S-Corp Educational Fringe Benefit

[AuditorTurnedGood]

All,
I hope everyone is having a relaxing post season! I have a question that is related, at this point, just to me. I am going to graduate school to attain enough credits to sit for the CPA in MN. The total cost of the certificate program is about 6K. According to TTB, I am treated as a common law employee for the purpose of an education assitance program, which would make tuition assistance deductible for the corp and nontaxable to me. I'm concerned with the non-discrimination rules though. I am the only employee, but since I'm a greater than 5% owner, is it taxable to me anyway? I sometimes wonder why I chose this entity type. Thanks!

ATG

[AJsTax]

Research

I just did the research on this subject for a S-corp client. They are a fairly large employer, but the one point that keeps them out of it is that no more than 5% of the amount paid in a year for the benefit can go to a more than 5% owner. So in your case it would be 100% to an owner and no deduction. But, of course, it might be eligible for Lifetime learning credit or educational expense on the Sch A.