This item provides an overview of the U.S. income tax implications of cancellation-of-debt income that results from bankruptcy or insolvency, with a focus on the differences in the tax treatment for C corporations, S corporations, and partnerships.
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Distributions & Shareholder Basis
The Transfer of Loss Property Between an S Corporation and Its Shareholders
S corporations and their shareholders often engage in transactions in which they transfer property with a basis greater than its FMV. This article examines the tax effects on both shareholders and the corporation.
S Corp. Shareholder Basis and Debt
The IRS issued final regulations addressing the basis of indebtedness of S corporations to their shareholders.
Final Rules Issued on Bona Fide Indebtedness and Terminating Partnership’s Startup Expenses
Final regulations were issued on S corporation shareholder basis of indebtedness of the S corporation to the shareholder only if the indebtedness is bona fide and on the deductibility of startup expenditures and organizational expenses for partnerships following a termination of a partnership.
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.
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 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.
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.
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.
Measuring Insolvency Under Sec. 108
While determining if a taxpayer is bankrupt is straightforward, determining whether a taxpayer is insolvent can be tricky.
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.
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.
Proposed Regs. on Basis for S Corporation Shareholders From Bona Fide Indebtedness
The IRS issued proposed regulations on when an S corporation shareholder can increase basis in the S corporation’s stock based on loans to the corporation.
Current Developments in S Corporations (Part II)
This article provides an annual update of recent IRS rulings, guidance, and other developments concerning S corporations. It discusses S corporation eligibility, elections, termination issues, second class of stock, and trusts owning S corporation stock.
Current Developments in S Corporations (Part II)
This article discusses S corporation eligibility, elections, and termination issues from the period July 2009–July 2010.
Sec. 465 Traps for the Unsuspecting S Corporation Shareholder
Without proper planning, the at-risk rules set out in Sec. 465 can limit the amount of deductible S corporation losses.
The Story of Basis
Basis is a beneficial concept for a taxpayer—it shields the taxpayer from tax on the sale of an asset and can produce losses that reduce tax liability. It has been described as a “summary of the tax impact of [past] events” that have affected an asset. Nevertheless, basis can be elusive: It can appear or disappear when we are not paying attention. It can cling to an asset, be adjusted up or down, replicate itself, or shift to another asset. In other words, the summary that basis provides can have a number of potential twists and turns.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
