Tax consequences of the departure of a partner or an S corporation shareholder

Article Abstract:

The tax consequences of the disposition of a partner or S corporation shareholder's entire interest in a pass-through entity are predictable, generating a series of planning techniques to minimize the consequences. Nondeductible concomitant capital losses generated when the assets' inside basis is lower than the entity interest's outside basis create one tax burden. This can be avoided through structuring the disposition as a stock sale. Deferral should be maximized in an installment sale through making an asset sale and postponing liquidation until the installment period ends.

Planning, Partnership, Partnerships, Stock transfer

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S corporation basis and distributions addressed by proposed IRS regulations

Article Abstract:

The IRS has issued proposed regulations under IRC sections 1367 and 1368 that clarify many problems with the effect of profit and loss pass-through on S corporation basis and the taxation of distributions. The proposed regulations adjust stock basis for gain, excess depletion deductions and income as well as distributions that are not dividends from earnings and profits, nondeductible expenses and other losses or deductions. However, the regulations fail to address difficulties with certain areas such as ordering rules.

Laws, regulations and rules, Corporate distributions, Basis (Taxation)

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