1. Banks loaned money or gave credit to so-called 'high risk' people who were less likely to pay their debts, hoping that they would run into difficulty and be forced to pay a higher interest rate on the loans and increase the profitability of the loan.

2. Instead of being able to pay when the interest rates increased, lots of these people were unable to continue to pay the higher interest payments, so they defaulted on their loans and were forced into bankruptcy.

3. The banks, who expected customers to keep paying the high interest, were faced with credit cards and loans that were losing money due to huge amounts of bankruptcy.

4. The banks had no money to loan to home buyers.

5. As businesses get into deeper credit trouble, they start laying people off in an attempt to cut costs. As they lose money, the stock market, which is basically a betting shop based on confidence in businesses, is filled with people selling their stock.

6. As the stock prices go down, the companies are perceived as being worth less. That means they will not be able to get loans as easily. In order to stop this, a company may lay off even more people in an effort to appear more profitable.

The result – people and businesses owe more interest than they can pay, businesses go under, the housing market collapses, banks go under, the stock market crashes, unemployment goes through the roof creating a vicious circle (i.e. even more people defaulting on credit and loans) that could have (and still could) result in a 1929-style crash.

Income or loss in an S-Corp passes directly to your individual income tax return in the same characterization as it would have if the S-Corp did not exist. Capital gains within the S-Corp would be computed on Form 1120-S Schedule D and then flow to the shareholders via Schedule K-1 on lines 7 and 8a – 8c. Those amounts would then pass to the appropriate lines on Form 1040 Schedule D.

ST gains are taxed at your marginal rate. The highest marginal rate is 35% and you'd be making a LOT of money for it to hit that level. There's no way that it would ever hit 40% even if you were in AMT territory.

Of course, I would ask the standard question here: Why have you formed an S-Corp for such a low risk type of business? There is no tax benefit for doing so and you only significantly complicate your tax filing requirements and costs. On top of that, most states treat an S-Corp like any other corporation; you have to file state corporate tax returns and pay state corporate taxes including any minimum state franchise fee regardless of any profit or loss in the business.

While a corporation does isolate your personal assets from claims against the business, this is NOT absolute protection. Any personal liability that accrues to you based upon your business actions leaves your personal assets wide open. Most small businesses would be much better served by purchasing a good general liability insurance policy to protect ALL of their assets, both business and personal. It will often be cheaper in the long run and much less complicated.