IRS finalizes rules on eligible terminated S corporations
The IRS issued final regulations on ETSCs and distributions of money from those corporations after the post-termination transition period.
S Corporation Income Taxation
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.
Taxpayer not a shareholder of not-for-profit corporation
The president and a director of a not-for-profit is not its beneficial owner and cannot be a shareholder of it.
Partnerships and S corps. can deduct state and local taxes
The IRS said it would issue proposed regulations allowing S corporations and partnerships to deduct “specified income tax payments” paid to state and local governments above the line and not as passthrough items for partners and shareholders.
Final regs. govern eligible terminated S corporation rules
The IRS finalized proposed regulations on eligible terminated S corporations, a new provision enacted under the Tax Cuts and Jobs Act that provided favorable treatment for corporations that wished to terminate their S elections.
Regulations coming on S corporations with accumulated E&P and GILTI
The IRS announced that it will issue regulations to allow S corporations with accumulated earnings and profits to elect to have global intangible low-taxed income inclusions increase the S corporation’s accumulated adjustments account.
Private equity and F reorganizations involving S corporations
The M&A market is poised to regain its pre-COVID-19 activity levels as many business owners seek to exit closely held businesses or explore alternatives. One popular transaction that could emerge is Sec. 368(a)(1)(F) reorganizations F reorganizations) of S corporations.
Making a new S election after termination
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.
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.
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.
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.
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.
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.
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.
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.
