Shareholder basis and other applicable loss limitations must be applied in a specified order, with differing rules.
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Allocations of Profits & Losses
PTE deduction: Timing issues for accrual-method taxpayers
taxpayers and practitioners face uncertainty regarding the timing of the deduction provided for in Notice 2020-75.
Minimizing a hobby loss issue by electing S status
To avoid the hobby
loss rules, with
their limitation on
deductible expenses,
an activity must be
engaged in for profit;
electing S status
can help a taxpayer
establish profit
motive.
Current developments in S corporations
This update on recent developments in taxation relating to S corporations includes cases and rulings on eligible terminated S corporations, S corporation income and losses, the one-class-of-stock requirement, and other issues.
Handling tax issues related to noncompete agreements
Covenants not to compete can protect a company’s interest as long as they are drafted in an appropriate manner, but their 15-year amortization period can cause issues.
Avoiding gain at the S shareholder level when a loan is repaid
When the basis in an S shareholder’s loan to the S corporation has been reduced by passthrough losses, repayment of the loan may be a taxable
event.
The built-in gains tax
The built-in gains tax applies to C corporations that make an S corporation election, and it can
be assessed during the five-year period starting with the first tax year for which the S election is effective.
Liquidating an S corporation that is not subject to the BIG tax
Review how shareholders would be taxed on the gain from the sale of stock in an S corporation that is not affected by the built-in gains tax.
IRS takes narrow view of aggregation under the at-risk rules
The IRS concluded that a taxpayer was not permitted to aggregate the S corporations with the partnership for the purpose of applying the at-risk rules of Sec. 465.
S corporation redemptions: Navigating Secs. 302 and 301
This discussion sheds light on these questions with an overview of the applications of Secs. 302 and 301 to S corporation redemptions.
3-year holding period applies to S corporations
The IRS announced that S corporations are subject to the new extended three-year holding period applicable to carried interests.
Sec. 336(e) elections for S corp. targets: Get a step-up without a letter ruling
Individuals, partnerships, or other noncorporate entities that could not benefit from a Sec. 338(h)(10) election may be able to qualify for a Sec. 336(e) election.
Longer carried interest holding period includes S corporations
The IRS announced that the new three-year holding period for carried interests applies to S corporations as well as partnerships.
Dispute between shareholders did not strip taxpayers of beneficial rights of ownership
The Tax Court held that the taxpayers’ poor relations with other shareholders of an S corporation did not affect their ownership interest in the corporation.
IRS will not acquiesce to ruling on non-safe-harbor reverse Sec. 1031 exchange
IRS announced it will not acquiesce to a Tax Court ruling in which it held that a taxpayer’s disposition and acquisition of property was not a self-exchange
and qualified for Sec. 1031 nonrecognition treatment.
Lack of economic substance dooms loss deductions
A taxpayer was not entitled to a passthrough loss
from the dissolution of an S corporation because the dissolution was part of a tax structure that did not have economic substance.
Structuring loans for S corp. shareholder basis planning opportunities
An understanding of S corporation basis rules enables practitioners to assist clients in taking advantage of planning opportunities aimed at maximizing deductible passthrough losses.
Allocating S corp. losses to acquiring and terminating shareholders
An S corporation’s election to use specific accounting can alter the allocation of passthrough items in some cases.
Tax Court upholds non-safe-harbor reverse like-kind exchange
The Tax Court’s decision in Estate of Bartell alleviates uncertainty about structuring
a reverse like-kind exchange intended to qualify for nonrecognition treatment.
Losses disallowed where S corp. not indebted to shareholder
The Tax Court held that an S corporation shareholder could not claim losses from several wholly owned S corporations due to insufficient basis.
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.
