CPE Self-Study

S Corporation Fundamentals - Tax Staff Essentials

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The benefits, the requirements, the drawbacks—when is the S corporation status advantageous for your clients’ businesses? Get the knowledge you need to speak effectively about how the S corporation business model can work for clients.

Featuring the PATH Act and other recent legislation affecting S corporations, this CPE course is a comprehensive introduction to the nature of the S corp and how it is treated for income tax purposes. During this course, you will examine some of the advantages and disadvantages of incorporation, go through the requirements for election to become an S corp and learn why more business taxpayers favor the pass-through entity over the C corporation.

Learning Objectives

  • Determine when an S corporation may be advantageous for a business.
  • Identify the potential disadvantages of operating as an S corporation.
  • Identify the requirements that must be met to qualify as an S corporation.
  • Recognize individuals and entities that are eligible to own S corporation stock.
  • Determine how to make a proper S corporation election.
  • Determine when the S election becomes effective.
  • Identify who must consent to the election.
  • Identify causes of voluntary and involuntary termination.
  • Identify revocation of the election.
  • Recognize events causing involuntary termination.
  • Recall methods of allocating income for the short years caused by a termination.
  • Determine what level of taxation an S corp is subject to
  • Calculate the tax on built-in gains.
  • Determine income or loss that passes through to the shareholder.
  • Identify the items of income, gain, loss, and deduction that adjust basis of shares and indebtedness and the order of application of the items.
  • Determine how losses can be offset by debt basis after stock basis has been reduced to zero.
  • Determine how accumulated earnings and profits, accumulated adjustments account, other adjustments account, and the shareholder’s basis are affected by distributions.
  • Determine permitted fiscal years, elections, and user fees.
  • Identify situations in which a fiscal year is allowable.
  • Recognize when a Section 444 election and resulting required payments should be made.
  • Recognize active and passive income and determine material participation.
  • Determine whether and to what extent passive losses can be deducted against other income.
  • Identify which fringe benefits are deductible by the shareholders.

Key Topics

  • Advantages versus disadvantages of S corporations
  • S corporation qualifications
  • Electing S corporation status
  • Termination of S corporation status
  • S corporation tax on built-in gains
  • S corporation pass-through to shareholders, basis and losses
  • S corporation distributions
  • Taxable year of S corporations
  • S corporation passive activity rules, fringe benefits, and other considerations

Who Will Benefit?

  • Public accounting staff and senior associates
  • Tax professionals in company finance or tax departments


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Find out more information on the Tax Section.

System Requirements

About the Authors

Gregory B. McKeen, CPA

About the Publisher

American Institute of CPAs

The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, and offers specialized credentials for qualified professionals who concentrate on personal financial planning; forensic accounting; business valuation; and information management and technology assurance. With The Chartered Institute of Management Accountants (CIMA), it offers the Chartered Global Management Accountant (CGMA) designation, which sets the global benchmark for quality and recognition in management accounting.

The AICPA and CIMA also make up the Association of International Certified Professional Accountants (the Association), which represents public and management accounting globally, advocating on behalf the public interest and advancing the quality, competency and employability of CPAs, CGMAs and other accounting and finance professionals worldwide.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.