Tax & Sports Update

S Corporation - When Should You Keep the S Corporation Alive After an Asset Sale?

Posted by Joseph B. Darby III on Apr 16, 2015 2:36:00 PM

dollarsign.jpgThe Situation

In contrast to the situation discussed in another blog post where, immediately after an asset sale, the S corporation's inside tax basis is greater than the shareholders outside tax basis, an entirely different tax strategy may make sense if the tax basis relationship is reversed — i.e., when the inside tax basis is higher than the outside tax basis.

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Topics: Tax Law, Partnership Tax, S Corporation

Converting an S Corporation into an LLC Tax Free! – The Drop-Down Transaction

Posted by Joseph B. Darby III on Mar 19, 2015 10:44:00 AM

LLC.jpgAssume an S corporation is owned 50-50 by two individuals, and one wants to buy out the other. This transaction will not come within the scope of the transactions where a § 338(h)(10) or §336(e) election will be applicable, so there is no “easy” path to get (mostly) capital gain to the seller and a full step-up in tax basis to the buyer. The question, therefore, is how best to implement this acquisition in a “tax efficient” manner.

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Topics: Corporate Tax, Tax Law, Partnership Tax, S Corporation

The Holy Grail: How to Get Inside Tax Basis When Buying S Stock

Posted by Joseph B. Darby III on Mar 5, 2015 11:00:00 AM

holygrail.jpgOne of the important differences between an S corporation and a partnership, and one of the drawbacks to choosing S corporation status, is the fact that if a partnership makes a § 754 election, then a purchaser of an interest in the partnership can receive the equivalent of a step-up in “inside” tax basis (meaning the tax basis of partnership assets in the hands of the partnership) and thereafter enjoy enhanced amortization or depreciation deductions.

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Topics: Corporate Tax, Tax Law, Partnership Tax, S Corporation

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