The Importance of Basis Tracking

I think most tax professionals would agree, one of the last phrases you want to hear in regards to a tax return is “I think we have basis issues.” Definitely no bueno. But what exactly is basis anyway, and why is it so important? Basis is essentially the amount of money that a taxpayer has …

Keep Reading

Relief for late filing of S-corporation elections

In order to properly qualify a newly created entity for S-corporation status, Form 2553 must be filed no more than two months and fifteen days after the beginning of the tax year the election is to take effect. Not surprisingly, this brief window of opportunity is frequently overlooked by taxpayers unfamiliar with the rule, and …

Keep Reading

Reasonable compensation for S-Corporation shareholder employees

S-Corporations have long been popular due to their single level of taxation as a pass-through entity and the shareholder’s share of the corporation’s net income is not considered self-employment earnings, and therefore, not subject to self-employment tax (15.3% in 2020). However, if the shareholder provides services to the S-Corp, he or she must receive reasonable …

Keep Reading

What is an S Corporation worth? The IRS fight continues

When it comes to the valuation of non-controlling interests in pass-through entities (PTEs) such as a Subchapter S corporation, there have been ongoing disagreements between business valuators and the IRS. The issue is whether and to what extent to offset PTE earnings for income taxes (often termed “tax-affecting”). Doing so reduces the value under the …

Keep Reading