TagS Corporation

Halving the Built-in Gain Period?

Capitol buildingBy:  Amanda Wilson

Following up on my February post (found here) discussing a proposal to reduce the built-in gain period for S corporations, this proposal is one step closer to becoming a reality.  The S Corporation Modernization Act of 2015, H.R. 2788, was recently introduced in the House.  This bill, if enacted, would reduce the built-in gain period for S corporations from 10 years to 5 years.  The bill would also make IRAs eligible S corporation owners.

Obviously, there is a long way to go, but the introduction of this bill is a solid first step.

The text of H.R. 2788 can be found here.

Is Your Compensation Reasonable?

Commercial_lending-webBy Amanda Wilson

If you are an employee of a company for which you are also an owner, you should consider reviewing your current compensation for its reasonableness.  It is very common for small businesses to be formed as Subchapter S corporations.  In these types of business, owners are also often employees of the business.   The owners may be willing to take a smaller salary because they will eventually receive the business profits anyway.  If this describes your business, be careful.  The Internal Revenue Service continues to focus on whether compensation paid to employee owners is fair and reasonable when auditing small businesses, particularly S corporations.


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