March 2008 - The Tax Adviser

PPA amended Sec. 1367(a)(2) to limit the reduction in a shareholder’s basis to the shareholder’s pro-rata share of the S corporation’s adjusted basis of the contributed property, not the FMV.

This article summarizes the tax consequences of entity changes involving the conversion to or from any entity treated as a partnership for federal income tax purposes (e.g., general partnerships, limited partnerships, LLCs with two or more members, and limited liability partnerships).

This article focuses on some of the more interesting items in the following corporate income tax areas: nexus; Sec. 338(h)(10) transactions; allocable/apportionable income; and tax base.

Through regulations and other forms of guidance issued since 1999, the IRS has clearly put tax practitioners on notice that it considers tax shelter transactions that generate noneconomic tax losses as not allowable for federal income tax purposes.

The U.S. Secretary of the Treasury and the Canadian Minister of Finance signed an important tax agreement (the Fifth Protocol) updating certain provisions of the Canada-U.S. Tax Treaty.