Nonliquidating distributions in a partnership
Distribution source and shareholders' basis for their corporate investment determine the tax consequences of distributions from S corporations.
The regulations being proposed under IRC Secs 13 provide the particulars of adjustments to stock basis and distributions to S corporation stockholders.
Payments made to officers of the corporation are wages that are subject to the FICA tax rate, which is lower than the self-employment tax that you would have to pay as a sole proprietor. First, you will need to pay a corporation tax on the income that is earned by the corporation.
Second, you will need to pay personal income tax for any wages that are paid to you by the corporation.
Business gross income • Business deductions • Limitations on business deductions • Specific business deductions • Accounting methods • Comparison of accrual and cash methods • Changes in accounting methods Legal classification • Nontax characteristics • Entity tax classification • Entity tax characteristics including favorable reallocation rules for LLC’s, disregarded entities and their effect on taxation, who can own stock in a sub chapter s corporation and other entities, limitations on different classes of equity for different entities, S elections for different types of entities and their consequences, S vs C corporation Depreciation - Personal property - Real property • Different basis rules for different entities and suspended losses, Special rules - Immediate expensing - Bonus depreciation • Amortization • Depletion, 83 (b) 4elections Realized and recognized gain or loss • Character of gain or loss • Depreciation recapture • Deferral transactions Transfers of property to a corporation • Corporate taxable income • Book-tax differences - Common permanent book-tax differences - Common temporary book-tax differences • Corporate specific deductions • Compliance • Corporate alternative minimum tax Computing earnings and profits • Ordering of E&P distributions • Distributions of noncash property • Constructive dividends Flow-through overview • Acquiring partnership interests • Accounting periods, methods, and tax elections • Reporting partnership operations • Distributions • Loss limitations, Partnership Allocations, Sales and Exchanges of Partnership Interests, Operating Distributions, Liquidating Distributions, Terminations and Death of a Partner Stock redemptions • Partial corporate liquidations • Stock dividends • Taxable corporate acquisitions • Tax-free corporate reorganizations • Mergers & reverse mergers • Chapters • Corporate divisions • Carryover of corporate tax attributes to shareholders They say that nothing is certain in life except death and taxes, but there are ways to minimize your corporate tax burden. The type of entity you choose, as well as other structural choices such as the ability to raise capital, are key components of getting the results you desire for both you and your shareholders.
One of the many functions of a corporate tax law attorney is to help you decide which business entity you should establish. If you establish a C-Corp, your personal and business finances will be kept completely separate so you are not personally liable in the event that a lawsuit is filed against your company.
Talking to a tax attorney now is critical to your understanding of what the IRS and other regulators require.
The following is a list of eight key areas when you should consult a business tax attorney for help.
The tax rates for qualified dividends are (1) 0% for taxpayers with a marginal tax rate on ordinary income of 10% or 15%; (2) 15% for taxpayers with a marginal tax rate on ordinary income of 25% or greater whose taxable income falls below the levels for the 39.6% regular tax rate (2014 inflation-adjusted 7,600 for married filing jointly, 6,750 for single filers, and 8,800 for married filing separately); and (3) 20% for taxpayers with taxable income above those levels.
These shareholder assets have tax bases which may change regularly as a result of corporate events.