1. More Than You Ever Wanted to Know About Sub Chapter S Corporations Presented by: Bill Parrish

2. Most Popular Business Entity  LLCs Are Not Overtaking  Blend of Features of Partnership and C Corps  Restricted Ownership Rules  Election Requirements

3. Compensation Issues  Reasonable Compensation Too Little Family Income Shifting  Excessive Compensation  Constructive Distributions  Government Compliance Initiatives

4. Shareholder Benefit Issues  2% Shareholder Status Medical Benefits Health & Accident Insurance Premiums Health Savings Accounts  Payroll Taxes on Benefits to Shareholders

5. Office in Home  Different Than Sole Proprietorship  Different Than Partnership  Treated as Itemized Deduction  Subject to 2% AGI Limit  Circumstances Must be Factual

6. Distributions  Earnings & Profits Account (E&P)  Accumulated Earnings & Profits Account (AEP)  Accumulated Adjustments Account (AAA)  Distributions With No AEP  Distributions With AEP

7. Other Schedule M2 Accounts  Undistributed Taxable Income Previously Taxed (PTI) Earnings as S Corp between 1958 & 1982  Other Adjustments Account (OAA) Catch All Account

8. Ordering of Distributions Layers of a Sandwich  All S Corps to the Extent of AAA  To Shareholders with pre-1983 PTI  S Corporations with AEP  All Other Distributions

9. Basis Issues  Inside Basis Usually Tracked at the Corp Level Equity Basis Loan Basis  Outside Basis Usually Tracked at the Shareholder Level Stock Basis Other Basis

10. S Corporation Pitfalls  Disproportionate Distributions  Distributions in Excess of Basis  Limits on Benefits to 2% Shareholders  Limitations on Pass Through of Losses

11. Separately Stated Items  Interest Income  Dividend Income  Capital Gains  Charitable Contributions  Section 179 Depreciation  Certain Losses

12. Advantages of S Corporation Status  Avoid Double Taxation on Profits  Allows Limited Pass Through of Losses  Provides Planning Opportunities

13. Planning Opportunities  Structure of Distributions  Limited Opportunities to Slowly Transfer Family Business  Protection of Personal Assets  Employment of Family Members  Ability to Enjoin Employees in Partial Ownership

14. For More Information  Bill Parrish  billparrish@oneplusone3.com