Contributions, Distributions & Basis

Determining the Taxability of S Corporation Distributions: Part II

This article covers the taxability of distributions from an S corporation with accumulated E&P and ancillary issues and planning opportunities.

Partnership Basis Rules Proposed

The IRS issued proposed regulations providing guidance on the application of Sec. 704(c)(1)(C) added by the American Jobs Creation Act and the amendments to the mandatory basis adjustment rules of Sec. 743 in the AJCA.

Proposed Rules Would Require Terminating Partnerships to Amortize Startup Expenditures

The IRS issued proposed regulations aimed at preventing partnerships from using technical terminations to accelerate their deductions of startup and organizational expenses.

Sec. 754 and Ground Leases

A partnership making an optional Sec. 754 basis adjustment for land subject to a long-term ground lease is permitted to adjust the basis of the land but may not allocate the basis adjustment to buildings or other depreciable assets the lessee constructed.

Debt and Proving Basis in Flowthrough Entities

A taxpayer’s basis is often scrutinized by the IRS, particularly when basis is claimed based upon debts incurred by a flowthrough entity.

Current Developments in S Corporations

This article discusses major changes and developments that directly affect S corporations and their tax advisers during the period of this update (July 10, 2012–July 9, 2013).

QSub Status Is Not Property of Bankruptcy Estate

An S corporation’s revocation of its S corporation status, which caused its QSub subsidiary to lose its status as a QSub, was not a post-bankruptcy-petition transfer of property of the QSub’s bankruptcy estate.

QSub Election Does Not Increase Shareholder Stock Basis

The Tax Court held that shareholders of an S corporation improperly increased the adjusted basis of their S corporation stock when the S corporation made a QSub election for its wholly owned C corporation subsidiary.

Defining “Attributable to” Under Sec. 897(g)

The lack of regulatory and published guidance has created uncertainty in applying Sec. 897 to determine the amount of gain attributable to a USRPI.

Incorporating an Insolvent Partnership: Availability of the Insolvency Exclusion

Incurring COD income at the partnership level may provide significantly different, and potentially detrimental, tax results to owners in a partnership than would incurring COD income at the corporate level.

Deducting S Corporation Losses to Extent of Shareholder Basis

An S corporation shareholder reports corporate income or loss on the personal income tax return for the year in which the corporate year ends; losses or deductions passed through to the shareholder first reduce stock basis, then loss amounts are applied against debt basis.

Partners’ Income Allocations and the New Net Investment Income Tax

The health care acts, along with recently issued Treasury guidance on the applicability of the additional Medicare tax, may prompt partnerships to reevaluate the potential tax impact of the partnership’s structure on their individual partners.

Current Developments in Partners and Partnerships

This article reviews and analyzes recent rulings and decisions involving partnerships. The discussion covers developments in partnership formation, income allocations, and basis adjustments.

Debt Discharge Under Sec. 108: Partnerships vs. S Corps.

As tax liability for COD income gives many taxpayers an unpleasant surprise in today’s economy, its tax treatment continues to be a focal point for tax professionals in tax planning and preparation.

Organizational and Startup Costs for Single-Member LLCs

Despite the widespread use of single-member LLCs, some confusion still exists regarding the tax treatment of the initial expenditures to form and operate this type of entity.

Measuring Insolvency Under Sec. 108

While determining if a taxpayer is bankrupt is straightforward, determining whether a taxpayer is insolvent can be tricky.

Timing a Loss Deduction

When a real estate venture is structured so that one partner provides the capital and the second provides operational experience, how are losses incurred by the capital partner treated?

Current Developments in S Corporations

During the period of this S corporation tax update, some major changes that directly affect S corporations took place. This article also presents tax planning ideas for S corporations and their shareholders.

S Corporation Shareholder Basis From Bona Fide Indebtedness

The IRS issued proposed regulations on the subject of when an S corporation shareholder can increase his or her basis in the S corporation’s stock based on loans to the corporation.

Contributions Increase Shareholders’ S Corporation Basis

The Tax Court held that shareholders in two related S corporations could increase their basis in one of the corporations by contributing assets to it that they had received in a distribution from the other corporation.
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