@pharaoh thanks a bunch. Makes sense now. I did answer my own question ha!
@jstewz
Good question. However it is very important to memorize the basis formulas because they are slightly different. Not sure if you are using becker or not. For example, loans directly increase the basis of an Scorp and they don't for partnerships.
They are treated VERY similarly in terms of the separately stated items and what actually flows to their K-1s (in both). Income is allocated in accordance with ownership (both). Losses are treated the same way.
For liquidating distributions – I cant really help you on that. I know that when a partnership liquidates – you reduce the basis by cash first and then property second. I'm pretty sure it works the same way with S-corps, but am not entirely sure. Can someone else help out on this?
One big difference to note here is for an s corp, you will be taxed on these non liquidating distributions. S corps are like actually corps, which are subject to double taxation. Partnerships, on the other hand, don't get taxed because think about it…
you put something into a partnership in which you already owned that property. Why would you get taxed on that AGAIN? In that case it wouldn't make sense to actually contribute to a partnership for that reason. No one would want to pull anything out in which they already owned. In s-corps – you are taxed!
Very similar concepts as they have flow through separately stated formulas, but the basis formulas are slightly different. I would maybe read up on those pages again for whatever study material you are currently using. I hope this helps. Just keep in mind..
SCORPS ARE ACTUAL CORPORATIONS AND NOT PARTNERSHIPS (THOUGH THEY ARE TREATED SIMILARLY).
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