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This Week in the iNews:

▲ S Corporations – A Primer

▲TECH TIP WEEKLY: Cleaning Windows XP: Taming Web Cache Files

▲ S Corporations  - A Primer  

An S corporation, is a pass-through entity that is treated very much like a partnership for federal income tax purposes. As a result, all income is passed through to shareholders and taxed at their individual tax rates. However, unlike a C corporation, an S corporation’s income is taxable to the shareholders when it is earned whether or not the corporation distributes the income. Because an S corporation has a unique tax structure that directly impacts shareholders, it is important to understand the S corporation distribution and loss limitations, as well as how and when items of income and expense are taxed, before developing your overall tax plan.

Some S corporation income and expense items are subject to special rules and separate identification for tax purposes. Examples of separately stated items that could affect a shareholder’s tax liability include charitable contributions, capital gains, Sec. 179 expense deductions, foreign taxes, and net income or loss related to rental real estate activities.

These items, as well as income and losses, are passed through to the shareholder on a pro rata basis, which means that the amount passed through to each shareholder is dependent upon that shareholder’s stock ownership percentage. A shareholder’s portion of the losses and deductions may only be used to offset income from other sources to the extent that the total does not exceed the basis of the shareholder’s stock and the basis of any debt owed to the shareholder by the corporation. The S corporation losses and deductions are also subject to the passive-activity rules.

Other key points to consider when developing your comprehensive tax strategy:

·          The availability of the Code Sec. 179 deduction at the corporate and shareholder level;

·          Reporting requirements for the domestic production activities deduction;

·          The tax treatment of fringe benefits;

·          Below-market loans between shareholders and the S corporation; and

·          IRS scrutiny of distributions to shareholders who have not received compensation.

Please contact you Prangley Marks professional if you would like to discuss the benefits of an S corporation to you and your business.

▲TECH TIP WEEKLY: Cleaning Windows XP: Taming Web Cache Files

PART THREE – FINDING AND CHANGING CACHE SIZE

FINDING THE CACHE

Most people never worry about where their browser stores its cache files.  Microsoft recognizes this and doesn’t make a big deal of advertising where the cache is located.  You can locate the cache by displaying the Internet Options dialog box (in the browser, click Toolsà Internet Options) and then clicking Settings.  The resulting Settings dialog box indicates where the cache is located (next to Current Location in the middle of the dialog box).  By clicking View Files you can see a listing of all files being stored as cache.

CHANGING THE CACHE SIZE

MS IE makes a point of ensuring that your cache never gets too big.  In some respects, the cache is similar to the Recycle Bin – when its maximum size is reached, it starts deleing the oldest files to make room for the new files.

The problem is that the cache is usually set much larger that in needs to be.  The Settings dialog box has a control that indicates the amount of disk space to use for the cache.

You can lower the cache size by:

1. In the browser, choose Tools -à Internet Options and on the General Tab click the Settings button.
2. Adjust the cache size by the Amount of Disk Space to Use slider or by typing a number in the box.  You should not hesitate to lower the cache space to the lower end of the scale if you have a high-speed Internet connection.

 By making this adjustment you can save lots of hard disk space for better use and it should not hurt the overall performance of Internet Explorer.