Which of the following is not a characteristic of both S corporations and partnerships?
A)Both are flow through entities
B)Owners increase basis for debt undertaken by an S corporation or partnership
C)Both forms limit owner's participation in tax-free fringe benefits
D)Owners increase basis for gains and decrease basis for losses

Question

Quizplus · Accepted Answer

S corporations do not allow owners to increase their basis for debt undertaken by the corporation, whereas partnerships do allow their partners to increase their basis for their share of partnership debt. This is a key difference between how debt affects owner's equity in these two types of entities.

Which of the Following Is Not a Characteristic of Both