thin corporation

thin corporation

A corporation with large debts to its shareholders and very little equity.In such a situation,the IRS may reclassify the debt as equity investment,meaning payments to shareholders do not include tax-deductible interest but are, instead, dividend payments. Thinly capitalized corporations are used for a variety of sophisticated tax planning vehicles.

References in periodicals archive ?
509 (1970); Hickman, The Thin Corporation: Another Look at an Old Disease, 44 Taxes 883 (1966).