TAX2503. Determining the Tax Treatment of S Corporation Distributions

In this session, Tony will illustrate how many tax practitioners go down the wrong path when trying to determine the tax consequences of an S corporation’s distributions. Tony will then explain how practitioners can “keep it simple” by appreciating the differences between shareholder basis, earnings and profits, and the S corporation’s accumulated adjustments account, as well as the role each attribute plays in driving the consequences of a distribution.

Learning Objectives:

• Recognize the three possible tax consequences that can arise when an S corporation makes a distribution to a shareholder.
• Identify the role a shareholder’s stock basis plays in determining the tax consequences of an S corporation’s distributions.
• Identify the role an S corporation’s AAA and E&P play in determining the tax consequences of an S corporation’s distributions.
• Distinguish three elections that allow an S corporation to change the ordering rule and outcome of its distributions.