Section 5: 23–33%R18

S Corporations

Exam insight

S corporations combine corporate liability protection with pass-through taxation, and the exam tests the tricky seams: eligibility, the per-share-per-day allocation, and the stock-basis ordering that decides how much loss a shareholder can actually deduct.

What AICPA wants you to know

1Apply S corporation eligibility requirements and identify disqualifying shareholders
2Determine the election timing and effect of Form 2553
3Allocate income and separately stated items per share, per day
4Compute shareholder stock basis using the correct ordering rules
5Apply the loss limitation hierarchy: stock and debt basis, at-risk, then passive
6Identify the built-in gains tax and the passive investment income sting tax

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Passthrough RulesPassthroughs separate what must flow through on its own, and the eligibility and contribution rules gate who gets in and how.The Passthrough BasisBasis rises with income and contributions, falls with losses and distributions, and never drops below zero.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.