1. What are some of the similarities and differences between an S corporation and a partnership? Which type of entity would you prefer for your business and why? 2. How much can an individual give away as gifts each year to a person without having to file the gift tax return? How does this helps in the giftor’s estate tax planning? Solution Similarity of S Corp & Partnership; No entity-level tax on earnings ( Exception for S corporations: built in gain (BIG) tax and excess net passive income (ENPI) tax ). Both S Corp owners and Partners are taxed on income as it is earned , rather than when distributed. Therefore , the Tax burden is generally on the owner level and not on the entity level. Differences of S Corp & Partnership; Only S corporations can have a single owner • S corporations can have only certain types of owners, Domestic individuals and certain trusts. No such restriction on partnership S corporations can have up to 100 owners only , in partnership , no limitation. S corporations can have only one class of ownership interest - Common stock only, voting and non-voting, partners can have multiple types of voting rights. Allocable income in S Corp is not subject to Self employment Tax , whereas in partnesrship, allocable income may be subject to SE tax In S Corp. shareholders may be employees, in partnership , partners are treated as self employed. In S Corp, entity liabilities not included in basis, in Partnership, it is included in basis. Gift Tax : Gifts worth $14,000 per person per year for any no of persons is exempt from gift tax. This is a great way of Estate Tax planning. You can transfer maximum upto $14,000 of assets per person to any no of persons to keep your estate valuation below $5.34 million which is the limit of Gift and Estate Tax free estate holding. Therefore intelligent planning to give away gifts within the allowable limit of $14,000 per person per year to keep owned estate valuation within tax free limits of $5..43 M is a very lucrative way of estate tax planning..