Entity Tax
Every incentive flows through an entity, and the entity's own rules — S elections, basis, reasonable compensation, partnership allocations, QSBS, state PTETs — determine what a credit or deduction is actually worth to its owners.
Start here
4 piecesNo background assumed — the pieces that build the foundation.
Guide · Intro · 9 min
The S corporation, end to end: election, eligibility, and the traps that terminate it
An S election converts a corporation into a pass-through: one level of tax, income and credits flowing to shareholders. Eligibility is narrow, Form 2553 timing is strict, and a single class of stock violation can quietly end it.
Brief · Intro · 4 min
How to read a Schedule K-1: the boxes that matter and the questions to ask
The K-1 reports your share of a partnership's or S corporation's income, deductions, and credits — including research credits buried in the codes. Here is what each region of the form means, why the capital account is not your basis, and what to ask the preparer.
Brief · Intro · 4 min
Late S elections: how Rev. Proc. 2013-30 relief actually works
A missed Form 2553 deadline is usually fixable. Rev. Proc. 2013-30 grants automatic late-election relief up to three years and 75 days out, with a reasonable-cause statement and shareholder consistency — no user fee, no ruling.
Brief · Intro · 4 min
Guaranteed payments vs. distributions: how partners actually get paid
Partners are paid through guaranteed payments, distributive shares with draws, or Section 707(a) payments — never W-2 wages. The label changes self-employment tax, QBI, and timing, and it means partner pay never enters an R&D credit wage base.
The working layer
7 piecesThe practitioner's day-to-day rules, mechanics, and traps.
Guide · Working · 7 min
Qualified small business stock: the Section 1202 exclusion after the OBBBA
Section 1202 lets noncorporate shareholders exclude gain on qualified small business stock — up to 100% after five years, and, for stock issued after the OBBBA's July 4, 2025 enactment, on a new tiered schedule starting at three years with a $15 million cap.
Brief · Working · 4 min
State pass-through entity tax elections: the SALT-cap workaround, mechanics and traps
PTET elections let partnerships and S corporations pay state income tax at the entity level — deductible federally without the individual SALT cap. The mechanics differ by state, the election windows are unforgiving, and state R&D credits complicate the math.
Brief · Working · 3 min
Self-employment tax across entities: the limited partner question and the S corporation arbitrage, honestly assessed
Partners generally pay self-employment tax on their distributive shares; S corporation shareholders pay FICA only on wages. The limited partner exception is unsettled for LLC members, and the S corporation arbitrage is real but smaller than advertised.
Brief · Working · 4 min
Shareholder loans to S corporations: back-to-back loans, open account debt, and the repayment income trap
Only direct, bona fide loans from shareholder to S corporation create debt basis. Back-to-back structures can work; guarantees do not; and repaying basis-reduced debt triggers income — ordinary if the debt is open account.
Brief · Working · 4 min
Single class of stock traps: how S corporations accidentally create a second class
The one-class-of-stock rule tests governing-document rights, not payment history — but disproportionate distributions, side agreements, and convertible instruments each have a way of terminating an S election. Most violations are curable if caught.
Brief · Working · 3 min
S corporation basis rules: why losses need basis but credits do not
Stock and debt basis determine whether S corporation losses are deductible and distributions tax-free. Credits pass through regardless of basis — a distinction that changes planning for credit-heavy companies.
Brief · Working · 3 min
Reasonable compensation for S corporation owners: the payroll tax fight, and the R&D credit angle nobody models
S corporation shareholder-employees must take reasonable wages before distributions. Low salary saves payroll tax but invites reclassification — and it also shrinks the wage base for the research credit, a tension few owners price.
Pro details
3 piecesSpecialist nuance: edge cases, interactions, and planning.
Guide · Pro · 7 min
Partnership allocations explained: 704(b), targeted allocations, and 704(c) in one pass
Partnership allocations are valid only if they have substantial economic effect under Section 704(b) or match the partners' economic deal. Here is how capital accounts, targeted allocations, Section 704(c), and minimum gain actually fit together.
Brief · Pro · 5 min
Entity conversions: what survives when you change tax form
LLC to S corporation, S to C, C to S, and F-reorganization conversions each carry different tax costs and attribute consequences. Post-OBBBA, Section 174A expensing and QSBS are pushing some pass-throughs toward C status — here is what travels and what dies.
Brief · Pro · 4 min
The accumulated earnings tax: when a credit-rich C corporation holds too much cash
Section 531 imposes a 20% penalty tax on earnings accumulated beyond reasonable business needs. Post-174A, research-heavy C corporations deducting costs currently and banking credits are holding more cash — and should paper the reason.