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Cleaning up intercompany debt

An intercompany loan between related corporations may be recharacterized as an equity contribution by the companies’ shareholders, resulting in a constructive dividend to the shareholders. This article focuses on a recent Tax Court case involving the proper characterization of purported intercompany loans between two S corporations.

Reasonable Compensation for S Corporation Shareholder-Employees

Two recent Tax Court opinions focusing on reasonable compensation for S corporation shareholder-employees provide important takeaways for owners and practitioners by addressing common issues surrounding distributions and loan repayments in the context of reasonable compensation.

S Corporation Reasonable Compensation

A recent district court decision highlights the employment tax risks to S corporations that are found to have paid unreasonably low compensation to shareholder-employees while making distributions to the same individuals.