ACCT553 WEEK 6
ACCT553
Week 6 Homework
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Chapter 21
1. Please explain how an S Corporation is created. (5 pts)
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
Have only allowable shareholders including individuals, certain trusts, and estates and may not include partnerships, corporations or non-resident alien shareholders
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders.
http://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/S-Corporations
2. Please explain how Charitable Contributions made at the S-Corporation level are treated for tax purposes. (5 pts.)
In Rev. Rul. 2000-43, the IRS held that an S Corporation's charitable deduction must be taken in the year the charitable contribution is actually made rather than in the year the contribution is authorized. http://www.pgdc.com/pgdc/s-corporation-charitable-deduction-timing 3. How are fringe benefits received by an S Corporation Shareholder treated for tax purposes? (5 pts.)
Fringe benefits are generally considered additional compensation for both income and employment tax purposes, and are reported on your W-2. http://www.badermartin.com/blog/are-your-fringe-benefits-taxable-what-partners-llc-members-and-s-corporation-shareholders-need-to-know/ 4. Please explain "pass through" taxation. ( 5 pts.)
Pass-through tax treatment means that the taxes of a business are "passed through" to the tax return of the individuals owning the business. Sole proprietorships, partnerships, most LLC's, and Sub-chapter S corporations qualify for
Week 6 Homework
_________________________________________________________
Chapter 21
1. Please explain how an S Corporation is created. (5 pts)
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
Have only allowable shareholders including individuals, certain trusts, and estates and may not include partnerships, corporations or non-resident alien shareholders
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders.
http://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/S-Corporations
2. Please explain how Charitable Contributions made at the S-Corporation level are treated for tax purposes. (5 pts.)
In Rev. Rul. 2000-43, the IRS held that an S Corporation's charitable deduction must be taken in the year the charitable contribution is actually made rather than in the year the contribution is authorized. http://www.pgdc.com/pgdc/s-corporation-charitable-deduction-timing 3. How are fringe benefits received by an S Corporation Shareholder treated for tax purposes? (5 pts.)
Fringe benefits are generally considered additional compensation for both income and employment tax purposes, and are reported on your W-2. http://www.badermartin.com/blog/are-your-fringe-benefits-taxable-what-partners-llc-members-and-s-corporation-shareholders-need-to-know/ 4. Please explain "pass through" taxation. ( 5 pts.)
Pass-through tax treatment means that the taxes of a business are "passed through" to the tax return of the individuals owning the business. Sole proprietorships, partnerships, most LLC's, and Sub-chapter S corporations qualify for