The passive or active nature of nonseparately stated income or loss passed through by an S corporation depends on whether the shareholder materially participates in the business's operations.
The passive or active nature of nonseparately stated income from an S corporation is determined by the level of shareholder involvement in the business's operation.
This case illustrates the need to index the AMT brackets and exemption amounts; to allow regular tax credits against the AMT; to allow more itemized deductions in calculating AMT; and to exempt from the AMT families with regular tax--adjusted gross income under a stated income
In addition to these sales, B generates $150,000 of nonseparately stated income
After the S termination year is divided into the two reporting periods, the separately stated items of income, loss, deduction or credit, and the amount of non-separately stated income
or loss, must be divided between the periods.
Interest expense incurred by an S corporation is passed through to shareholders as --trade or business expense (reduces the corporation's nonseparately stated income
on page 1 of Form 1120S); --investment expense (passes through as a separately stated item and is subject to limitation at the shareholder level); --rental expense or as a component of any other passive gain or loss (reduces passive activity income from rental or other activity); and --other interest expense (passes through as a separately stated item; shareholder treatment is determined by reference to how the loan proceeds were used).
"Industry analysis suggests up to 90 percent of stated incomes
are exaggerated by 5 percent or more, and that 60 percent of stated incomes
are inflated by more than 50 percent," said Romano.