The S corporation: selling the business on a deferred payment basis

Article Abstract:

The most likely form of sale of an S corporation is an asset sale done on a deferred payment basis, and practitioners should be aware of the tax and accounting planning that should be included in such a transaction. IRC section 453 will apply to the installment sale, and gain will have to be reported separately for different categories of assets. If the S corporation had been a C corporation at any time, built-in gains tax, excess passive income tax or both taxes may apply. The owner making the asset sale must also consider whether to liquidate or maintain the corporation.

Installment contracts, Business sale

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S corporations and their shareholders: the issue of constructive distributions

Article Abstract:

Subchapter S corporation shareholders can be subject to the constructive dividend tax liability and basis adjustment, though the incidence of such liability is limited because S corporations generally do not have retained earnings and profits. Analysis of the statutes and case law that has imputed dividend treatment on transactions between corporations and shareholders demonstrates that there is no barrier to the principle's application to S corporations. Excess rent or the sale of property for other than fair market value may give rise to a constructive distribution.

Dividends

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