ALBUQUERQUE, N.M. — In today’s column we celebrate Festivus, or at least one part of it. Festivus was introduced to the general public as a fictional holiday practiced by the Costanza family on the old Seinfeld show. It was an actual celebration of the family (the parent’s first date) of the episode’s writer.
One aspect of the fictional Festivus was the “airing of grievances.” It is that aspect that I celebrate today. My grievance? The common statement made by tax advisers that “S corporations are corporations taxed like partnerships.”
I have a problem with you people! Both partnerships and S corporations are called “pass through entities,” which means the income is taxed to the owners rather than the entity. That is pretty much where the similarities end.
There is one common factor that explains the differences between the two business types. Corporations, including S corporations, use the “entity” approach to taxation. Partnerships use the “aggregate” approach.