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.
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TOPICS / PASSTHROUGHS
S Corporation Income Taxation
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.
Converting from S corp. to C corp.: Select issues for consideration
As a result of tax reform, which provides for a significant decrease in the corporate tax rate and a more modest decrease in passthrough tax rates, business owners may consider revoking S corporation elections.
Understanding the new Sec. 199A business income deduction
The new deduction allows certain business owners to keep pace with the significant corporate tax cut provided by the Tax Cuts and Jobs Act.
Intercompany transactions do not increase debt basis in S corporation
Loans among related entities were not bona fide
indebtedness that would give rise to debt basis in an S corporation for the shareholder.
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.
Tax Court holds microcaptive insurance company was not a bona fide insurer
Tax Court held that amounts passthrough business entities paid to a purported insurance company they
owned were not premiums paid for insurance contracts and not deductible.
Items and factors to consider in setting reasonable compensation
All companies should maintain supporting documentation for payments.
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.
Current developments in S corporations
The AICPA S Corporation Taxation Technical Resource Panel offers a summary of recent court decisions and IRS guidance.
Using qualified Subchapter S trusts (QSSTs)
The QSST may be useful for estate planning purposes and for holding S stock for the benefit of a minor or incompetent.
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.
Liability for payment of employment taxes when using a PEO
Chief Counsel Advice was issued regarding who is ultimately liable for payment of employment taxes when using a professional employment organization.
Tax Court allows full meal deduction for NHL team’s away games
Pregame meals provided to Boston Bruins players and personnel before away games qualify as a de minimis fringe benefit.
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.
The importance of tracking AAA and E&P in transactions involving S corps.
Tracking these accounts is important if an S corporation enters into certain transactions such as redemptions, liquidations, reorganizations, or corporate separations.
Boston Bruins can deduct full cost of meals for team’s away games
The Tax Court held that the owners of the Boston Bruins could deduct the full cost of their team’s pregame meals for away games as a de minimis fringe benefit.
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.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
