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S Corporations

CCA rejects S corp’s attempt to convert worthless stock capital loss to ordinary loss

CCA rejects S corp’s attempt to convert worthless stock capital loss to ordinary loss

Chief Counsel Advice 201552026 In Chief Counsel Advice (CCA), IRS has rejected an S corporation’s attempt to claim an ordinary loss deduction under Code Sec. 165(g)(3) for losses incurred in connection with its qualified subschapter S subsidiary’s (QSub’s) conversion to a C corporation, which was effective one day before the S corporation’s termination of its […]

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Court of Federal Claims holds that S corporations are subject to same lower interest rates on tax overpayments as C corporations

Court of Federal Claims holds that S corporations are subject to same lower interest rates on tax overpayments as C corporations

Eaglehawk Carbon, Inc. v. U.S., (Ct Fed Cl 7/16/2015) 116 AFTR 2d ¶2015-5053 The Court of Federal Claims has held that the corporate overpayment interest rates of Code Sec. 6621(a)(1) apply to S corporations, rejecting a taxpayer’s claim that it was owed additional interest on tax overpayments that it made over a 5-year period. The […]

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Corporation’s accumulated adjustments account doesn’t survive break in S status

Corporation’s accumulated adjustments account doesn’t survive break in S status

Chief Counsel Advice 201446021 In Chief Counsel Advice (CCA), IRS has determined that the accumulated adjustments account (AAA) of a corporation that elected, terminated, then re-elected S status, was zero. It found that the plain language of Code Sec. 1368(e)(2), which defines the “S period” during which the AAA is adjusted as the most recent […]

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Draft Instructions For Form 1120-S For S Corporation Released By IRS

Draft Instructions For Form 1120-S For S Corporation Released By IRS

Click here for the draft Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation. IRS has released draft Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation. The instructions include information on what’s new on the 2014 Form 1120S and other new requirements for S corporations. Background. A domestic corporation […]

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IRS Releases Draft Instructions For 2014 Form 1120S For S Corporation

IRS Releases Draft Instructions For 2014 Form 1120S For S Corporation

Click here for the draft Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation. IRS has released draft Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation. The instructions include information on what’s new on the 2014 Form 1120S and other new requirements for S corporations. Background. A domestic corporation […]

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Revocation of parent’s S status means former QSub must separately account for income, etc.

Revocation of parent’s S status means former QSub must separately account for income, etc.

Chief Counsel Advice 201433014 In Chief Counsel Advice (CCA), IRS has determined that an S corporation that became a C corporation during the tax year cannot prorate, between the S corporation and C corporation, any items that arose with respect to its former QSub after the date on which its S status terminated. IRS also […]

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Final regs provide that only bona fide shareholder loans to S corporation create basis

Final regs provide that only bona fide shareholder loans to S corporation create basis

T.D. 9682, 07/22/2014; Reg. § 1.108-7, Reg. § 1.1366-2, Reg. § 1.1366-5 IRS has issued final regs that provide that S corporation shareholders may increase their adjusted basis in any indebtedness of the S corporation to them – and thus use that basis to allow them to deduct their pass-through deductions and losses – only […]

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Chief Counsel Advice determines tax treatment of S corp’s disallowed loss from property distribution

Chief Counsel Advice determines tax treatment of S corp’s disallowed loss from property distribution

Chief Counsel Advice 201421015. In Chief Counsel Advice (CCA), IRS has concluded that an S corporation’s disallowed Code Sec. 311(a) loss will be treated as nondeductible, noncapital expenses under Code Sec. 1367(a)(2)(D). Accordingly, the Code Sec. 311(a) loss will reduce shareholders’ bases in S corporation stock, and the S corporation must reduce its accumulated adjustments […]

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Third Circuit affirms: Qsub election doesn’t increase shareholder’s basis in S corporation

Third Circuit affirms: Qsub election doesn’t increase shareholder’s basis in S corporation

In R. Ball, etc.,  et al., vs. Commissioner (Court of Appeal 3rd Cir.,2/12/2013) 113 AFTR 2d ¶ 2014-494, the Third Circuit, affirming a Tax Court opinion, has ruled that an election by an S corporation to treat its subsidiary as a qualified Subchapter S subsidiary (QSub) did not increase the basis of the S corporation’s […]

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IRS gives green light to favorable tax results on transfer of S corporation to employees

IRS gives green light to favorable tax results on transfer of S corporation to employees

In a private letter ruling, PLR 201405005, IRS has issued favorable tax rulings for a proposed transaction to transfer ownership of an S corporation from the two equal retiring co-owners to key employees. Specifically, IRS concluded that profit on a redemption of the owners’ shares by the company for notes will be taxed to them […]

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Acquisition of S corp’s stock by REIT didn’t result in its being taxed as C corp

Acquisition of S corp’s stock by REIT didn’t result in its being taxed as C corp

IRS has privately ruled in PLR 201345021 that, in connection with the purchase of all the shares of an S corporation by a qualified real estate investment trust (REIT), there was no period between the termination of the S corporation’s election under Code Sec. 1362(d)(2) and its qualification as a qualified REIT subsidiary under Code […]

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Court of Appeals for the Seventh Circuit rejects tax shelter organizer’s attempt to avoid tax on payments to his S corporation

Court of Appeals for the Seventh Circuit rejects tax shelter organizer’s attempt to avoid tax on payments to his S corporation

The Court of Appeals for the Seventh Circuit, affirming the Tax Court, has determined in Rogers v. Commissioner, (Court of Appeals 7th Cir.,  08/26/2013) 112 AFTR 2d ¶2013-5247, that a distressed asset/debt (DAD) tax shelter organizer had to report as income funds received by his solely owned S corporation as part of the shelter arrangement. […]

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Court of Appeals denies pass-thru losses, deductions, and amortization of cell phone businesses

Court of Appeals denies pass-thru losses, deductions, and amortization of cell phone businesses

The Court of Appeals for the Sixth Circuit, in Broz v. Comm., (CA 6 8/23/2013) 112 AFTR 2d ¶ 2013-5231, affirming the Tax Court, has found that a cellular service entrepreneur couldn’t deduct pass-through losses from his S corporation because he lacked the required basis in his S corporation. The Court also denied the business […]

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Shareholder dispute didn’t shift beneficial interest of S corp shares

Shareholder dispute didn’t shift beneficial interest of S corp shares

The Tax Court, in Kumar v. Commissioner, T.C. Memo. 2013-184, has held that a doctor with a minority ownership interest in a medical practice organized as an S corporation, who was excluded by the majority owner from participation in the corporation’s activities, was not deprived of the economic benefit of his share ownership and was […]

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Information on S corp return wasn’t treated as disclosed by shareholder

Information on S corp return wasn’t treated as disclosed by shareholder

In Chief Counsel Advice, 2013-3008, IRS has concluded that information contained in an S corporation return that is filed after a shareholder of that corporation files his own return, cannot be considered to be adequately disclosed on the shareholder’s return, for purposes of Code Sec. 6501(e)(1)(A)’s six-year limitation on assessment. Facts. A taxpayer filed a […]

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Distributions from S corporation to its president were wages, not loan repayments

Distributions from S corporation to its president were wages, not loan repayments

The Tax Court has held in Glass Blocks Unlimited v. Commissioner, T.C. Memo 2013-180, that distributions from an S corporation to its president/sole shareholder were taxable wages. IRS’s determination that the president was an employee was uncontested, and the S corporation failed to show that any portion of the distributions reflected repaid loans or that […]

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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