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Full fringe benefit deduction for LLC elected as S Corp

by csnova, Window Shopper

  • Created: May 6, 2009, 4:59 pm
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2 comments
If a wife and a husband form a LLC elected S corp as taxation purpose with husband own 98% share and wife own 2% share, can the LLC apply the full fringe benefit deduction for the wife (like C corp could) since she owns only 2% share without being taged a Personal Service Corp (PSC) which has to pay a flat 35% income tax?
Tags: Discuss Popular Topics, Filing and Paying Taxes
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jbeidle | Contributor | 7/2/2009 - 11:26 am

The short answer is no. However there are many benefits that can be paid for on a pre-tax basis. Having the proper tax plan and knowing how to implement the various tax strategies is an investment that pays for itself for years to come. You can find more info at my website at http://www.1040wealthdesigns.com Respectfully, Message Edited by JamieD on 07-05-2009 10:08 PM
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ZanetaB | Former Moderator | 5/18/2009 - 1:56 pm

First an S corporation is not a Personal Service Corporation (PSC), all earnings pass through to the owners. With respect to the fringe benefit rules, attribution rules apply so both husband and wife both are treated as greater than 2% shareholders for fringe benefit purposes. Therefore in order for the corporation to take a deduction, any listed fringe benefit should be included as compensation to the shareholder. For more information on S corporations. try the IRS.gov page on S corporations.