S Corp. Distributions: Determining the Taxability

Author: Jennifer Kowal

S corporations commonly make distributions to shareholders. Determining whether the distributions are taxable distributions or return of basis largely depends on shareholder basis. Additionally, it may be difficult to determine if a distribution is a loan, a loan repayment, a salary, or a distribution of income. This course will provide detailed training on how the intersection of these rules affects taxability of distributions of cash and property by an S corporation, illustrated with case studies.

Publication Date: May 2018

Designed For
Tax practitioners at all levels who provide advice and return preparation involving S corporations.

Topics Covered

• Rules regarding pass-through of S corporation items of income and deductions
• Additions to S corporation basis, including effects of S corporation liabilities
• Characterization of distributions as salary vs. distributions of income
• Loans between S corporation and shareholders
• Tax distributions

Learning Objectives

• Describe transactions and events that increase and decrease a shareholder's basis in S corporation stock
• Identify the difference in treatment between distributions of salary, S corporation income, and shareholder loans
• Explain how tax distributions work, and how they affect future distributions of cash and property
• Identify advantages and disadvantages of forming an S Corporation
• Recognize the ordering rules and proper sequence
• Differentiate correct statements relating to an S Corporation and shareholder debt on basis and distributions
• Describe employment tax issues
• Identify acceptable reasons for backdating
• Recognize how many shareholders are required to form an S Corporation

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
None

Advance Preparation
None