Video: Tax Implications of Various S Corporation Transactions

Tax planning for S corporations involves strategizing to optimize the tax liabilities of these entities which, by design, pass corporate income, losses, credits, and deductions to their shareholders for federal tax purposes. Effective planning requires understanding the specific tax implications of distributions, compensation, and business expenses, ensuring compliance with the complex regulations governing these pass-through entities.

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Video Transcript

Instructor: Nick Palazzolo

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All right, let's see tax implications of various transactions within an S-Corp. We've got transactions between the entity itself and the shareholder. We've got J.K.L. Corp and shareholder Mike. After the formation of an S-Corp, we've got various transactions, and you want to know how these transactions work in any entity, whether it's an S-Corp, whether it's just actually just a Schedule C business the person may have, C-Corp, partnership, whatever it may be. You want to understand the tax implications of any transaction, if it's just person-to-person, between corporation-to-corporation. You want to understand every tax situation you can. If you're thinking that's daunting, it is. That's the nature of this exam, but you can do it. Don't you worry. We've got a scenario involving non-cash property, so loans and repayments and all this. We've got different transactions here. First off, we've got number one is a non-cash property contribution, and two is a distribution. First off, Mike is contributing equipment with a fair market value of $50,000 and a basis of $30,000, and the Elders tackle one and two, and then three and four. Then J.K.L. distributes a company vehicle to Mike with a fair market value of $20,000 and a basis of $15,000. What happens for our first scenario? That is our contribution. What happens for the shareholder Mike? Well, no gain or loss is going to be recognized on the contribution of property per stock. Mike is looking to be generally either a single shareholder, or a majority shareholder, and we're not going to deal with any gain or loss recognized on... I mean, generally speaking, we don't have any gain or loss recognized on contributing property to entities. And then for the corporation here, the basis in the contributed equipment is the same as Mike's basis.

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S corporations

Module: 3 Concepts, 35 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