The buying or selling of an interest in a closely held corporate business is an important transaction. CPAs must be prepared to fully consider the unique tax characteristics of an S corporation to advise their clients, whether sellers or buyers. We'll consider buyer and seller perspectives, relevant law, tax planning opportunities, pitfalls to avoid and critical compliance issues. Review rules related to determining the stock basis of an S corporation, treatment of suspended losses, distributions, accumulated adjustment accounts, the built-in gain tax, excess net passive income tax, allocation of income and losses related to changes in ownership of an S corporation and tax treatment of S corporation election terminations. Finally, consider different tax consequences of asset and stock sales, including Sect. 338 and 336(e) elections.
Learning Objectives
• Identify potential tax advantages or costs of making an S corporation election
• Recognize tax considerations of liquidating an S corporation
• Determine when to use Secs. 338(g), 338(h) (10), 336(e) and qualified subchapter S subsidiary elections
• Identify allocation taxable income or loss between the buyer and shareholder
Major Topics
• Making the S-election
• "Qualified business income" deduction (IRC 199A)
• Built-in gain tax, including planning ideas
• Net excess passive income tax and planning
• Liquidation of S corporation, including special rules related to installment obligations
• Suspended loss rules, including tax planning opportunities
• Sect. 338(h)(10) and Sect. 336(e) elections
• Qualified subchapter S subsidiary election (QSUB)
• ESOPs
• Redemption of S corporation stock, including planning opportunities
• Basics of acquisitive reorganizations as applied to S corporations
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