Principles of corporate taxation / by Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris.
2010
KF6465 .K35 2010 (Map It)
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Details
Author
Title
Principles of corporate taxation / by Douglas A. Kahn, Jeffrey H. Kahn, Terrence G. Perris.
Published
St. Paul, MN : West, [2010]
Copyright
©2010
Call Number
KF6465 .K35 2010
ISBN
9780314184962 (pbk.)
0314184961 (pbk.)
0314184961 (pbk.)
Description
xviii, 400 pages : illustrations ; 24 cm.
System Control No.
(OCoLC)647735179
Bibliography, etc. Note
Includes bibliographical references and index.
Series
Record Appears in
Gift
Gift of Prof. Marvin A. Chirelstein
Purchased from the income of the Edith L. Fisch Fund
Purchased from the income of the Edith L. Fisch Fund
Added Author
Gift
The Arthur W. Diamond Law Library
Gift of Prof. Marvin A. Chirelstein
Purchased from the income of the Edith L. Fisch Fund
Purchased from the income of the Edith L. Fisch Fund
Table of Contents
Preface
v
ch. One
Introduction
1
¶ 1.01
Overview
1
¶ 1.02
General Tax Treatment of C Corporations
2
¶ 1.03
Nonrecognition
4
¶ 1.04
What Organizations Constitute a Corporation?
5
¶ 1.05
Diagraming Transactions
7
ch. Two
Distributions to Shareholders: [§] 301 Distributions
9
¶ 2.01
Introduction
9
¶ 2.02
Amount Distributed
11
¶ 2.03
Definition of "Dividend"
12
¶ 2.04
Dividend-Received Deduction for Corporate Shareholders
16
¶ 2.05
Treatment of Dividend to a Noncorporate Shareholder
17
¶ 2.06
Earnings and Profits---In General
18
¶ 2.07
Effect of Discharge of Indebtedness on E and P
21
¶ 2.08
Effect of [§] 301 Distributions on E and P
22
¶ 2.09
Distribution of Corporation's Stock or Bonds
26
¶ 2.10
Amendments to [§] 312 and Depreciation Deductions
27
¶ 2.11
[§] 301 Distributions to 20 Percent Corporate Shareholder
30
¶ 2.12
Distributions to Shareholders in Excess of Earnings and Profits
32
¶ 2.13
Extraordinary Dividends to a Corporate Shareholder
33
¶ 2.14
Basis of Property Distributed to Shareholders
35
¶ 2.15
Distributing Corporation's Recognition of Gain or Loss: General Utilities Doctrine
35
¶ 2.16
Current Status of General Utilities
36
¶ 2.17
Disguised and Constructive Dividends
37
ch. Three
Distributions in Redemption of Stock
39
¶ 3.01
Introduction
39
¶ 3.02
Attribution of One Individual's or Entity's Stock Ownership to a Different Individual or Entity
41
¶ 3.03
Tax Consequences of Stock Redemption
45
¶ 3.04
Purchase or Dividend Treatment?---Standards Set at the Shareholder Level
50
¶ 3.04.1
[§] 302(b)(1)---Not Essentially Equivalent to a Dividend
50
¶ 3.04.2
Substantially Disproportionate Redemptions
56
¶ 3.04.3
Termination of Shareholder's Interest
58
¶ 3.04.3.1
Preclusion of Family Attribution
58
¶ 3.04.3.2
Waiver of Attribution by an Entity
62
¶ 3.05
Partial Liquidations---Standards Set at the Corporate Level
63
¶ 3.06
Gain or Loss Recognized by Distributing Corporation
68
¶ 3.07
Distribution in Redemption of Stock That Was Included Within the Gross Estate of a Decedent for Federal Estate Tax Purposes
68
¶ 3.08
Effect of Redemption of Stock on Corporation's Earnings and Profits
70
¶ 3.09
Extraordinary Dividend Resulting From Stock Redemption or Partial Liquidation
73
¶ 3.10
Redemption of Stock of One Shareholder as a Dividend to Other Shareholders
74
¶ 3.11
Constructive Redemption---The Sale of Corporate Stock Either to a Subsidiary Corporation or to a Sister Corporation
75
¶ 3.11.1
Brother-Sister Corporations
76
¶ 3.11.2
Parent-Subsidiary Corporations
79
¶ 3.11.3
Overlap With [§] 351
81
ch. Four
Complete Liquidation of a Corporation
83
¶ 4.01
Introduction
83
¶ 4.02
A Liquidating Corporation's Recognition of Gain or Loss
85
¶ 4.03
Shareholder's Treatment in an Ordinary Liquidation
91
¶ 4.04
Reincorporations
92
¶ 4.05
Liquidation of a Controlled Subsidiary Corporation
93
¶ 4.05.1
Requisites for Nonrecognition for Parent Corporation
94
¶ 4.05.2
Minority Shareholders
98
¶ 4.05.3
Taxation of the Liquidating Subsidiary
98
¶ 4.05.4
Partial or Full Satisfaction of Subsidiary's Indebtedness to Its Parent Corporation
100
ch. Five
Taxable Purchase and Sale of a Corporate Business
103
¶ 5.01
Introduction
103
¶ 5.02
Sale of Assets
103
¶ 5.03
Sale of Stock
105
¶ 5.03.1
Sale of Stock Followed by Liquidation of Target
106
¶ 5.03.2
Section 338 Election
107
¶ 5.04
Section 338(h)(10) Election
111
¶ 5.05
New T's Basis in Its Assets
113
¶ 5.06
Section 336(e) Election
116
ch. Six
Distribution of Stock and Section 306 Stock
119
A.
Stock Dividends
¶ 6.01
Introduction
119
¶ 6.02
The Nature of Stock Dividends
120
¶ 6.03
Historical Background / Eisner v. Macomber
120
¶ 6.04
Section 305---In General
121
¶ 6.05
Stock Dividend Equivalents
127
¶ 6.06
Treatment of a Taxable Stock Dividend
129
¶ 6.07
Basis of Stock Received as a Tax-Free Dividend Under [§] 305(a)
129
B.
Preferred Stock Bailouts And Section 306 Stock
¶ 6.08
Introduction
131
¶ 6.08.1
Definition of "Section 306 Stock"
134
¶ 6.08.2
Disposition of Section 306 Stock
137
¶ 6.08.3
Exemption From [§] 306 Treatment
139
ch. Seven
Organization of a Corporation
141
¶ 7.01
Introduction
142
¶ 7.02
Basic Rules Apart From [§] 351
142
¶ 7.03
Basic Overview of [§] 351(a)
143
¶ 7.04
Basis Limitation Rules
146
¶ 7.05
[§] 351 Requirements---Business Purpose and Continuity of Interest
148
¶ 7.06
[§] 351 Requirements---"Persons in Control Immediately After the Exchange"
149
¶ 7.06.1
Accommodation Transfers
150
¶ 7.06.2
"Immediately After"
152
¶ 7.07
[§] 351 Requirements---The Transferor Must Transfer "Property"
153
¶ 7.08
[§] 351 Requirements---The "Exchange" Requirement
154
¶ 7.09
[§] 351 Requirements---Transfers "Solely in Exchange for Stock"
155
¶ 7.10
Contribution of Capital
156
¶ 7.11
Receipt of "Boot," Part I (In General)
156
¶ 7.11.1
Nonqualified Preferred Stock
159
¶ 7.11.2
Controlled Corporation's Recognition of Gain or Loss
163
¶ 7.12
The Receipt of Boot, Part II (Corporate Assumption of Transferor Liability and Netting of Obligations)
163
¶ 7.12.1
Tax Avoidance Purpose
165
¶ 7.12.2
Liabilities in Excess of Basis
166
¶ 7.12.3
Liabilities That Would Give Rise to a Deduction
169
¶ 7.12.4
Avoiding [§] 357(c)
171
¶ 7.12.5
Liabilities in Excess of Fair Market Value
174
¶ 7.13
The Receipt of Boot, Part III (Corporate Obligations to Shareholder)
174
¶ 7.14
Overriding [§] 351
175
¶ 7.14.1
Statutory Overrides---Depreciation Recapture ([§] 1245)
175
¶ 7.14.2
Statutory Overrides---Related Party Transactions ([§] 1239)
176
¶ 7.14.3
Statutory Overrides---Reallocations by the Commissioner ([§] 482)
177
¶ 7.14.4
Statutory Overrides---Anti-Bailout Rule I ([§] 304)
178
¶ 7.14.5
Statutory Overrides---Anti-Bailout Rule II ([§] 306)
178
¶ 7.15
Non-Statutory Overrides
179
¶ 7.15.1
Non-Statutory Overrides---Assignment of Income
179
¶ 7.15.2
Non-Statutory Overrides---The Tax Benefit Rule
180
¶ 7.15.3
Non-Statutory Overrides---Business Purpose Test and Court Holding Doctrine
180
ch. Eight
Corporate Divisions
183
¶ 8.01
Introduction
184
¶ 8.02
Types of Corporate Divisions
185
¶ 8.03
Nonrecognition Treatment and the Potential for Tax Avoidance
185
¶ 8.04
An Overview of [§] [§] 355 and 356
187
¶ 8.05
"Stock or Securities"
189
¶ 8.06
Distribution of a Controlling Interest
191
¶ 8.07
The "Device" Test
191
¶ 8.08
The Five-Year Active Trade or Business Requirement
195
¶ 8.08.1
Active Conduct of a Trade or Business
195
¶ 8.08.2
Active Conduct of a Trade or Business Through a Subsidiary
198
¶ 8.08.3
The Five-Year Requirement
199
¶ 8.08.4
Division of an Integrated Business and the Problem of "Expansions"
200
¶ 8.08.5
Corporate Divisions Followed by Corporate Acquisitions
203
¶ 8.09
Nonstatutory Requirements---Business Purpose and Continuity of Interest
204
¶ 8.09.1
Business Purpose
204
¶ 8.09.2
Continuity of Interest
207
¶ 8.10
Boot
210
¶ 8.10.1
Excess Securities Boot
211
¶ 8.10.2
Stock Boot
212
¶ 8.10.3
Nonqualified Preferred Stock Boot
214
¶ 8.11
Tax Consequences for Shareholders When Boot Is Distributed
214
¶ 8.11.1
[§] 356---General Rules
214
¶ 8.11.2
[§] 356---Amount and Characterization of Gain
215
¶ 8.11.3
[§] 356---Special Problems in Split-Offs With Boot
215
¶ 8.11.4
[§] 356---Testing for Dividend Equivalency
216
¶ 8.12
Basis Calculation
219
¶ 8.13
Taxation of the Distributing Corporation
220
¶ 8.13.1
Not Pursuant to a Reorganization
221
¶ 8.13.2
Pursuant to a Reorganization
222
¶ 8.13.3
Gain Recognition Required by [§] 355(d) and (e)
223
¶ 8.13.3.1
[§] 355(d)
224
¶ 8.13.3.2
[§] 355(e)
229
¶ 8.14
Earnings and Profits
232
ch. Nine
Reorganizations
233
¶ 9.01
Introduction
233
¶ 9.02
General Tax Consequences of Mergers and Acquisitions That Qualify as Reorganizations
235
¶ 9.03
Reorganizations---Extra-Statutory Requirements
236
¶ 9.03.1
Continuity of Proprietary Interest
236
¶ 9.03.2
Continuity of Business Enterprise
240
¶ 9.03.3
Other Extra-Statutory Doctrines
243
¶ 9.04
Overview of the Statutory Requirements of Reorganizations
244
¶ 9.04.1
A Reorganizations
244
¶ 9.04.2
B Reorganizations
247
¶ 9.04.3
C Reorganizations
253
¶ 9.04.4
Triangular Reorganizations
258
¶ 9.04.5
D Reorganizations
265
¶ 9.04.5.1
Divisive D Reorganizations
266
¶ 9.04.5.2
Acquisitive D Reorganizations
267
¶ 9.04.6
E Reorganizations
269
¶ 9.04.6.1
Exchange of Stock for Stock
270
¶ 9.04.6.2
Exchange of Bonds for Stock
272
¶ 9.04.6.3
Exchange of Bonds for Bonds
272
¶ 9.04.6.4
Exchange of Stock for Bonds
272
¶ 9.04.7
F Reorganizations
273
¶ 9.04.8
G Reorganizations
274
¶ 9.05
A Closer Look at Statutory Reorganizations
274
¶ 9.05.1
Tax Treatment of Simple A Reorganizations
276
¶ 9.05.2
Tax Treatment of Simple B Reorganizations
277
¶ 9.05.3
Tax Treatment of Triangular B Reorganizations
277
¶ 9.05.4
Tax Treatment of Simple C Reorganizations
280
¶ 9.05.5
Tax Treatment of Triangular C Reorganizations
280
¶ 9.05.6
Tax Treatment of Triangular A Reorganizations: Forward and Reverse Triangular Mergers
283
¶ 9.05.7
Acquisitive D Reorganizations
287
¶ 9.06
Tax Treatment of Shareholders Who Receive Boot in Qualifying Reorganization
288
¶ 9.07
Tax Treatment of Target Corporation (Distribution of Appreciated Assets)
292
¶ 9.08
The Rise of [§] 351 Exchanges as an Alternative to a Reorganization
294
ch. Ten
Acquisition or Retention of Tax Attributes
297
¶ 10.01
Introduction
297
A.
Acquisition Of Tax Attributes
¶ 10.02
Introduction
299
¶ 10.03
Liquidation of Subsidiary Corporations
300
¶ 10.04
Acquisitive Reorganizations
300
¶ 10.05
Triangular Reorganizations
301
¶ 10.06
Taxable Years and Carrybacks
302
¶ 10.07
Net Operating Losses
303
¶ 10.08
Earnings and Profits
304
B.
Statutory Limitations
¶ 10.09
Introduction
306
¶ 10.10
The [§] 382 Limitation---Overview
307
¶ 10.11
Objective of [§] 382 Limitation
308
¶ 10.12
Events that Cause the Application of the Limitation
309
¶ 10.13
The Amount of the [§] 382 Limitation
318
¶ 10.14
Continuity of Business Requirement
321
¶ 10.15
Insolvent Corporations
322
¶ 10.16
Recognized Built-in Gains and Losses
322
¶ 10.17
The [§] 383 Limitation on Carryovers of Net Capital Losses and of Certain Tax Credits
326
¶ 10.18
Limitation on Offsetting Preacquisition Losses and Credits of One Corporation Against Another's Built-In Gains
326
¶ 10.19
Acquisitions Made to Evade or Avoid Income Tax---[§] 269
329
C.
Non-Statutory Limitation On Survival Of Tax Attributes
¶ 10.20
The De Facto Dissolution Doctrine
331
ch. Eleven
S Corporations
333
¶ 11.01
Small Businesses---Introduction
333
¶ 11.02
Subchapter S---Introduction
334
¶ 11.03
Application of Subchapter C to S Corporations
336
¶ 11.04
Eligibility, In General
336
¶ 11.05
Qualified Subchapter S Subsidiary ("QSSS" or"QSub")
338
¶ 11.06
Trusts as Shareholders
338
¶ 11.07
One Class of Stock Requirement, In General
340
¶ 11.08
Debt as a Second Class of Stock
340
¶ 11.09
Call Options and Warrants as a Second Class of Stock
342
¶ 11.10
Buy-Sell Arrangements
342
¶ 11.11
Difference in Amounts or Timing of Actual Distributions
342
¶ 11.12
Election
343
¶ 11.13
Taxable Year
344
¶ 11.14
Taxation of the S Corporation
344
¶ 11.15
Earnings and Profits
345
¶ 11.16
Pass-Through of Tax Items, In General
346
¶ 11.17
Shareholder's Basis---Adjustments
347
¶ 11.18
Order of Adjustments to Shareholder's Basis
348
¶ 11.19
Limitations on Deductions, In General
349
¶ 11.20
At Risk and Passive Activity Loss Limitations
350
¶ 11.21
Distributions to Shareholders---No Earnings and Profits
351
¶ 11.22
Distributions to Shareholders---Accumulated Adjustments Account (AAA)
351
¶ 11.23
Distributions to Shareholders of Property
354
¶ 11.24
Distributions to Shareholders During Post-Termination Transition Period
354
¶ 11.25
Termination of S Election---Revocation
355
¶ 11.26
Termination of S Election---Cessation of Qualification
355
¶ 11.27
Termination of S Election---Passive Investment Income
356
¶ 11.28
New S Election After Termination
357
¶ 11.29
S Termination Year
357
¶ 11.30
Taxation of Passive Investment Income
357
¶ 11.31
Purpose and Operation of [§] 1374
359
¶ 11.32
LIFO Recapture Amount
363
Table of Cases
365
Table of Internal Revenue Code Sections
369
Table of Treasury Regulations
383
Table of Revenue Rulings
389
Table of Miscellaneous Decisions
391
Index
393