In dispositions where T is an S corporation
, all of its shareholders must also make the election, whether or not they are selling their stock, for the election to be effective.
The letter ruling describes three shareholders who planned to restructure their ownership of an S corporation
with the same series of transactions.
1.1368-l (g) election is its availability in situations other than when a shareholder is getting out of the S corporation
(i.e., terminating his or her interest).
Note that the S corporation
transaction is presented for illustrative purposes; similar issues may arise in other variants of elections under Secs.
Some cases have held that when a sole shareholder of an S corporation
is the "central worker" of the corporation and performs more than minor services for the corporation, the sole shareholder should be treated as an employee; see Nu-Look Design, Inc.
Prior to the AJCA, an S corporation
could have no more than 75 shareholders.
The second situation was the same as the first, except that X transferred--by either sale or tax-free reorganization other than an F reorganization--all of its assets, including the Sub1 stock, to M, another S corporation
. In the third situation, X owned all of the membership interests in limited liability company LLC, an eligible entity that elected under Regs.
Schneider is a former chair and current member of the AICPA Tax Division's Corporations
& Shareholders Taxation Technical Resource Panel.
An S corporation
may acquire a C corporation in a taxable stock acquisition.
* Unlike an S corporation
shareholder, who reports corporate-level items on a per-day, per-share basis, if the decedents death did not occur on the last day of the partnership tax year, his share of partnership income for the year of death generally will not be includible in his final return.
Example 1: Individual S is a shareholder in an S corporation
. On jan.
It is not uncommon for an S shareholder with zero stock basis to loan money to the S corporation
to use either current year or suspended losses.