Advanced S Corporation Tax Planning

Categories: Federal Tax, IRS CE
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About Course

This two-hour advanced continuing education course equips tax professionals with a technically rigorous command of federal tax planning issues for S corporations and their shareholders — the rules that separate a well-structured S corporation from one that draws IRS scrutiny. The course is built for enrolled agents and other tax return preparers who already handle S corporation returns and want to advise closely-held business clients with confidence.

Participants examine the reasonable compensation requirement for shareholder-employees, stock basis and debt basis computation and adjustment, the Accumulated Adjustments Account and the ordering rules governing distributions, the Section 1374 built-in gains tax applicable to a converted C corporation, and the Section 302 redemption tests and Section 331/336 liquidation rules. Throughout the course, the focus remains on federal tax law as it applies to S corporations and their shareholders.

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What Will You Learn?

  • Apply the multi-factor reasonable compensation standard to an S corporation shareholder-employee
  • Apply the rules for computing and adjusting an S corporation shareholder's stock basis and debt basis
  • Apply the Accumulated Adjustments Account ordering rules to a distribution from an S corporation
  • Apply the Section 1374 built-in gains tax to an S corporation that was previously a C corporation
  • Apply the Section 302 redemption tests to a distribution in redemption of S corporation stock
  • Apply the Section 331 and Section 336 rules governing a complete liquidation of an S corporation

Course Content

Module 1 – Reasonable Compensation and the Employment Tax Distinction
This module covers the multi-factor reasonable compensation standard for S corporation shareholder-employees, key court decisions including Watson and Glass Blocks Unlimited, the employment tax consequences of recharacterization, and practical methods for documenting a defensible compensation figure.

  • Reasonable Compensation and the Employment Tax Distinction

Module 2 – S Corporation Stock Basis and Debt Basis
This module addresses the computation and annual adjustment of stock basis, the separate debt basis rules and the economic outlay requirement, formal notes versus open account debt, and the debt-basis-first ordering rule for restoring basis in a year following a loss.

Module 3 – The Accumulated Adjustments Account, Distributions, and the Built-In Gains Tax
This module covers the Accumulated Adjustments Account and the Section 1368(c) ordering rules governing a distribution, the Section 1374 built-in gains tax for a converted C corporation, and the related Section 1375 excess net passive income tax and involuntary termination risk.

Module 4 – Redemptions and Liquidations
The final module covers the Section 302 redemption tests and Section 318 attribution rules distinguishing sale-or-exchange treatment from a dividend, and the Section 331 and Section 336 rules governing a complete liquidation of an S corporation.

Final Assessment – Advanced S Corporation Tax Planning
You have completed an advanced review of federal tax planning for S corporations and their shareholders, covering reasonable compensation and the employment tax distinction, stock basis and debt basis, the Accumulated Adjustments Account and the built-in gains tax, and redemptions and liquidations. You are now prepared to demonstrate your understanding of the key concepts. The following final examination assesses your knowledge of the material covered in all four modules. A passing score of 70% is required to successfully complete the course.

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