By electing to use the S corporation's tax accounting method to allocate profits or losses between the C short year and S short year in the termination year, the corporation can shift losses into an S short year where the shareholders obtain an immediate benefit at a marginal tax rate of up to 37%, or it can shift profits into a C short year to take advantage of the 21% corporate tax rate.

Question

Quizplus · Accepted Answer

By using the S corporation's tax accounting method, losses can be shifted into an S short year with a higher marginal tax rate, while profits can be shifted into a C short year with a lower corporate tax rate.

By Electing to Use the S Corporation's Tax Accounting Method