Nevertheless this conundrum allowed me the opportunity to drill down into the ‘check the box’ regulations. .” Basically when husband/wifes’s LLCs in question were granted S elections, they were electing to be associations, which in turn means that they were classified as corporations “for ALL federal tax purposes.” Treatment Under IRC 368 of LLCs That Have Elected Corporation Status The IRS has issued a number of private letter rulings that approve IRC 368 transactions involving LLCs that elected corporation status.Like most things these regulations start with eligibility. is treated as having made an election under this section to be classified as an association . The four PLRs below indicate that the IRS deems LLC ownership interests as “stock” for IRC 368 purposes.Except as provided in subparagraph (B), that portion of the distribution which is not a dividend, to the extent that it exceeds the adjusted basis of the stock, shall be treated as gain from the sale or exchange of property.
If no outside events happened to the shareholders individually - wouldn't the basis come from the balance sheet by each shareholders percentage?
I am more than willing to pay extra for your time and patience.
The corp is sold and no longer doing business, so the liquidating dividend would be a sale of stock.
I might have missed this answer - is there a list or an ordering of stock basis calculation?
I just wanted make sure I had a handle on the situation. 109-222, §102." Here is IRC 57(a)(7) being referred to in the article: General rule For purposes of this part, the items of tax preference determined under this section are- ...(7) Exclusion for gains on sale of certain small business stock An amount equal to 7 percent of the amount excluded from gross income for the taxable year under section 1202. The liquidation will take place for all shareholders at the same time, but as a technicality, it is the 'liquidation of the shareholders' interest' that will trigger the capital gain (assuming a corporation wanted to continue, it would be a purchase of the shareholder's stock directly as opposed to via a liquidation generally, should a single shareholder get bought out by the corporation or a third party). No stock was issued and nothing was paid in for ownership other than they were employees of the company.
The corp President is coming to the office tomorrow and we will go over all of the information. I'm thinking of the sunset provisions for the 7% AMT preference (AMTI = alternative minimum taxable income with respect to the alternative minimum tax, aka AMT): Article: Tax/Tax Exclusion_"The Jobs and Growth Tax Relief Reconciliation Act of 2003 (P. 108-27) amended Code §57(a)(7), resulting in only 7 percent of the excluded gain being included in AMTI. Because IRC 1202 applies to the gain recognized by shareholders, it is the timing of the shareholders' gain that should go through before 12/31/10... The corporation will file a final return too (check a box on Form 1120). Well of course 10% of the liquidating dividend is to go to the 10% owner's.This post addresses the tax implications of converting an LLC to a Corporation as part of a buyout strategy.The husband/wife were concerned that their LLCs electing S corporation status might not be able to engage in a corporate reorganization because the LLC’s were comprised of ‘member interests’ and they did not have any “stock” – which is a key term in IRC 368 governing statute.Recently a husband/wife owned 3 LLC’s that each successfully elected to be treated as S-corporations for federal income tax purposes by filing IRS Form 2553 – Election by a Small Business Corporation.Subsequently this great couple found themselves entertaining a rather complicated buyout offer of all 3 of their LLCs.The C Corp I am working with just went thru an asset sale of the company and will report the gain on sale. After all entries are made, gain on sale, taxes paid, etc we have left common stock and retained earnings. The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses).