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I have been using TurboTax for years but encountered an investment situation that TurboTax is not designed to handle. After searching the web for local CPAs/Accountants and chatting with a couple on the phone I was unable to find someone locally with sufficient experience in my particular situation with whom I felt comfortable. Deciding to broaden my search beyond my local area I discovered Gary's website and a detailed discussion with options pertinent to my situation. During a brief phone conversation, Gary answered all of my questions, explained how we would exchange information online and gave me an estimate for preparing my current tax return and an amended return. It was a pleasure working with Gary. He delivered everything he promised with no surprises.

Hank Varno, Purcellville, VA

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Form 1120-S CPA discusses Tax Court decision that keeps Roth IRAs from being Shareholders in S Corporations

Form 1120-S CPA discusses an S Corporation Tax Court case

Gary Bode, CPA: My firm operates as an S Corporation, so you know I stay on top of developing issues. For a free initial phone consult please call (910) 399-2705.

The Ninth Circuit Court of Appeals upheld a Tax Court case stating that Roth IRAs cannot be shareholders in an S Corporation. While the Ninth Circuit has limited national scope, the west coast, Form 1120-S CPAs worry this decision will eventually become national, perhaps even adding prohibitive wording to the underlying Revenue Ruling 92-73.

Traditional IRAs are specifically mentioned as ineligible to be S Corporation shareholders in Revenue Ruling 92-73. And understandably so, since S Corporations are pass through entities whose profits are taxed currently through their shareholder’s Form 1040. Traditional IRAs defer taxation until retirement. And yes, I understand the differences between a traditional IRA and a Roth IRA. While Revenue Ruling 92-73 precedes the creation of Roth IRAs, and doesn’t specifically mention them, I wouldn’t have advised a client that a Roth IRA should be an S Corporation shareholder. But maybe there was some overwhelming potential advantage for this taxpayer I don’t know about.

Why do Form 1120-S scrutinize Tax Court cases?

Tax Court cases often precede tax regulation changes. They tell us which way the wind is blowing. Sometimes we can proceed with tax strategies before they become regulations, subject to the client’s potential tax savings and risk sensitivity.

We’re a CPA firm with a virtual office to serve long distant clients. And add convenience for our local clients as well. We function as an S Corporation, so you know we stay on top of developing issues. For a free initial phone consult, please call (910) 399-2705.

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