Harsh new regs. may terminate many S elections
Article Abstract:
The IRS on 4 Oct 90 issued Proposed Regulations concerning corporations' second class of stock on that would terminate many S corporation elections. The Regs. cover S corporations' single class of stock requirements, reiterating that corporations with more than one class of stock do not qualify as S corporations. Corporations have more than one class of stock if there are outstanding shares that do not carry identical liquidation and distribution rights. Arrangements that do not qualify as a second class of stock include structures with differences in voting rights, buy-sell arrangements, deferred compensation arrangements, and straight debt safe harbors. Arrangements that do constitute a second class of stock include nonconforming distributions, options and warrants, and any instrument, obligation, or arrangement that constitutes equity.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1991
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Deferred exchanges easier to set up under final regs
Article Abstract:
New regulations that could help taxpayers identify and acquire replacement property without paying any taxes have been issued recently. The provisions in Section 1031 help taxpayers make sure that the deferred like-kind exchanges they conduct are non-taxable. Such an exchange is not subject to taxes if the taxpayer identifies and accepts replacement property approximating the relinquished property within the allowed period of time without recognizing any gain. Actual or constructive receipt of money or property may be avoided by meeting any one of the safe harbors offered by the new regulations. These include examining security or guarantee arrangements, qualified escrow accounts and trusts, exceptions to tax restrictions, and utilizing qualified intermediaries.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1991
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