Small C and S Corporations : Avoiding IRS

Contains information not found in IRS publications, FedWorld online services, or tax software programs, covering the characteristics of a corporation with annual gross receipts under 5 million dollars. Discusses the various tax situations and deductions that apply to a C and S company of that type. Softcover.

Corporation Bona Fides

1

(1)

The Liability Limitation Issue

2

(1)

Articles of Incorporation

3

(3)

Why Incorporate in Delaware?

6

(1)

Adoption of Bylaws

7

(1)

Shares & Share Certificates

8

(4)

Shareholder Meetings & Minutes

12

(1)

What Constitutes ``True'' Minutes

13

(1)

Dilemma When No Minutes

14

(3)

Inquiries the IRS Makes

17

Election of S Status

1

(1)

Subchapter S Overview

2

(2)

How S Status Defined

4

(2)

Counting the Shareholders

6

(2)

Unanimous Consent Required

8

(1)

Timing of the Election

9

(1)

Elect on Form 2553

10

(3)

Revocation by Majority Vote

13

(2)

Reinstatement after Termination

15

Forms 1120 and 1120S

1

(1)

Introductory Differences

2

(2)

Income & Deduction Blocks

4

(1)

Pages 2 and 3 Compared

5

(4)

Capital Gains & Losses

9

(2)

How Tax Items Compare

11

(1)

How Tax Rates Compare

12

(2)

Schedule K-1 (Form 1120S)

14

(4)

Schedule L: Balance Sheets

18

Compensation of Officers

1

(1)

Business Necessity Essential

2

(3)

Active Business Requirement

5

(1)

What is a ``Reasonable'' Salary?

6

(2)

General Factors for Decisions

8

(2)

Special Factors for Scrutiny

10

(2)

The ``Dexsil'' Appeals Case

12

(2)

The ``Leonard Pipeline'' Case

14

(2)

Treatment of Excess Compensation

16

When Undercapitalized

1

(1)

What is Expected of You

2

(2)

Stockholder Reluctance

4

(1)

Below-Market Loans

5

(3)

Section 1244 Stock

8

(1)

Conditions for 1244 Stock

9

(4)

Payroll Withholdings & Taxes

13

(1)

The 100% Trust Fund Penalty

14

(2)

Responsible Person Defined

16

(2)

Scrutiny of Employee Benefits

18

(1)

Immediate Assessment Authority

19

Methods of Accounting

1

(1)

Selection of Tax Year

2

(2)

Change of Tax Year

4

(1)

Dominance of Section 446

5

(2)

Must Clearly Reflect Income

7

(2)

Cash vs Accrual Methods

9

(1)

Inventory Capitalization

10

(2)

Valuing Ending Inventory

12

Balance Sheet Balancing

1

(1)

Clarification of Bad Debts

2

(1)

Asset Listing Review

3

(3)

Now, the Liabilities Side

6

(1)

Stockholders' Equity

7

(2)

Accumulated Earnings

9

(2)

Treasury Stock Explained

11

(2)

Reconciliations

13

(2)

C Corporations

15

(2)

S Corporations

17

Cautions RE PHC Status

1

(1)

S Corporations Unaffected

2

(1)

Avoid Confusion with PSC

3

(2)

Overview of PHC Statutes

5

(1)

PHC Income Defined

6

(1)

Adjusted Ordinary Gross Income

7

(2)

The 60% PHC Income ``Test''

9

(2)

The 50% Ownership Test

11

(1)

Constructive Ownership of Stock

12

(1)

Overview of Schedule PH

13

(3)

Computing Undistributed PHC Income

16

(1)

Cheaper to Distribute

17

Foreign Activity Questions

1

(1)

The Most Common Question

2

(2)

Form TD F 90-22.1

4

(3)

The Next Common Question

7

(1)

Commentary on Foreign Trusts

8

(3)

C Corporations: Question A

11

(2)

If ``Yes'' to Question A: Form 5471

13

(1)

C Corporations: Question B

14

(2)

Concluding Commentary

16

Items Not Deductible

1

(1)

Starting at the Top

2

(1)

When Business Purpose Not Shown

3

(2)

Life Insurance Premiums

5

(2)

Using the Corporation as Intermediary

7

(1)

Company Sponsored Entertainment, Etc

8

(3)

Example: Clear Business Purpose

11

(1)

Executive Travel Expenses

12

(3)

Luxury Autos, Boats, Planes

15

(2)

Personal Use Affidavits

17

Basis in Stock Held

1

(1)

Shareholders Ledger Not Relevant

2

(1)

Contributions to Capital

3

(3)

When Services Exchanged

6

(2)

Founder Shares: Basis In

8

(2)

Additional Stock for Cash

10

(1)

Taxable Stock Dividends

11

(2)

Nontaxable Distributions Reduce Basis

13

(2)

Basis in Gifted Stock

15

(2)

Basis in Inherited Stock

17

Sell, Merge, or Go Public

1

(18)

Preliminary Decisions to Make

2

(2)

Instructions to Committee

4

(1)

Effect of Sale on Shareholders

5

(2)

Effect of Sale on Corporation

7

(2)

Treatment as ``Sale of Assets''

9

(2)

Stock-for-Stock Exchanges

11

(1)

Types of Reorganizations

12

(2)

The Merger Process Exemplified

14

(2)

Precautions When ``Going Public''

16

(2)

Tax Law Statement

18

(1)

Issuance Goal: 10 Times Assets

19

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Small C and S Corporations : Avoiding IRS Suspicions of Improper Personal Gain

Summary

Table of Contents

Supplemental Materials