S Corps. can still reduce taxes in acquisitions, reorgs

Article Abstract:

The repeal of the General Utilities doctrine and the more strict alternative minimum tax rules have increased the popularity of Subchapter S corporation elections. S corporation status offers many advantages: it allows shareholders to deduct losses, it allows for the more liberal use of the cash method of accounting as compared to C corporations, and it avoids double taxation and taxes levied on accumulated earnings and personal holding companies. Generally, S corporation status liberates deferred tax liabilities that have been previously booked and eliminates the necessity for making the calculations required by Statement of Financial Accounting Standard 96. Taxpayers selecting S corporation status must be aware of the many issues in the area that are still unsettled.

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Planning prior to departure of S corp. shareholders may provide tax savings

Article Abstract:

Minority shareholders in S corporations have limited planning options in cases when a decision to sell their shares is made, or if they are forced out of the corporation. For example, if the corporation does not make a distribution in a given year, minority shareholders may incur a tax obligation without having liquid assets to pay it. It is important for minority shareholders to make sure they have proper representation before electing S status, before signing a shareholders' agreement, and before selling interest in the corporation.

Minority stockholders

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Taxpayer's intent defeats last-minute attempt to switch debt to stock

Article Abstract:

Whether or not a taxpayer intended to create a debt with expectation of repayment, and whether or not that was present in the economic reality of the transaction, are the critical matters when courts decide whether a contribution to a corporation qualifies as debt or equity. The case of Miller is discussed, and guidelines outlined in Roth Steel Tube are presented to illustrate the issue.

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