Question
Where does an S shareholder's debt basis come from?
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Answer
Only direct loans from the shareholder to the corporation.
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Question
What triggers the Section 1374 built-in gains tax?
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Answer
A former C corp disposes of preconversion built-in gain assets during the 5-year period.
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Question
How is income allocated in an S termination year?
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Answer
Split into S and C short years, by day or by closing the books.
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Question
Why can passive investment income terminate an S corporation election?
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Answer
Excess passive income with accumulated E&P triggers automatic termination after 3 years.
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