Complex Tax Challenges – Shareholder’s Basis in S Corporation Stock and Debt: What You Need to Know in 2015
Few things match the daunting complexity and confusion of tax regulations regarding Unicap and partnership capital account maintenance rules. But, determining Shareholder's Basis in S Corporation Stock and Debt is a challenge even to taxation specialists. In July 2014, the IRS issued final regulations addressing indebtedness of S corporations to their share-holders, ruling that S corporation shareholders may increase their debt basis only if the indebtedness is bona fide.
Ideally, shareholders must track this basis. But in-variably, this is left to tax professionals. The rules are written to distinguish between C and S corporations. In S corporations, tax on income is allocated to the corporation’s shareholders who report it in their individual tax returns (pass through). Debt must be directly from the shareholder to the S corporation and the shareholder must have an actual economic out-lay.
The Knowledge Group has assembled a panel of key thought leaders to provide the audience with an over-view and in-depth discussion of S Corporation stock and debt share-holder basis regulations, challenges, and legal up-dates. In this CLE webinar, the panel of speakers also will help listeners understand how distributions from an S corporation are taxed, how to calculate and adjust a shareholder's initial stock and debt basis, determine the timing and ordering rules and consequences of re-paying reduced-basis debt, and they will discuss compliance risks.
Some of the major topics that will be covered in this course are:
- S Corporation Regulations
- Recent Legal Issues on S Corp and Tax- Exempt Organizations
- C Corporation vs. S Corporation
- Direct Debt
- Economic Outlay
- Fund Sources and Flow
- Unrelated Business Taxable Income (UBTI) Liabilities
- Excess Business Holdings Tax
- Best Practices to Resolve Complex Tax Challenges
- Possible Legal Actions
Mitchell Silberberg & Knupp LLP
- Why is basis in debt important for an S corporation shareholder;2. What type of shareholder debt qualifies (i.e. must be direct debt and not guarantees and shareholders do not share in debt of S corporations);
- Restoration of basis in debt and
- Gain recognized on repayment.
- Charitable contributions by S corporations (“inside” versus “outside” basis issues with pass-through of charitable deduction)
- Charitable contributions of S corporation stock (quasi-“hot assets” rule; unrelated business taxable income trap)
- Liquidation/distributions of appreciated property (section 1239 / ordinary income versus capital loss trap)
- Transition from S to C status (effect of outside basis on distributions)
- Inherited S corporation stock (income with respect to decedent, “inside” versus “outside” basis, maintenance of S election issues)
McGinnis Lochridge & Kilgore LLP
- Designing the debt to avoid the One Class of Shareholder rule
- Timing of debt obligations and basis limitations
- Treatment of open account debt
- Worthless debt
- Compare to partnership rules
Who Should Attend:
- Tax Advisers
- Tax Directors
- Tax Preparers
- Tax Attorneys
- Tax-Exempt Auditors
- Tax Compliance Officers
- Tax Managers
- Tax-Exempt Organization Lawyers
Robin Gilden is Partner in Mitchell Silberberg & Knupp’s Los Angeles office and is a member of the Trusts and Estates and Tax Practice Groups. Her practice focuses on issues relating to tax and wealth planning, international tax, employee benefits and executive compensation, business transactions tax, tax controversies, corporate matters and healthcare. Robin is a frequent author and speaker on tax and wealth planning issues for several organizations including the Bureau of National Affairs (BNA), California Society of CPA’s, and the Beverly Hills Bar Association. She has been recognized as a Southern California Super Lawyer. Robin earned her B.A. and J.D. from New York University.
Robin Gilden is Partner in Mitchell Silberberg & Knupp’s Los Angeles office and is a member of the Trusts and …
Douglas Schwartz, a Partner in Nossaman LLP’s Los Angeles office, specializes in tax matters (international, federal, state, and local) as they affect individual and compensation planning; business formations, transactions, and operations; charities, public pension systems, and other tax-exempt entities; and investments in different asset classes and investment vehicles. He has a comprehensive understanding of the complex local, state, and federal laws and regulations that affect personal and business taxes for a wide variety of industries, including entertainment, internet, manufacturing, real estate, sports, nonprofit, and public agencies, and including advice on sales and use tax; Proposition 13; documentary transfer; and local business license taxes in addition to income and franchise taxes.
Douglas Schwartz, a Partner in Nossaman LLP’s Los Angeles office, specializes in tax matters (international, federal, state, and local) as …
Robert E. Reetz, Jr. concentrates his law practice in the areas of Mergers and Acquisitions, Taxation, Corporate Restructuring, Business Organizations, Financing Transactions and Contracts. As a Certified Accountant and Board Certified in Tax Law by the Texas Board of Specialization, Mr. Reetz is able to provide a distinctive perspective on maximizing the shareholder/owner value in a business transaction though the formation, merger, spin off, reorganization, merger or acquisition. Mr. Reetz has managed the start up of an entity or organization, guide it through its development and through the most challenging aspects of the business life including the ultimate sale of the business or transition to new ownership and management. With years of experience as a tax attorney, Mr. Reetz is able to provide tax planning for a business along with representing taxpayers in controversy matters all the way through the administrative process including the U.S. Tax Court. His experience includes planning and preparing corporation documentation such as stock option plans, stock transactions, secured transactions, employee benefits, loan documentation and estate tax planning. Mr. Reetz's current professional activities includes serving as the president of the Austin Tax Study Group. He has also been recognized by Martindale Hubbell® as an AV® Preeminent™ attorney and has been named to the Best Lawyers© list in the field of Tax law since 2012. Mr. Reetz is also involved in his community and serves on several neighborhood and boards.
Robert E. Reetz, Jr. concentrates his law practice in the areas of Mergers and Acquisitions, Taxation, Corporate Restructuring, Business Organizations, …
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About Mitchell Silberberg & Knupp LLP
Established in 1908, Mitchell Silberberg & Knupp LLP (MS&K) maintains a well-deserved reputation of excellence in providing sophisticated, pragmatic and cost-effective legal and business solutions for its clients. A premier mid-sized law firm, MS&K offers clients the highest quality legal work and exceptional, personal client service. Many of our 130 attorneys are regularly recognized as leaders in their respective fields and the firm is often distinguished as a "go-to" firm by industry and legal insiders. From our offices in Los Angeles, New York and Washington, D.C., the complex, important and often ground-breaking matters on which we work attract the best and brightest attorneys to join the firm. We are proud that so many of our clients have for decades turned to MS&K for counsel and representation, and we work hard to earn their loyalty every day.
About Nossaman LLP
Nossaman LLP is a California-based national law firm with 160 professionals who work seamlessly across seven U.S. offices in Los Angeles, Orange County, San Francisco, and Sacramento, California; Austin, Texas; Washington, DC; and Arlington, Virginia. We utilize a multi-disciplinary approach that combines the skills and experience of our transactional and regulatory attorneys, litigators, and state and federal policy advisors to achieve clients' goals. Nossaman focuses its practices on several key areas of law and industries including corporate, taxation, real estate, employment, financial services, insurance coverage, environmental, and litigation matters.
About McGinnis Lochridge & Kilgore LLP
McGinnis Lochridge is a highly experienced, multi-practice Texas law firm that has provided innovative, efficient, timely, and effective legal services for our clients for 85 years. Formed in 1927 and continuing to spread its deep roots in Texas and the greater southwest, the firm has maintained and strengthened its legislative, regulatory and judicial traditions. We have been fortunate to count among our lawyers distinguished leaders in judicial, legislative and other governmental positions, including state and federal trial judges, a Chief Justice and a Justice of the Texas Supreme Court, a Justice on the U.S. Court of Appeals for the Fifth Circuit, state and federal legislators, a past president of the Texas Bar and a Governor of Texas. The firm continues to grow and adapt to meet our clients’ diverse needs in a changing and increasingly complex business and legal environment.
With offices in Austin and Houston, the firm maintains a broad civil law practice in all Texas state and federal agencies, courts, and before the Texas legislature. Our clients range from individuals and small businesses to some of the world’s largest corporations.
At McGinnis Lochridge, each client and every legal matter receives senior-level attention. This level of focus ensures maximum value, efficiency and results. At the same time, the breadth of our practice areas enables clients to rely on McGinnis Lochridge as a comprehensive resource — a single-source, trusted advisor that can address their most challenging business and legal needs.