Liquidating qsss qsub

Tweet The list of questions below leads to pages that answer the most common questions I get from CPA firm clients and from website visitors.Therefore, if you have a question about forming, operating or ending an S corporation, the answer probably appears below.

liquidating qsss qsub-31

Such a structure would have been inefficient for Edgewater from a tax perspective, however.   Because a stock purchase would not permit Edgewater to obtain a “step-up” in the basis of the underlying acquired assets for depreciation and amortization purposes.

To illustrate, if Edgewater had simply acquired say, 20% of the Fishnet stock for $10 million, it would have taken a basis in the acquired stock of $10 million.

First, if you transfer a liability along with property to the corporation and the liability exceeds the tax basis of the property, Section 357(c) kicks in, and you are required to recognize gain to the extent of the excess.

Second, a transferor may exclude gain on the transfer of appreciated property to a corporation if the transferor receives only stock of the corporation in exchange.

In Fish, here's what the two sides came up with: On its tax return for the year of the transaction, Holdings reported $9.7 of long-term capital gain.

The IRS challenged this treatment, arguing that the gain was ordinary income. To find out why, let’s take a tour through the transaction and the relevant statute.

Thus, a taxpayer who already owns say, 85% of a corporation may continue to transfer appreciated property to the corporation, and the gain will be deferred under Section 351.

In addition, Section 351 allows for a group of transferors.

Under Section 1361(b)(1)(B), an S corporation must generally have only individual shareholders; partnership or corporate shareholders are not permitted. Section 1361(b)(3) provides that an S corporation may be owned by another S corporation, provided that the parent S corporation hold 100% of the subsidiary S corporation’s stock and make a “qualified subchapter S subsidiary" (QSSS) election on behalf of the subsidiary.

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