DEFINITION of 'IRS Publication 542'
A document published by the Internal Revenue Service (IRS) that provides information on the general tax rules domestic corporations must follow. IRS Publication 542 outlines the type of organizations that are taxed as corporations, the accounting methods typically used, the deductions allowed and the tax tables to be used.
BREAKING DOWN 'IRS Publication 542'
Corporations are treated differently than partnerships, in which gains and losses are passed through to partners, and S Corporations, where gains and losses are passed through to shareholders.
Shareholders in a corporation can receive income from the business itself in the form of dividends, which can be taxed both on the corporate level (prior to distribution) and on the individual level (when sent to shareholders).
Corporations are still subject to the alternative minimum tax (AMT).