Allocations of Profits & Losses
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.
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.
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 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.
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.
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.
This discussion sheds light on these questions with an overview of the applications of Secs. 302 and 301 to S corporation redemptions.
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.
The IRS announced that S corporations are subject to the new extended three-year holding period applicable to carried interests.
The IRS announced that the new three-year holding period for carried interests applies to S corporations as well as partnerships.
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 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.
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.
An understanding of S corporation basis rules enables practitioners to assist clients in taking advantage of planning opportunities aimed at maximizing deductible passthrough losses.
An S corporation’s election to use specific accounting can alter the allocation of passthrough items in some cases.
The Tax Court held that an S corporation shareholder could not claim losses from several wholly owned S corporations due to insufficient basis.
The Tax Court’s decision in Estate of Bartell alleviates uncertainty about structuring
a reverse like-kind exchange intended to qualify for nonrecognition treatment.
This item discusses whether S corporations should be entitled to an ordinary loss under Sec. 165(g)(3) as a matter of law.
Disposing of property related to a passive activity does not resolve all matters related to the property.
Tax Court held that royalties received by an S corporation under a license agreement are taxable as ordinary income to the S corporation’s individual shareholder.
