Generally, after a corporation has revoked or terminated an S election, it cannot make an S
election for any tax year before its fifth tax year that begins after the first tax year for which the
termination was effective, unless the IRS consents to the election.
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TOPICS / PASSTHROUGHS
S Corporation Income Taxation
State and local considerations in using an F reorganization to facilitate an acquisition
Foresight of the potential state tax implications of an F reorganization will allow a seller to evaluate the lesser-known hazards.
Current developments in S corporations
This annual update on S corporations covers cases, regulations, and IRS rulings that have been issued in the last year, including the rules for eligible terminated S corporations.
Electing S status by an LLC
A limited liability company can elect to be classified as a corporation and elect S status by following the procedures discussed here.
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.
Payment of S corp.’s expenses by affiliated companies did not increase shareholder’s basis
A tax court recently found that where an S corp. and affiliated entities were partially owned by a taxpayer, payment of the S corp.’s expenses by the affiliated entities did not increase the taxpayer’s debt basis in the S corporation.
New rule on nonresident aliens in an S corporation
The TCJA provides a way to avoid the unexpected termination of the S election when certain ESBT situations occur.
Deducting losses after an S corporation terminates
A special relief provision allows unused losses caused by a lack of basis to be deducted by an S corporation shareholder under certain conditions for one year (or more) during the S corporation’s post-termination transition period.
Impact of S corp. shareholder agreements in M&A transactions
Shareholders and their advisers should be prepared to verify the validity of the S election when the decision is made to begin marketing the company
for sale.
Distribution by former S corporation is part dividend
The IRS ruled that a distribution to the sole shareholder of a C corporation was partly a recovery of the former S corporation’s accumulated adjustments account (AAA) and a taxable dividend for the remaining distribution.
Terminating an S election by revocation
Revoking an S election may be the best course in some cases, but timely filing and shareholder consent are required.
Nonresident alien as an indirect S corp. shareholder
The TCJA fundamentally relaxed the rules on S corporation ownership by allowing nonresident aliens to be potential current beneficiaries of ESBTs and, therefore, indirect corporation shareholders.
Current developments in S corporations
This update on recent developments in taxation relating to S corporations includes cases and rulings on eligible shareholders, electing small business trusts, inadvertent S election terminations, and other issues, as well as changes made by the TCJA.
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.
Economic benefits of life insurance premium payments are not includible in income
Economic benefits from an S corporation’s payment
of a premium on a life insurance policy were not includible in the shareholder/employee’s income.
Capital contribution of reduced basis S corporation debt
The passthrough of S corporation losses to the extent of the shareholder’s basis in his or her stock and debt can be beneficial, but the resulting reduced basis debt may lead to taxable income on repayment of the debt.
Converting from an S corp. to a C corp.
This item discusses the many tax ramifications of converting.
Amended returns satisfy statement-of-inconsistency requirement
A taxpayer’s amended returns sufficiently apprised the IRS of inconsistencies between the amended returns and the returns filed by the bankruptcy trustee of his wholly owned S corporation.
Using R&D credits to reduce payroll taxes: An overlooked opportunity for startups
This article discusses who qualifies to take the credit, how to make the election, the calculation and allocation of the credit, and how to report it.
Filing a timely S election
Many factors must be considered when electing S status for a new corporation or converting an existing C corporation to ensure a timely election.
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
