Surgent's Understanding S Corporation Taxation: Shareholder Basis, AAA, and Retained Earnings

Overview

Even though they have been around for several years, the tax laws pertaining to S corporations remain some of the more difficult areas of the Internal Revenue Code. Given the rising popularity of S corporations, understanding how shareholder basis and the equity section of the balance sheet work together for tax purposes is imperative for nearly any tax practitioner. In this course, we will discuss this relationship. Using examples and illustrations, we will show how contributions, operating transactions, and distributions affect shareholder basis as well as equity.

Prerequisites

None

Objectives

• Recognize the formula for calculating S corporation shareholder basis
• Identify the items of income and deduction that are allocated to AAA, PTI, AE&P, and OAA
• Calculate the tax effects of a distribution on shareholder basis and AAA

Highlights

• S corporation earnings layers
• Observations on earnings layers
• S corporation basis calculation
• IRC 351 transactions
• Four loss tiers
• Appreciated property distributions