Acquiring a “C” with an “S”? Consider Making a Qsub Election

Have an “S” Corporation?  Want to acquire a corporation and treat it as a subsidiary?  Want to avoid double taxation on the acquired corporation’s income?  Consider making a Qsub election. An “S” corporation can acquire and own the stock of a “C” corporation.  But having an “S” corporation own a “C” corporation may not make…

Profits Interest vs Capital Interest – What’s the Difference?

When an ownership interest in a partnership (or LLC taxed as a partnership) is transferred to a member in exchange for services, the tax consequences of such transfer are governed by partnership tax law.  Ownership interests in partnerships can be profits interest, capital interests or both.  Partnership tax law is quite complex, and there is…

Allocating Income Using the Closing of the Books Method

When a shareholder joins or leaves an S corporation during the year, it can cause many problems. Among these problems is the question of how to allocate income for tax purposes. The IRS has issued Treasury Regulations to clarify how to deal with some of these situations. The S corporation’s structure is simple.  There is…