The letter ruling describes three shareholders who planned to restructure their ownership of an S corporation with the same series of transactions.
Since for federal tax purposes, the LLC is "disregarded," the shareholder is deemed to own all of its S corporation stock; therefore, it is the sole owner of the limited partnership.
1368-l (g) election is its availability in situations other than when a shareholder is getting out of the S corporation (i.
Because these elections allocate only the total earnings of the tax year from the dates shares are owned, the future income/loss is being allocated to those shareholders, and only those shareholders, who still have ownership in the S corporation after the transfer date.
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.
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.
It concluded that U was thus treated as an S corporation immediately after the merger, and the reorganization did not terminate X's election to treat Sub1 as a QSub.
An S corporation may acquire a C corporation in a taxable stock acquisition.
If an S corporation wants to treat its wholly owned domestic subsidiary as a flowthrough entity, it could elect QSub status for the subsidiary on Form 8869, Qualified Subchapter S Subsidiary Election.
Example 1: Individual S is a shareholder in an S corporation.
If the S corporation has E&P from C corporation years, the character of the distribution is determined under Sec.
And the shareholder can structure the loan to be made at or near year-end, with repayment early in the subsequent year, resulting in minimal economic loan costs to the shareholder (the shareholder can use his own cash or borrow the funds to loan to the S corporation
for a short period of time).