1. Topics

S Corporation, Partnership & LLC Taxation

Navigating Secs. 743 and 734 in the Current Economy

Given the current economy and the resulting decline in the value of investment partnership portfolios, tax practitioners must be familiar with the mandatory basis adjustments under Secs. 743 and 734 and the alternative rules for electing investment partnerships.

Economic Outlay Revisited

Under the economic outlay doctrine, to obtain basis in an S corporation with respect to debt, a shareholder must make an actual economic outlay, the outlay must somehow leave the shareholder poorer in a material sense, and the debt created must run directly between the shareholder and the S corporation.

Target or Waterfall: Partnership Allocations

In recent years, more and more partnership agreements have been drafted using the targeted capital account approach for allocating partnership items of income or loss (targeted capital approach) versus the typical Sec. 704(b) economic effect approach (waterfall approach).

Distressed S Corporations: Tax Issues Involved in Restructuring

This article highlights tax issues and planning opportunities that may arise relative to a distressed S corporation, its shareholders, and its creditors.

S Corporation Tax Year Rules

The use of a fiscal year defers reporting of the S corporation’s passthrough income to the shareholders and facilitates year-end tax planning.

Partner Cannot Sue for Refund of Penalty Paid by Partnership

The Eighth Circuit reversed a district court and held that where a partnership paid a penalty under a closing agreement with the IRS, a partner in the partnership did not have standing to sue for a refund of part of the penalty payment.

Using a Limited Liability Partnership as the Entity of Choice

A new type of entity that has appeared in the United States in recent years is the limited liability partnership (LLP) or registered limited liability partnership (RLLP). This entity is similar in many respects to the limited liability company (LLC). All states now have LLP statutes.

Current Developments in Partners and Partnerships

This article reviews and analyzes recent rulings and decisions involving partnerships.

Final Sec. 1367 Regs. Address Open Account Debt Between S Corps. and Their Shareholders

Final regulations (T.D. 9428) amend the definition of open account debt, which may significantly affect when an S corporation shareholder recognizes gain on the repayment of such debt.

Temp. Regs. Allow Deemed Election to Expense Startup, Organizational Costs

Effective July 8, 2008, the IRS issued new temporary regulations to amend the rules under Secs. 195, 248, and 709 regarding elections to deduct startup expenditures and organizational expenditures of corporations and partnerships (T.D. 9411).

Like-Kind Exchanges of Partnership Properties

A partnership can distribute real property to its partners so that the partners can exchange the property in a Sec. 1031 like-kind exchange; if the exchange is properly structured, some of the partners can trade their interests in the property distributed in Sec. 1031 exchanges and some of the partners can sell their interests in the property in taxable transactions.

Partner Allowed to Make Different Elections for Different Partnership Interests

The Tax Court held that taxpayers owning multiple interests in the same partnership were entitled to make different elections under Sec. 6223 for each interest.

Allocating Passthrough Items to S Corporation Shareholders

Passthrough items from an S corporation are allocated on a per-share, per-day basis (Sec. 1377(a)(1)).

Guidance on S Corporation Life Insurance Premiums Raises Questions

The IRS recently issued long-awaited guidance on the treatment of life insurance premiums paid and life insurance proceeds received by an S corporation.

Current Developments in S Corporations (Part II)

This article discusses S corporation eligibility, elections, and termination issues, including guidance for changes made by the American Jobs Creation Act of 2004 and the Gulf Opportunity Zone Act of 2005 , significant issues related to second class of stock, and a notice that provides a simplified method to make an S election.

Termination of a Partnership Interest

This item explores the two main methods used when terminating a partnership interest: purchase and liquidation.

Treatment of Investment Interest Expense Allocable to Partnerships Trading Activity

IRS rulings confirm the proper tax treatment of investment interest expense allocable to a partnership’s trading activity

S Corporation Sale of Assets Followed by a Liquidation

This item focuses on the specific tax implications to the seller of the sale of an S corporation’s assets followed by a liquidation or a deemed asset sale followed by a liquidation.

Current Developments in S Corporations (Part I)

This two-part article discusses recent legislation, cases, rulings, regulations, and other developments in the S corporation area. Part I covers operational issues, including new guidance on the treatment of medical insurance premiums for wholly owned S corporations, new built-in gain developments, and the impact of charitable giving by S corporations on shareholders’ adjusted basis in stock.

S Corporation Shareholder Loans: A Cautionary Tale

A practitioner should take special care in advising clients on shareholder loans to an S corporation. Repayment of the loans by the corporation has the potential to generate unexpected taxable income to the shareholder.
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