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Are there any ways to defer taxation on S-Corp profits in a year?

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3 Answers

up vote 3 down vote

If you wish to do this then you should consider C-corp status.

The simple answer to your question is, "No", but it looks like you are looking for more detailed ways to play games with revenue, etc. (based on the comment(s) you have for other response(s).)

You need the help of an accountant and/or attorney. You should probably get professional help for this question.

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I am guessing @N-L is looking to convert to a C-corp, but that conversion would immediately incur a tax liability on any of the S-Corp's YTD profits. I interpreted the question as asking if it is possible to somehow avoid or defer that liability. – ESultanik Aug 21 '12 at 15:57
I didn't make that assumption – TimJ♦ Aug 21 '12 at 16:25
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Generally no. The S-Corp earnings flow to the owners, and the owners are the ones who pay taxes on it. The income is taxed when earned, according to the corporation accounting method.

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Thanks for your answer, but I'm looking for a little bit more. For example, what about investments? Can the company make investments in treasuries, securities, or other instruments for the purposes of deferring current year taxation? – N L Aug 21 '12 at 0:26
@NL For a bit more get a tax consultation, because you're dealing with fire here. Investments aren't deductible expenses, and using S-Corp for investments might be a recipe for troubles. – littleadv Aug 21 '12 at 0:43
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Our clients have used a structured sale, which is based on IRC 453. It allows deferred installment sale treatment. So you can defer the tax obligation into the future while earning interest based on your risk tolerance. Feel free to contact me with any further questions. Chris Princis, Brook Hollow Financial. cp@brook-hollow.com

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This is good for planning, but not for existing profits... And of course, you get deferred income, not only tax. – littleadv Aug 22 '12 at 4:38

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