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Tax Law Roundup current law developments in U.S. taxation

Category Archives: S corporation

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Final S corporation Regulations Limit Basis To Bona Fide Shareholder Loans

Posted in Debt vs. Equity, S corporation

The IRS issued final regulations granting an S corporation shareholder outside basis only in “bona fide” loans directly from the shareholder to the S corporation. A shareholder does not obtain debt basis merely by guaranteeing a loan or acting as a surety, accommodation party, or in any similar capacity relating to a loan.  Further, a… Continue Reading

IRS Revamps and Expands Late Election Relief For S corporations

Posted in General, Passthrough Entity, Procedure, S corporation

The IRS published Rev. Proc. 2013-30, which is a consolidation and extension of a series of prior procedures to assist taxpayers with late elections relating to S corporations.   The revenue procedure provides the exclusive simplified methods for taxpayers to request relief for late S corporation elections, Electing Small Business Trust (ESBT) elections, Qualified Subchapter S… Continue Reading

IRS Throws the Book At Leveraged Partnership Structure

Posted in Economic Substance, Joint Venture, Partnership/LLC, Passthrough Entity, S corporation

In ILM 201324013 the IRS sent a resounding message to taxpayers using partnerships and debt financing to “sell” assets to a buyer without paying tax – make sure your seller guarantees are real and subject to normal commercial terms.  In attacking  one such “seller”  indemnity, the IRS concluded that: (1)  “The indemnity lacked important features… Continue Reading

Senate issues 8th Tax Reform Paper: Types of Income and Business Entities

Posted in Compensation, Debt vs. Equity, Financial Products, Legislative, REITs, S corporation, Tax reform

The Senate Finance Committee issued its 8th tax reform paper, discussing the tax treatment types of income (e.g., ordinary, wages, capital gains) and business entities (e.g., C corporations, pass-throughs, RICs, and REITs).  The report also addresses the disparate treatment between debt and equity and financial product reform.  For pdf version click here.  This follows the… Continue Reading

Rep. Camp Introduces Small Business/Pass-through Tax Reform

Posted in Legislative, Partnership/LLC, Passthrough Entity, S corporation, Tax reform

Rep. Camp (R-MI), Chair of the House Ways and Means Committee, introduced a discussion draft of tax reform proposals for small business, mostly addressing pass-through entity taxation.  Rep. Levin (D-MI) issued a statement noting that many of the Camp proposals have bi-partisan support.  The proposal also includes two alternative reform proposals for partnerships and S… Continue Reading

S corporation Modernization Act of 2013 Re-Introduced

Posted in General, Legislative, S corporation

Rep. D. Reichert (R. Wash.) introduced H.R. 892, the S Corporation Modernization Act of 2013 (the Act).  A significant provision in the Act is to permanently reduce the Section 1374 “built-in gains” period from 10 to 5 years, effective January 1, 2013.  If enacted, C corporations that convert to S corporation (or REIT) status would… Continue Reading

CBO Report Examines Shifting of Tax Base To Pass-through Entities

Posted in Corporate, Legislative, Partnership/LLC, Passthrough Entity, S corporation

A new Congressional Budget Office Report shows a shifting of business structures to using pass-through entities, subjecting the income only to the individual income tax (as compared to the corporate income tax).  The report notes that the shift has reduced federal revenues but has probably promoted overall investment and a more efficient allocation of resources.  The… Continue Reading

Proposed Regulations Require Bona Fide Loan for S Corporation Shareholder Basis

Posted in General, S corporation

The IRS issued proposed regulations, allowing an S corporation shareholder stock basis for direct shareholder loans that represent “bona fide indebtedness”.  This represents a move away from the highly litigated “actual economic outlay” test and instead looks to whether the direct loan is “bona fide” based on applying more general federal tax principles to the… Continue Reading