Built-In Gains Tax and Passive Investment Income
Special Entity-Level Taxes
Although S corporations generally avoid entity-level taxation, certain special taxes may apply in limited situations, including the built-in gains tax and taxes relating to excessive passive investment income.
- Built-in gains tax.
- Passive investment income limitations.
- Situations involving former C corporations.
- Limited entity-level tax exposure.
Note
The CPA REG Exam commonly tests the fact that S corporations are generally pass-through entities but recognizes specific exceptions.
Summary
Most S corporations avoid entity-level tax, but certain special circumstances trigger additional taxes.