Note the breathtaking implications if in the future this decision is extended beyond
Subchapter S corporations, to include other business arrangements, such as partnerships, individual proprietorships, or limited liability corporations where there are pass-throughs of tax liability.
It is now organized as a
Subchapter S corporation with eight shareholders who are all related family members.
Many
Subchapter S corporations are locked into elections made years ago; while they would prefer to adopt the tax-favored partnership form, they cannot without a heavy tax toll charge.
A new Treasury Inspector General for Tax Administration (TIGTA) report, titled "The Internal Revenue Service Does Not Always Address
Subchapter S Corporations' Officer Compensation during Examinations," may signal the beginning of a new Service position on the compensation issue.
These figures included companies that had zero earnings as well as Subchapter C and
Subchapter S corporations. (
Subchapter S corporations have 35 or fewer shareholders and enjoy special tax advantages; Subchapter C corporations are regular corporations.)
Under the SBJPA, the law governing
subchapter S corporations underwent numerous changes, one area of which will open up new estate planning opportunities for CPAs concerning the types of trusts allowed to hold S corporation stock.
(63) See Joint Committee on Taxation, Law and Proposals Related To
Subchapter S Corporations and Home Office Deductions (JCS-16-95), 5/24/95, Table 3.
As a result, the only firms represented are individual proprietorships, partnerships and
Subchapter S corporations. Many of the larger black Subchapter C corporations were left out of the report altogether, a fact that leaves the validity of the census report open to debate.
Part of the problem with the Census Bureau report is its use of administrative data which includes only individual proprietorships, partnerships and
Subchapter S corporations. Many larger firms are Subchapter C corporations and are not captured in the Census data.
(2) Joint Committee on Taxation, Present Law and Proposals Relating To
Subchapter S Corporations and Home Office Deductions (JCS-16-95), 5/24/95, Table 3.
"Any hopes have been dashed," he said, "by nex taxes and the potential for additional health care costs." He added, "I just received a notice from a supplier announcing that it had raised prices for the first time in four years specifically because of higher taxes on
subchapter S corporations." He concluded, "The NFIB's growth forecast for the second half of the year might be on the optimistic side."