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.

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509 (1970); Hickman, The Thin Corporation: Another Look at an Old Disease, 44 Taxes 883 (1966).
Variable rate preferred stock: current status and prospects for a continuing favorable tax climate in the 1980s and 1990s

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