Fed Tax
Income: from whatever sources derived Sec. 702(a)(8)- owners of partner and S corp – items subject to ord income treatment are lumped ‘S’-Corporation vs. Sole Proprietorships comparison: Note: 1
GI, Prop G/L, Prop Non-Recog, Sale and called 702 Income or loss. Recognized even if no cash is distributed. Accordingly, generally not (a) BOTH have single taxation; ‘S’ over Prop-(b)Liability shield except for personal profession of Business & Capital assets, Entities not taxed on distributions. Compute: Ord Income (including Sec 1245 recap); less: Exclusions; liability;(c) profits allocated to owners are not subject to FICA/FUTA(payroll tax advantage);
- Exclusions and Deferred Comp less: COGS (result Gross Income); less: Op Exp (including depr, sal exp, rent exp, repairs/maint, (d)ownership of S can be ‘gifted’ to children; not with Prop;(e)(HUGE)Gain on sale S-corp stock
Gross Income (Start of 1040 p.1) ad exp, professional fees, guaranteed payment to partners=operating income); less: Org expenses results in favorable capital treatment. The sale of a Prop. is treated as a sale of individ assets.
Rental Income but not expenses from and syndication costs. Thus, sale of inven, receivables, and other Ord Inc prop would result in unfavorable tax treat. PERSONAL use activities Separately Stated Items-items ultimate tax treatment may vary from owner to owner. Items are Prop over ‘S’- S-corp more complex (tracking Acc Adj Acct, Other Adj Acct, and debt basis)
‘B’ – Int and Div Inc (>$1,500) (K-1) first computed at the entity level. Then, each share of items is reported to them on K-1 or S corp ‘S’-Corporation vs. ‘C’-Corporation comparison:
‘C’ – 1099 rev and expenses return. Finally, owner transfers 702(a)(8) and separately stated to appropriate schedules of 1040 ‘S’ over ‘C’-(a)Single Taxation-C are taxed at entity; S are not(except for Sec 1374 built-in gain
GI, Prop G/L, Prop Non-Recog, Sale and called 702 Income or loss. Recognized even if no cash is distributed. Accordingly, generally not (a) BOTH have single taxation; ‘S’ over Prop-(b)Liability shield except for personal profession of Business & Capital assets, Entities not taxed on distributions. Compute: Ord Income (including Sec 1245 recap); less: Exclusions; liability;(c) profits allocated to owners are not subject to FICA/FUTA(payroll tax advantage);
- Exclusions and Deferred Comp less: COGS (result Gross Income); less: Op Exp (including depr, sal exp, rent exp, repairs/maint, (d)ownership of S can be ‘gifted’ to children; not with Prop;(e)(HUGE)Gain on sale S-corp stock
Gross Income (Start of 1040 p.1) ad exp, professional fees, guaranteed payment to partners=operating income); less: Org expenses results in favorable capital treatment. The sale of a Prop. is treated as a sale of individ assets.
Rental Income but not expenses from and syndication costs. Thus, sale of inven, receivables, and other Ord Inc prop would result in unfavorable tax treat. PERSONAL use activities Separately Stated Items-items ultimate tax treatment may vary from owner to owner. Items are Prop over ‘S’- S-corp more complex (tracking Acc Adj Acct, Other Adj Acct, and debt basis)
‘B’ – Int and Div Inc (>$1,500) (K-1) first computed at the entity level. Then, each share of items is reported to them on K-1 or S corp ‘S’-Corporation vs. ‘C’-Corporation comparison:
‘C’ – 1099 rev and expenses return. Finally, owner transfers 702(a)(8) and separately stated to appropriate schedules of 1040 ‘S’ over ‘C’-(a)Single Taxation-C are taxed at entity; S are not(except for Sec 1374 built-in gain