Regslayer funny you say that. i have a short list of things i want to ensure i make it over if i don't have time to read through my copius amount of notes and that was something i wrote down earlier. i have this so far:
When an S corporation has income, the income passes through to the shareholder on a Form 1120S, K-1. The shareholder pays the taxes on the income. When this happens, the shareholder increases the basis of his or her stock. That income creates an accumulated adjustment account (AAA) in the S corporation. When the S corporation makes a distribution, the basis of the stock and the AAA goes down.
A shareholder will report his share of the ordinary income from an S corporation whether it is distributed or not, and this income is not subject to self-employment tax at the shareholder level.
Generally, income items such as interest and dividends will increase the AAA (accumulated adjustments account) of an S corporation. Capital contributions and distributions have no effect on the AAA account, and charitable contributions would decrease the AAA account.
AEP is profits held/not distribution, reinvested. it can be avoided by paying enough in dividends or proving reasonable needs of the company
Accumulated earnings credit = greater of $250k (income – credit = accumulated taxable income) or the reasonable needs of the business (say the company plans to build next year so needs to hold on to those funds)
Accumulated earnings tax (penalty) = 20% of accumulated taxable income:
taxable income
+NOL
+DRD
– corporate income tax
– dividends paid
-LTCG net of tax
-excess charitable contributions
-accumulated earnins credit
= accumulated taxable income
.