By John G. Hodnette Section 1361(b)(1) provides a corporation can qualify for taxation as an S corporation only if none of its owners are nonresident aliens, foreign entities, partnerships, corporations, or ineligible trusts. An S corporation shareholder generally must be a U.S. resident individual, but there are several exceptions. Section 1361(b)(1)(B) allows decedent’s estates, eligible trusts, […]
By John G. Hodnette Subject to the origin of the claim test, most judgments or settlements paid by a business are fully deductible as ordinary and necessary business expenses under Section 162(a). However, one exception is in Section 162(f), which provides “no deduction otherwise allowable shall be allowed under this chapter for any amount paid or […]
By Keith A. Wood I. Sections 453 and 1042 Deferral Provisions Can Apply in the Same ESOP Transaction; Berman vs. Commissioner, 163 TC No. 1 (2024). In 2002, Mr. and Mrs. Berman sold their closely held C corporation stock to an ESOP for promissory notes. They did not receive any sale proceeds in 2002. They […]
By John G. Hodnette The doctrine of equitable recoupment applies to both assessment by the IRS (in Section 6501) and refunds by taxpayers (in Section 6511) where the IRS or taxpayer may characterize a transaction, item, or event in a different way in open tax years than it was characterized in a closed year. Inconsistencies between […]
By John G. Hodnette Pursuant to Rev. Proc. 2001-43, recipients of unvested profits interests are treated as partners on the date of grant regardless of whether they make Section 83(b) elections. Therefore, when the profits interest later vests, there is no additional income provided the parties meet the requirements of Rev. Proc. 2001-43 and Rev. Proc. […]
By Keith A. Wood I. Conservation Easement Charitable Deduction Limited to Taxpayer’s Basis in Ordinary Income Property; Oconee Landing Property vs. Commissioner, TC Memo 2024-25. Oconee Landing Property, LLC claimed a charitable contribution deduction of almost $21 million for its donation of a conservation easement on property it owned in Georgia. The IRS disallowed the […]
By John G. Hodnette The assignment of income doctrine was established in Lucas v. Earl, 281 U.S. 111 (1930). It is a judicial doctrine that requires income earned by a taxpayer to be taxed to the taxpayer regardless of to whom it is paid. In Lucas, the taxpayer assigned to another individual his right to receive […]
By John G. Hodnette Section 409A addresses the taxation of nonqualified deferred compensation plans. A nonqualified deferred compensation plan is any arrangement that provides for the deferral of compensation, subject to exceptions. Section 409A is a response to executive compensation practices Congress felt were inappropriately beneficial. Amounts deferred that do not meet the requirements of Section […]
By John G. Hodnette Tax practitioners are familiar with Subchapter C (C corporations), Subchapter K (partnerships), and Subchapter S (S corporations) but are generally less familiar with Subchapter T (§§ 1381-1388), which governs the taxation of cooperatives. A cooperative is an association otherwise taxable as a C corporation that markets, purchases, or performs business functions for […]
By Reed J. Hollander I trust everyone is having a good summer and finding enjoyable ways (aside from work) to avoid the heat and the daily downpours. We were fortunate this year to have wonderful weather during our annual CLE at Kiawah Island. Our CLE co-chairs, Kristin King and Jordan Fieldstein, did an outstanding job […]