We've got these items here, making sure we understand where each of these items are going to go on the tax forms. What amount of net business income should we report? We have the answer there, but let's not get to it yet. Well, we've got both separately stated and not separately stated items. The interest income is actually going to be a separately stated item and as such will not be included in the calculation of net business income. Therefore, our calculation is going to be $80,000 minus $10,000 minus $15,000 with this $7,000 being separately stated. And there we go. This is net business income, the ordinary income that we would report there, whereas again, this would be separately stated. All right, wonderful questions. Keep practicing. The more questions you see, the more sims you see, especially the better off you will do on the exam. Make sure you're practicing. I know you got this. Let's wrap it up with a summary.

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

Get more from this lesson

Create an account 7-day free trial. No credit card required.

S Corporations

Module: 2 Concepts, 28 Videos

S Corporations: Eligibility and Election Overview

3:48

Introduction to S Corporations: Eligibility and Election

2:21

Shareholders of an S Corporation

4:57

S Corporation Eligibility Requirements