TCP — Quick Sheet
S Corporation Compliance & Planning
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One-minute revision
- Basis order: income ↑ → distributions ↓ → nondeductibles ↓ → losses ↓ (excess suspended)
- Direct shareholder loans create basis; loan guarantees do not
- S income avoids SE tax → reasonable compensation is the battleground; wages also affect the QBI wage limitation
- With accumulated E&P: AAA → E&P (dividend) → basis → capital gain
- BIG tax on appreciation existing at C→S conversion if disposed within the recognition period
- Excess net passive income >25% of gross receipts for 3 years with E&P → terminates the election