We frequently hear about the many wealthy foreigners who acquire investment interests in New York real property, and the complex tax considerations relating to such investments. Yet, we sometimes forget that there are many US persons outside of NY (New Jersey is still part of the US, right? Oh well) who are drawn to an
What Dividend Distribution?
In the last several weeks, I have seen a number of examples of what are commonly referred to as “constructive dividends,” including a corporation’s satisfaction of the personal expenses of its shareholders.
Unlike a regular dividend distribution, a constructive dividend does not involve the formal declaration of a dividend by the corporation, followed…
C Corp-to-S Corp: It “Pays” To Be The Last In and First Out?
Tax-Free? Not Quite.
In general, a C corporation may achieve pass-through treatment for income tax purposes, without triggering immediate income or gain recognition, by electing to be treated as an S corporation.
One caveat to this general rule, however, is the so-called “LIFO Recapture” rule. Under IRC Sec. 1363(d), an electing C corporation that…
Oh No! Valuation Discounts Under Siege?
Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.
Mayor: What do you mean, “biblical”?
Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath of God type stuff.
Dr. Peter Venkman: Exactly.
Dr Ray Stantz: Fire and brimstone coming down from the…
Don’t Be Passive About Losing the “S” Election
They’re Still Here
Once upon a time, before the advent of limited liability companies (“LLCs”), taxpayers would occasionally acquire real property in a corporation rather than in a limited partnership.
The corporation may have been created to hold the real property, or it may have been an operating company that, for some misguided reason, decided…
The Disgruntled Shareholder & “Breaking” the S Election, Part I
During the course of the year, we encounter a number of shareholder disputes. Sometimes we represent a minority shareholder; sometimes we represent the corporation or the majority shareholders.
Regardless of who the players are, the resolution of the dispute will involve some economic deal. The economic deal, in turn, will depend in no small part…
Shareholder Buy-Outs In A Closely-Held Corp: Part II
Our last post examined what are commonly thought of as the most “direct” income tax consequences arising from a the buy-out of a departing shareholder by way of a cross-purchase or redemption of his or her shares. However, there are a number of other tax consequences to be considered that are no less direct, and…
The IRS Considers an S Corp Redemption Plan
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…
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…