Accounting Question

TAX 655 Module Four Short Paper Guidelines and Rubric

Overview

When choosing business entities, you need to take many factors into account. For this paper, you will consider what you have learned about S corporations. Think about a company’s tax plan and how this impacts decision making when considering taxation and the choice of business entity.

This short paper will help you deepen your understanding of different business entities.

Directions

Write a short paper considering your knowledge of S corporations. Specifically, you must address the following rubric criteria:

1. Summarize the limitations that apply to the amount of loss pass-through an S corporation shareholder can deduct. Consider the following in your response:

   Losses exceeding this limitation
   Stock transfers from a shareholder
   Limitations of loss and the calculation of basis are accounted for per the current tax regulations

2. Describe the three hurdles a taxpayer must pass if they want to deduct a loss from their share in an S corporation. Determine the hurdle you think provides the greatest challenge for a taxpayer. Consider the following in your response:

   Limitation rules and their impact on the deductibility of losses from an S corporation

3. Describe how an S corporation determines a reasonable salary for its shareholder or employee. Consider the following in your response: 

   Factors that must be considered

Provide a potential tax planning strategy related to a shareholder or employee compensation to reduce the overall tax liability of the shareholder. Consider the following in your response:

Tax savings for shareholders under various classifications of compensation.