[jdiiorio]

Hi all,

quick question. I need some help understanding what these separately stated income/loss items are vs. non-separately stated income/loss items with regards to S corporations. I’m doing some problems and I don’t understand why I wouldn’t subtract charitable contributions or LT capital loss to arrive at Ordinary Income. The explanation to the answer was that I would not subtract those bc they are non-separately stated items that retain their taxing attributes. I have no idea what that means. I think it’s kind of a vocab misunderstanding that I’m having but any help would be appreciated.

Thanks in advance =)

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[kb24]

These are items that flow thru to shareholders.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[pshustler]

What kb24 said. Ordinary Income will be for the S-Corp itself and not for the shareholders

BEC - 86
AUD - 94
REG - 88
FAR - 89

[jdiiorio]

Hey thanks guys. I understand how the S corp flows through to the shareholders etc. I guess the part that confused me was separately stated vs. non-separately stated. I don't think I understand what that means. Is it specific items that classify as either separately or non-separately stated?

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[TJG]

jdiiorio –

Separately stated items on S Corps and Partnerships are items that may be treated differently depending on the shareholder/partner. Because not all individuals fall in the same income tax brackets, and because individuals, Corps, other partnerships, all have different treatment for items such as dividends and capital gains (are they elegible for the dividends received deduction? 15% for the individual shareholder, but 35% for the corporate shareholders), investment interest expense (limited to the amount of investment income), etc, these items need to be separately reported to the individuals from ordinary income. Normally, you can think of ordinary income as the income that comes from the actual trade or business being conducted by the S Corp or partnership, while the separately stated items come from other activities in which the entity is involved (most notably – rental activities and investment activities). Pick up a schedule K-1 or instructions for Schedule K-1 (either 1120S or 1065) from the IRS website to get more info.

[Author]

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