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This article provides a "how to" approach to achieve a step-up in basis for assets owned by an S corporation upon the death of the sole shareholder. First, the tax implications of distributions of assets from an S corporation are reviewed. With the basics established, an analysis in which an S corporation sells an appreciated asset after the death of the shareholder is given. The article then determines what result is obtained if the asset is not sold but simply distributed, conclusively demonstrating that the tax implications to the taxpayers are identical whether the asset is sold or simply distributed. A final example is a reminder that this technique works for a sole shareholder of an S corporation but will not address the concerns of surviving shareholders if multiple shareholders are involved. This analysis encourages advisors to strongly consider the liquidation of a decedent's S corporation to receive a step-up in the basis of the decedent's S corporation's assets without increasing the decedent's tax liability. [ABSTRACT FROM AUTHOR]

One of the more interesting and often frustrating aspects of dealing with a client's investment in a flow-through entity is tracking the client's basis. Basis is doubly important in a flow-through investment because it is not only used to calculate the gain or loss on the disposition of the investment, but also because it is the starting point for determining whether losses from the entity which flow-through to the owner will be allowed during the current tax year. An additional complication is that while the concept of basis is similar to both partnership and S corporation investments, the calculations are not identical and are governed by separate Internal Revenue Code provisions. [ABSTRACT FROM AUTHOR]

Private equity firms are becoming significant players in the mergers and acquisitions marketplace. Increasingly, buyers are interested in obtaining less than 100 percent of the target corporation and are also keen on using rollover equity to defer tax to the seller and provide additional financing for the buyer. Finally, buyers also wish to obtain a stepup in the basis of the assets of the target. A Type F reorganization involving a state law conversion of an S corporation into a limited liability company (LLC) can provide harmony between buyers and sellers in these transactions. This article will examine the technique and will offer practical guidance to practitioners. [ABSTRACT FROM AUTHOR]

In order to be effective in their guidance, financial planners who advise S corporation owners must be familiar with the requirements of trusts that are permitted to own S corporation stock. There are many planning permutations that may surface along the way. In this column, we address some of the factors that an S corporation owner must consider in balancing estate and business planning objectives. [ABSTRACT FROM AUTHOR]

Purpose: This paper investigates the significant increase in S corporation banks converting to C corporations following the 2017 Tax Cuts and Jobs Act (TCJA) and the shift in motivations behind these conversions. Design/methodology/approach: The paper uses bank-level panel data from Federal Deposit Insurance Corporation (FDIC) Call Reports to analyze the determinants of S bank conversions after the TCJA, comparing post-TCJA conversion trends with pre-TCJA trends utilizing an ordinary least squares (OLS) and logistics model. Findings: The study finds that post-TCJA conversions are primarily driven by financially stable banks seeking improved tax conditions and relaxed shareholder restrictions as C corporations. This contrasts with pre-TCJA conversions, which were predominantly driven by financially distressed S corporation banks seeking new equity capital to maintain solvency. Research limitations/implications: The findings necessitate a comprehensive reconsideration of the Subchapter S status' sustained relevance for smaller institutions, especially in light of the comparative benefits now offered by the C corporation status post-TCJA. The results underscore the importance of ongoing academic investigation to deepen the understanding of the evolving fiscal landscape's effects on community banks, thereby contributing to the knowledge of the resilience and health of the US economy. Practical implications: This research nudges policymakers and regulators to contemplate the ongoing relevance and advantages of the S corporation status. Given the substantial benefits conferred by the C corporation status in the post-TCJA environment, this study suggests that retaining the S corporation status may not offer the same appeal for smaller community banks as it once did. Originality/value: This paper contributes to the broader understanding of the impact of tax policy on businesses' organizational choices, particularly in the banking industry and emphasizes the need for a comprehensive review of the S corporation status to assess its ongoing applicability in fostering small and community-focused financial institutions in light of the evolved corporate tax landscape. [ABSTRACT FROM AUTHOR]

Trajficking in and harvesting preexisting or manufactured tax losses and credits may be both beneficial and lucrative, but it may be subject to restrictions and limitations. Internal Revenue Code ("IRC") Section 269 generally provides that acquisition of control of a corporation to gain the benefit of a deduction, credit, or other allowance is prohibited. Does the Section 269 prohibition present a concrete barrier or is it just a smoke screen? This article examines the business purpose and economic substance doctrines to explain ways to circumvent Section 269. Then, this article analyzes IRC Section 382 to describe its impact and limitations when an "ownership change" is involved. Finally, this article discusses whether Section 382 applies to S corporations. [ABSTRACT FROM AUTHOR]

Copyright of Die Unternehmensbesteuerung (Ubg) is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Although would-be buyers in middle market M&A transactions continue to face challenges in what generally remains a seller's market, there are sometimes opportunities to take advantage of an often-overlooked planning method that can offer tax and non-tax benefits for both buyers and sellers. A significant number of target companies in the middle market are organized as S corporations, and a buyer's strategic use of an "F reorganization" in an M&A transaction involving an S corporation can generate substantial tax benefits for the buyer and, in some cases, more flexibility for the seller. Despite a decidedly non-glamorous name, the "F reorganization" can be a powerful tool in a buyer's M&A toolkit that should not be ignored. [ABSTRACT FROM AUTHOR]

Sen. Wyden has proposed dramatic changes to Subchapter K. Probably no change is further reaching than that made to section 752, which provides the rules for allocating partnership debt to partners. At a minimum (the exact scope is unclear), the proposal would radically change the allocation of recourse debt. No longer would the allocation be based on partners' "economic risk of loss;" instead, it would be based on partner profit shares. This Article reviews and analyzes current law and the changes the Wyden proposal would make to that law. The Article argues that the Wyden proposal in its current form goes too far but could be viable if an exception for small business is made. If implemented, the proposal might be the biggest single change to Subchapter K since 1954, with large tax consequences to partners and their partnerships. Fair transition rules that would mitigate these consequences would be vital. [ABSTRACT FROM AUTHOR]

Buy-sell agreements are a necessary part of any business succession plan. S corporations (whether electing limited liability companies or electing C corporations) are popular forms of doing business. The two basic buy-sell agreement structures are cross-purchase or stock redemption (entity). This article compares and contrasts the attractions and limitations of both structures, with particular attention paid to life insurance funding and the mechanics and taxation at death or retirement. It reviews variations--wait- and-see, one-way, and asset sales--as they are affected, then reviews many of the factors to be considered in choosing the appropriate structure. In the end it concludes that every plan needs to be tailored to the specific circumstances of each business. [ABSTRACT FROM AUTHOR]

There is a growing awareness that federal tax law caters to a small number of wealthy and well-advised taxpayers without regard for the rest of the taxpaying public, and partnership tax is a prime example. This Article explains how complexity and indeterminacy have transformed partnership tax, harming millions of forgotten taxpayers who struggle to comply with their annual filing obligations. A root cause of this phenomenon is the professional culture among elite practitioners, policymakers, and scholars at the heart of the partnership tax system. The most troublesome provisions of partnership tax are also its most fundamental--namely the allocation rules that regulate how partners share a partnership's taxable items. Complexity is a universal problem faced by partnerships at all levels of wealth, status, and sophistication, and the vast majority of taxpayers respond with improvisational tax compliance. Indeed, in remarkably diverse contexts, improvisation has replaced technical compliance as the norm in partnership allocations. Wealthy partnerships make a strategic choice to improvise, using "target allocations," while poorer partnerships improvise because they have no other choice, routinely following "intuitive" tax law and hoping for the best. Reframing this complexity problem as a shared experience of all partnerships exposes the technical and cultural fractures of partnership tax in a new and different light. First, the technical rules governing partnership allocations do not work as designed for any category of partnership. A second, less explored fracture is the professional culture of partnership tax, which takes for granted the technical sophistication of substantive tax law without appreciating the distributional consequences of sustained complexity and improvisation. Partnership allocations require more than technical solutions. One necessary step is addressing the professional culture of partnership tax to rethink what it means for tax law to work. This Article proposes that partnership reforms developed by experts and directed at wealthy and well-advised partnerships should be accompanied by reforms addressing parallel problems faced by forgotten partnerships. The solutions will necessarily differ, but a bilateral focus on the universal problems of all partnerships would represent meaningful progress, signaling a commitment to a fair, principled, and representative system of partnership tax. [ABSTRACT FROM AUTHOR]

The article focuses on Subchapter V of Chapter 11 of the Bankruptcy Code and fees paid to the United States Trustee; and the involvement of a Subchapter V trustee. It mentions debtor is required to propose a bankruptcy plan within 90 days of the filing of the initial petition. It also mentions Subchapter V is a single-step process, with some of the elements of a disclosure statement incorporated into the plan.

This column highlights some of the differences confronted by clients in choosing the optimal form of business for their entrepreneurial venture. In an environment where individual tax rates are now higher than C corporation rates, coupled with the advantageous fringe benefit treatment afforded C corporations, the choice of C over S may see a resurgence! [ABSTRACT FROM AUTHOR]

This case requires students to take a multi-year tax-planning perspective for an S Corporation owner-employee. The case emphasizes the Internal Revenue Code (IRC) §199A deduction (qualified business income (QBI) deduction, created by 2017 Tax Cuts and Jobs Act) and electronic spreadsheet skills. The case also includes reasonable compensation and cost recovery issues. Students perform tax research to identify factors relevant to QBI deductions and apply this research to make QBI deduction calculations. Then, students demonstrate knowledge of the flow-through entity by incorporating IRS rules and logic into electronic spreadsheets. Finally, students improve their tax-related decision-making skills by evaluating scenarios related to the QBI deduction in a flow-through entity setting. [ABSTRACT FROM AUTHOR]

This paper develops a statistics-based approach for analysis of transmission outage data. The method is applied to the Western Electricity Coordinating Council (WECC) transmission inventory and outage data collected and submitted by member utilities to the North American Electric Reliability Corporation's (NERC) Transmission Availability Data System (TADS). The developed model considers the random nature of Alternating Current (AC) circuit outages and introduces fourteen inventory attributes of the AC circuits as explanatory variables for the outage frequency. The main goal of the paper is to investigate statistical relationships between the number of automatic outages on AC circuits and AC circuit inventory attributes based on the TADS data from 2013–2018, which has proven to be sufficient in obtaining statistically valid results. Concepts associated with the statistical validation of performance indices are discussed with emphasis placed on analysis of distinct types of explanatory variables such as voltage class, mileage, number of terminals, circuits per structure, terrain, elevation, etc. [ABSTRACT FROM AUTHOR]

One of the main reasons to consider a partnership for owning a business rather than an S Corporation is the adverse impact upon death if the business is held by an S Corporation. Because partnership status is generally preferable to the S Corporation structure for tax purposes, the estate or heirs can also use this event to convert from an S Corporation to a partnership without the usual tax consequences of such a conversion. [Extracted from the article]

The Supreme Court's decision in Gitlitz v. Commissioner[1] is an irresponsible decision disrupting the logic of tax for the benefit only of abuse.[2] In Gitlitz the Supreme Court gave the equivalent of a double deduction, both an appropriate exclusion of cancellation of indebtedness income for an insolvent Subchapter S corporation and also an inappropriate increase in shareholder basis. Congress amended section 108(d)(7) to provide that the rules for COD income and attribute reduction for S corporations would be applied without treating excluded COD income as an "item of income."[6] The Conference Committee described the Gitlitz error in explaining the legislative reversal. The Supreme Court in shifting the blame for the Gitlitz problem onto Congress mandates a congressional omniscience well beyond what any group of mortals can satisfy, at a cost of having bad law reign for whatever period it may take for Congress to overrule the court decision through legislation. In these days of partisan paralysis in Congress, the administration and courts need to get the issue right, because Congress will not be able to fix it, even for clear error. [Extracted from the article]

Although the Tax Cuts and Jobs Act (TCJA) 2017 contains many favorable business tax provisions such as a flat 21 percent tax rate for C corporations as well as the elimination of the corporate alternative minimum tax (AMT); it also creates new unfavorable limitations on business expense deductibility. For example, the TCJA (2017) amends the Internal Revenue Code (IRC) section 163(j) to reduce the deductibility for net business interest expense. Due the complexity of section 163(j), both the Treasury and the Internal Revenue Services (IRS) have issued numerous regulations detailing the application of section 163(j) as amended by the TCJA (2017). C corporations, S Corporations and partnerships implement the provisions of section 163(j) in different ways. This paper summarizes these varying implementations including the use of a real-life case. The application of section 179 (immediate expense), section 274 (food and beverage for employees) as well as section 163(j) (interest expense) are also examined. Finally, this paper updates readers with the newest guidance from the IRS on the Coronavirus Aid, Relief, and Economic Security Act (2020) in relation to section 163(j). [ABSTRACT FROM AUTHOR]