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In part 2 of this course, the importance of shareholder basis is emphasized. The annual basis adjustments, and an important election in the ordering of the computation are discussed. The differences between partnerships and S corporations are explored, especially when it comes to utilizing debt to create basis. The next area the course examines is the nature of the retained earnings and various memo accounts that S corporations can have, including such unusual acronyms as Accumulated Adjustments Account (AAA), Profits (E&P), Previously Taxed Income (PTI), and Other Adjustments Account (OAA). The importance of correctly defining Earnings and Profits is emphasized. Finally, the course describes the various entity level taxes that S Corporations may face, including the LIFO tax, the tax on Excess Passive Income, and the built-in-gains ( BIG) tax.

Course Series

This course is included in the following series:

Learning Objectives
  • Explore the concepts of basis and basis adjustments
  • Identify the importance of basis to shareholders
  • Recognize the differences between various equity and adjustment accounts, including Accumulated Adjustments Account (AAA), Earnings & Profits (E&P), Previously Taxed Income (PTI) and Other Adjustments Account (OAA)
  • Explore how to compute S Corporation entity level taxes, including Last In First Out (LIFO), Excess Passive Income and Built in Gains taxes
Last updated/reviewed: August 24, 2023
1 Review (10 ratings)


Member's Profile
Great introductory course to Sub S corporations and the tax issues associated with them.

Course Complexity: Advanced

Complete course Taxation of S Corporations and their Shareholders Part I .

Participants should be aware of basic principles of income tax,  some familiarity with S Corporations will be helpful. 


Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
Course Syllabus
  Introduction to Taxation of S Corporations Part ll2:30
  Basis - S Corporations7:44
  Deducting Shareholder Losses5:16
  Debt Basis10:25
  What's in Retained Earnings?9:54
  Entity-Level Taxes S Corporation8:00
  Tax on Built-In Gains12:31
  Terminating S Corp Election11:35
  Wrap Up5:11
  Taxation of S Corporations Part ll 1:13:04
Supporting Materials
  Slides: Taxation of S Corporations and their Shareholders Part IIPDF
  Taxation of S Corporations and their Shareholders Part II Glossary/IndexPDF