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Small C and S Corporations (205)
Author: Holmes F. Crouch
Pages: 224
List Price: $19.95
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  • Summary

    SMALL C & S CORPORATIONS (T/G 205) covers the characteristics of a bona fide corporation with annual gross receipts under $5,000,000; accounting consistency and methods; the omens of undercapitalization; importance of balance sheets and C vs. S treatment of retained earnings; those expenditures which are expressly not deductible; and establishing the "tax basis" in each share of stock held. Also covered:

    • Election and termination of S corporation status
    • The 4 "Dexsil tests" regarding officer compensation
    • Designation of 1st $1,000,000 as "Sec. 1244 stock"
    • The 100% penalty for misuse of payroll withholdings
    • Foreign accounts questions & PHC status
    • Issuance goal (10 times assets) when "going public"

    Table of Contents
    Small C & S Corporations
    Book: 205
    
    Table of Content
    
    1.  CORPORATION BONA FIDES                      1-1
            
        The Liability Limitation Issue              1-2
        Articles of Incorporation                   1-3
        Why Incorporate in Delaware?                1-6
        Adoption of Bylaws                          1-7
        Shares & Share Certificates                 1-8
        Shareholder Meetings & Minutes              1-12
        What Constitutes “True” Minutes             1-13
        Dilemma When No Minutes                     1-14
        Inquiries the IRS Makes 
        1-17                    
    2.  ELECTION OF S STATUS                        2-1
    
        Subchapter S Overview                       2-2
        How S Status Defined                        2-4
        Counting the Shareholders                   2-6
        Unanimous Consent Required                  2-8
        Timing of the Election                      2-9
        Elect on Form 2553                          2-10
        Revocation by Majority Vote                 2-13
        Reinstatement after Termination             2-15
    
    3.  FORMS 1120 AND 1120S                        3-1
    
        Introductory Differences                    3-2
        Income & Deduction Blocks                   3-4
        Pages 2 and 3 Compared                      3-5
        Capital Gains & Losses                      3-9
        How Tax Items Compare                       3-11
        How Tax Rates Compare                       3-12
        Schedule K-1 (Form 1120S)                   3-14
        Schedule L:  Balance Sheet                  3-18
    
    4.  COMPENSATION OF OFFICERS                    4-1
    
        Business Necessity Essential                4-2
        Active Business Requirement                 4-5
        What is a “Reasonable” Salary?              4-6
        General Factors for Decisions               4-8
        Special Factors for Scrutiny                4-10
        The “Dexsil” Appeals Case                   4-12
        The “Leonard Pipeline” Case                 4-14
        Treatment of Excess Compensation            4-16
    
    5.  WHEN UNDERCAPITALIZED                       5-1
    
        What is Expected of You                     5-2
        Stockholder Reluctance                      5-4
        Below-Market Loans                          5-5
        Section 1244 Stock                          5-8
        Conditions for 1244 Stock                   5-9
        Payroll Withholdings & Taxes                5-13
        The 100% Trust Fund Penalty                 5-14
        Responsible Person Defined                  5-16
        Scrutiny of Employee Benefits               5-18
        Immediate Assessment Authority              5-19
    
    6.  METHODS OF ACCOUNTING                       6-1
    
        Selection of Tax Year                       6-2
        Change of Tax Year                          6-4
        Dominance of Section 446                    6-5
        Must Clearly Reflect Income                 6-7
        Cash vs. Accrual Methods                    6-9
        Inventory Capitalization                    6-10
        Valuing Ending Inventory                    6-12
    
    7.  BALANCE SHEET BALANCING                     7-1
    
        Clarification of Bad Debts                  7-2
        Asset Listing Review                        7-3
        Now, the Liabilities Side                   7-6
        Stockholders’ Equity                        7-7
        Accumulated Earnings                        7-9
        Treasury Stock Explained                    7-11
        Schedule M-1: Reconciliations               7-13
        Schedule M-2: C Corporations                7-15
        Schedule M-2: S Corporations                7-17        
    
    8.  CAUTIONS RE PHC STATUS                      8-1
    
        S Corporations Unaffected                   8-2
        Avoid Confusion with PSC                    8-3
        Overview of PHC Statutes                    8-5
        PHC Income Defined                          8-6
        Adjusted Ordinary Gross Income              8-7
        The 60% PHC Income “Test”                   8-9
        The 50% Ownership Test                      8-11
        Constructive Ownership of Stock             8-12
        Overview of Schedule PH                     8-13
        Computing Undistributed PHC Income          8-16
        Cheaper to Distribute                       8-17
    
    9.  FOREIGN ACTIVITY QUESTIONS                  9-1
    
        The Most Common Question                    9-2
        Form TD F 90-22.1                           9-4
        The Next Common Question                    9-7
        Commentary on Foreign Trusts                9-8
        C Corporations: Question A                  9-11
        If “Yes” to Question A: Form 5471           9-13
        C Corporations: Question B                  9-14
        Concluding Commentary                       9-16
    
    10. ITEMS NOT DEDUCTIBLE                        10-1
        
        Starting at the Top                         10-2
        When Business Purpose Not Shown             10-3
        Life Insurance Premiums                     10-5
        Using the Corporation as Intermediary       10-7
        Company Sponsored Entertainment, Etc.       10-8
        Example: Clear Business Purpose             10-11
        Executive Travel Expenses                   10-12
        Luxury Autos, Boats, Planes                 10-15
        Personal Use Affidavits                     10-17
    
    11. BASIS IN STOCK HELD                         11-1
    
        Shareholders Ledger Not Relevant            11-2
        Contributions to Capital                    11-3
        When Services Exchanged                     11-6
        Founder Shares:  Basis In                   11-8
        Additional Stock for Cash                   11-10
        Taxable Stock Dividends                     11-11
        Nontaxable Distributions Reduce Basis       11-13
        Basis in Gifted Stock                       11-15
        Basis in Inherited Stock                    11-17
        
    12. SELL, MERGE, OR GO PUBLIC                   12-1
        
        Preliminary Decisions to Make               12-2
        Instructions to Committee                   12-4
        Effect of Sale on Shareholders              12-5
        Effect of Sale on Corporation               12-7
        Treatment as “Sale of Assets”               12-9
        Stock-for-Stock Exchanges                   12-11
        Types of Reorganizations                    12-12
        The Merger Process Exemplified              12-14
        Precautions When “Going Public”             12-16
        Tax Law Statement                           12-18
        Issuance Goal:  10 Times Assets             12-19

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