If you make an S corporation election and do not fix the standard language that is typically included in the LLC company agreement, you’ll void the S corporation election. This is an issue that is usually identified by during an audit by the IRS. Many taxpayers overlook this issue until it is too late (it… Continue reading S Corp Election Terminated by Standard LLC Language
Category: Business Tax
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Loan to an S Corporation to Allow Tax Loss
Tax basis can limit a shareholder’s loss from an S corporation. If an S corporation has a tax loss but the shareholder doesn’t have sufficient tax basis to take the loss, the shareholder will typically have to loan money to the S corporation. This tax debt basis makes the loss allowable in the current year.… Continue reading Loan to an S Corporation to Allow Tax Loss
The IRS Recent Focus on S Corp Owners
The IRS has announced several new compliance campaigns focusing on S corporations. This is needed as the audit rate for S corporation is extremely low. The most recent IRS compliance campaign focuses on shareholder stock basis issues for S corporation owners. Those who have significant S corporation losses or large distributions should take time to… Continue reading The IRS Recent Focus on S Corp Owners
Using Warrants to Make Future Purchases of S Corporation Stock
Can you make a gift to charity but retain the right to pull back the value of the gift in the future, and still get a charitable deduction for the gift? The court said “no” in In Re Stapley, No. 09-47699 RLE (Bankr. N.D. Cali. 2019). The failed tax shelter included an S corporation whose… Continue reading Using Warrants to Make Future Purchases of S Corporation Stock
Can the IRS Ignore the Legal Existence of a Corporation?
If a taxpayer forms a legal entity and it is taxed as a C corporation, can the IRS disregard the legal existence of the corporation and assess the corporation’s tax to the owner? The court addresses this in Russell v. Commissioner, T.C. Memo. 2019-146. Facts & Procedural History The taxpayer filed his personal income tax… Continue reading Can the IRS Ignore the Legal Existence of a Corporation?
The Timing Trap: Failed Installment Sales
What happens if you sell an asset and are to receive payments in the future, but your accountant fails to elect the installment method? Do you have to report the full amount of the gain in the year of sale? What happens if the buyer fails to make the payments in subsequent years? The IRS… Continue reading The Timing Trap: Failed Installment Sales
S Corp Conversions: Watch out for Disappearing AAA
Small and medium-sized business can save quite a bit in taxes by using S corporations. But with this tax savings comes complexity. This complexity comes from how S corporations flow through profit and have the profit taxed on the individual owner’s personal tax return. The rules for tracking this are, well, lacking. Accountants are often… Continue reading S Corp Conversions: Watch out for Disappearing AAA
Final Regulations Issued: Leveraged Partnership Distributions Still Viable
The “leveraged partnership distribution” or “disguised sale” is a common tax savings technique used by real estate owners. Taxpayers pushed the envelope with these transactions by using “bottom dollar guarantees.” This led to guidance from the government making it more difficult to benefit from leveraged partnership distributions. The Treasury recently finalized regulations that say what… Continue reading Final Regulations Issued: Leveraged Partnership Distributions Still Viable
The Importance of Accounting for C Corporation Expenses
It is important to keep accurate books and records. Accurate books and records can result in significant tax savings. This is particularly true for entrepreneurs who own more than one business. When one or more of these businesses are taxed as a C corporation, the stakes can be even higher. The Nzedu v. Commissioner, T.C.… Continue reading The Importance of Accounting for C Corporation Expenses
IRS & the Burden to Prove Constructive Dividends
When a C corporation pays expenses for its shareholder, the payment can be subject to income tax for the shareholder as a constructive dividend. One defense is that the expenses for the C corporation were legitimate. Does the taxpayer have to prove the amount of the expenses or does the IRS? The Combs v. Commissioner,… Continue reading IRS & the Burden to Prove Constructive Dividends