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Printable Form Steps to Complete 2553 IRS Sacramento California: What You Should Know
Income of corporations subject to a 10 percent income tax may be considered “specified income.” All profits from specified income will normally be treated as if it qualified as long-term capital gains. When the company elects to be an S corporation, all such income will be taxed as long-term capital gain. Income that is not subject to withholding is not includible or includible in gross income. The income of the S corporation will, therefore, be treated as follows: (i) Specified income includes: (1) The gross income of the S corporation from any source (other that specified income) (2) Other specified income, but, if the S corporation is a natural person, any itemized deduction from gross salary, wages, tips, or other remuneration paid to the S corporation (but that is not an item of specified income) to an individual for business purposes (3) Other specified income, except the income of the S.O.C. Reasonable Expenses Instructions for Form 2553 — IRS General Instructions. Qualifying small business corporations, or S corporations that are required by their articles to file as an S corporation, generally may deduct reasonable business expenses. However, the expenses must be: (1) Generally deductible within the time limit of Sec. 1.446-1(b)(2); (2) Included in the gross income of the S corporation regardless of whether the reasonable expenses were actually incurred; and (3) Reasonable in amount. Deductible Expenses. Ordinary office expenses. Ordinary office expenses for the purpose of preparing income tax returns may be deductible in an amount up to 1,500. Loss from business. Expenses for selling, disposing of, or otherwise disposing of assets of the S corporation or for the acquisition of assets by the S corporation may be deductible if the amount is: (1) Measured by the total adjusted basis or profit attributable (as described in section 937(c)(3)) to the assets sold, disposed of, or acquired; or (2) Measured by the adjusted basis or profit of the S corporation, whichever is the greater. Reasonable expenses. However, no deduction shall be made for any amount paid by the S corporation that does not exceed the net deduction allowed by Sec. 1.
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