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Sales Up in March Week 3
In the third week of March, independent grocery sales made it into positive territory, up 1.36 percent over the same period in 2015. Customer counts were up 1.08 percent.
Easter Sunday has a big effect on grocery sales and can produce some gaudy-looking sales figures because of the unfixed date. In 2015, Easter occurred in April, whereas in 2016 it was in late March. We can expect to see a big boost in sales at the end of March, where the following week will probably show another swing in the opposite direction.
Tomorrow the Bureau of Labor Statistics will release its March unemployment report. Initial estimates show steady job growth at around the 200,000 mark.
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| Same Store Sales
% Change from last year
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Same Store Sales – Previous Months
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| BGBC Partners Tax Update: Why an S-Corp Shareholder May Report More Income Than Actually Received
If you operate your store as an S corporation, or are thinking about it, one of the perplexing mysteries is why you might be taxed on more income than what was actually distributed to you. In this segment of our Tax Update, we seek to unravel that mystery.
The answers lie in the way S corporations and their shareholders are taxed. The primary concept here is that when shareholders are taxed on undistributed income, they won't be taxed again if and when the income ultimately is paid to them.
Unlike a C corporation, an S corporation generally isn't subject to income tax. Rather, each shareholder is taxed on the corporation's earnings, whether or not the earnings are distributed. Similarly, if an S corporation has a loss, the loss is passed through to the shareholders. Various rules, however, may prevent a shareholder from currently using his or her share of the corporation's loss to offset other income. While an S corporation generally isn't subject to income tax, it is treated as a separate entity for purposes of determining its income, gains, losses, deductions and credits. This makes it possible to pass on to shareholders their share of these items.
An S corporation must file an information return (Form 1120-S). On Schedule K of this form, the corporation separately identifies many items of income, deduction, credits, etc. This is so that each shareholder can properly treat items that are subject to limits or other rules that could affect their correct treatment at the shareholder's level. Examples of such items include capital gains and losses, charitable contributions, and interest earned. Each shareholder gets a Schedule K-1 showing his or her share of these items.
Basis and distribution rules ensure that shareholders aren't taxed twice. A shareholder's initial basis in his or her stock (the determination of which varies depending on how the stock was acquired) is increased by his or her share of the S corporation's taxable income. When that income is paid out to shareholders in cash, they aren't taxed on the cash if they have sufficient basis. Rather, shareholders merely reduce their basis by the amount of the distribution. If a cash distribution exceeds a shareholder's basis, then the excess is taxed to the shareholder as a capital gain.
Example. Flo and Eddie each contribute $50,000 to form an S corporation. The corporation has $80,000 of taxable income in Year 1, during which it makes no cash distributions to Flo or Eddie. Each of them pick up (and pay tax on) $40,000 of taxable income from the corporation as shown on their K-1s. Each has a starting basis of $50,000, which is increased by $40,000 to $90,000. In Year 2, the corporation has zero taxable income and distributes $50,000 to both Flo and Eddie. Flo and Eddie have no income from the corporation in Year 2. Plus, the cash distributed to them is received tax-free. Each of them, however, must reduce the basis in stock from $90,000 to $40,000.
In reality, the basis and distribution rules are far more complicated. For example, many other events require basis adjustments and there are a host of special rules covering distributions from an S corporation having accumulated earnings and profits from a tax year when it was a regular corporation.
As you can see, these provisions can be very complex, so be sure to contact your CPA for more details of how you may find opportunities in these rules, and how to avoid any pitfalls.
BGBC Partners, LLP is a full service certified public accounting and business consulting practice.
For more information, contact Brad Bell, CPA or Steve Reed, CPA/ABV/CFF at BGBC Partners, LLP (317-633-4700).
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| For More Information,
Contact Mark Ehleben
877-435-9400 x1402
marke@fmssolutions.com
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