No, this post is not “Part II” to last week’s piece on the tax consequences of a stock redemption. That being said, it describes an interesting redemption-related ruling that was recently issued by the IRS. The ruling considered a redemption plan proposed to be adopted by a closely-held business. The context for the plan
Shareholder Buy-Outs In A Closely-Held Corp.: Part I
Every owner of a closely-held corporation has certain property rights, arising from his or her status as an owner, that have economic value to the owner. At the inception of the business, the owner may count among these rights the ability to share in the profits generated by the business, whether in the form of
When A Loan Is Really A Dividend
Related parties, be they family members or commonly-controlled business entities, must be careful when transacting business with one another. They, and their advisers, must recognize that these transactions will be subject to close scrutiny by the IRS. The parties must treat each other, as much as possible, as unrelated persons, and they must be able
Installment Reporting? Maybe Not
Installment Sale of Business
Why Defer Receipt of Purchase Price?
Generally speaking, the seller of a closely held business would prefer to be paid in cash at closing. There are situations, however, in which the seller may prefer to dispose of the business in exchange for some combination of cash and an installment note, especially
Employers, FICA Taxes & Deferred Comp: “When Was I Supposed to Withhold?”
Nonqualified Deferred Compensation
In general, a nonqualified deferred compensation plan allows an executive to defer the “receipt” and income taxation of a portion of his compensation to a tax period after the period in which the compensation is earned (i.e., the time when the services giving rise to the compensation are performed).
The payment of
Deal Economics: Contingent Purchase Price & Imputed Interest
Deferred Payments
It goes without saying that when a taxpayer disposes of property in a taxable sale or exchange, the gain realized on the sale will be subject to tax. Depending upon the nature of the asset disposed of, the gain may be taxable at ordinary or at capital gain rates.
It is also generally
From “S” to “C” to “S,” or, “But I Was Already Taxed On That”
It is relatively easy for an S corporation to inadvertently lose its tax status. For example, a disgruntled shareholder may transfer all or a portion of his or her shares to a person that is not qualified to hold S corporation shares, such as a C corporation or a nonresident alien. Upon the occurrence of
Hot Partnership Assets & Installment Sales
Installment Reporting: Sale of Corporate Stock v. Sale of Partnership Interest
Most advisers understand that if a taxpayer sells his or her shares of stock in a corporation in exchange for a promissory note, the taxpayer generally can defer recognition of the gain realized on the sale until principal payments are received on the note
The Burden of Responsibility
It’s great to be the chief executive of a business that is doing well. You are likely being paid well, in some combination of salary, bonus and distributions, you enjoy the many other perks that are attendant to the position, and, of course, there is the prestige that goes along with the job.
Unfortunately, a
Corporate Events as Indirect Gifts
Last month we considered a situation in which the recapitalization of the equity in a family-controlled business resulted in a taxable gift. Today we will consider how a family-owned corporation’s redemption of shares from a parent-shareholder may be treated as a taxable gift from the parent, and may result in some unexpected consequences for the