Workout or bankruptcy's effects depend on entity
Article Abstract:
Partnerships and S corporations are taxed differently when they take part in a workout or bankruptcy proceeding. This despite the fact that both are pass-through organizations under which profit and loss issues are addressed on the level of the individual partner or shareholder. For partnerships, income generated through partnership debt cancellation is allocated to the individual partner. On the other hand, debt cancellation income in S corporations is mixed with other profit and loss items which go to the shareholders. Debt restructurings involving reduced principal debt balance will require the recognition of the cancellation-of-debt income. Methods for restructuring debt are term modification, purchase-price reduction, principal reduction and exchange of certain debts or all of the debts for an interest in the entity.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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Extra care needed for S corporation election
Article Abstract:
The Internal Revenue Code allows for reinstatement of Subchapter S status to corporations when the lapse in Subchapter S qualifications is inadvertent and the company and individuals involved take action to reinstate such status. Three examples of Subchapter S corporations that lost their status are described and discussed; of the three, the Internal Revenue Service allowed a return to Subchapter S status in two cases. The corporation that was not allowed to return to Subchapter S status (in the case of Seely, TCM 1986-216) had lost its status because one of the three individuals involved had failed to receive the written consent of his spouse on the Subchapter S consent form, prior to its filing.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1986
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Proposed regulations provide guidance on electing or terminating S status
Article Abstract:
Proposed regulations that provide guidance to small corporations attempting to elect, revoke, or terminate S status are reviewed. Election of S corporate status requires consent of certain shareholders, is effective until terminated, and must have the consent of certain shareholders in order to be revoked. An S election is also terminated when the corporation ceases to be a small business corporation, or when it receives excess passive investment income.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
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