Fundamentals of corporate taxation : cases and materials / by Stephen Schwarz, Daniel J. Lathrope.
2012
KF6464 .S39 2012 (Map It)
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Details
Author
Title
Fundamentals of corporate taxation : cases and materials / by Stephen Schwarz, Daniel J. Lathrope.
Published
New York : Foundation Press : Thomson Reuters, 2012.
Call Number
KF6464 .S39 2012
Edition
Eighth edition.
ISBN
9781609300685 (alk. paper)
1609300688 (alk. paper)
1609300688 (alk. paper)
Description
lxxii, 720 pages ; 26 cm.
System Control No.
(OCoLC)798066198
Note
Revised edition of: Fundamentals of corporate taxation / by Stephen A. Lind [and others].
Bibliography, etc. Note
Includes bibliographical references (pages lxix-lxxii) and index.
Series
Record Appears in
Gift
Gift of Professor Marvin A. Chirelstein
Added Author
Gift
The Arthur W. Diamond Law Library
Gift of Professor Marvin A. Chirelstein
Table of Contents
Preface
v
Table of Internal Revenue Code Sections
xxvii
Table of Treasury Regulations
li
Table of Revenue Rulings
lix
Table of Miscellaneous Rulings
lxi
Table of Cases
lxiii
Table of Authorities
lxix
pt. ONE
Introduction
1
ch. 1
An Overview of the Taxation of Corporations and Shareholders
2
A.
Introduction
2
1.
Taxation of Business Entities
2
2.
Influential Policies
4
3.
The Common Law of Corporate Taxation
10
B.
The Corporation as a Separate Taxable Entity
14
1.
The Corporate Income Tax
14
2.
The Corporate Alternative Minimum Tax
19
3.
Multiple Corporations
22
4.
The S Corporation Alternative
23
Problem
26
C.
Corporate Classification
27
1.
In General
27
2.
Corporations vs. Partnerships
29
a.
"Check-The-Box" Regulations
29
b.
Publicly Traded Partnerships
32
3.
Corporations vs. Trusts
33
D.
Recognition of the Corporate Entity
34
Commissioner v. Bollinger
34
E.
Tax Policy Issues
39
1.
Corporate Integration
39
Excerpt From Canellos, "Tax Integration by Design or by Default?"
41
Excerpt From Joint Committee on Taxation, Present Law and Background Relating to Selected Business Tax Issues
44
Note
48
Description of President's Dividend Exclusion Proposal
48
Note
50
2.
Other Corporate Tax Reform Options
51
pt. TWO
Taxation of C Corporations
55
ch. 2
Formation of a Corporation
56
A.
Introduction to Section 351
56
Problem
60
B.
Requirements for Nonrecognition of Gain or Loss Under Section 351
60
1.
"Control" Immediately After the Exchange
61
Intermountain Lumber Co. v. Commissioner
62
Note
66
Problem
67
2.
Transfers of "Property" and Services
67
3.
Solely for "Stock"
68
Problem
69
C.
Treatment of Boot
71
1.
In General
71
Revenue Ruling 68-55
73
Note
75
2.
Timing of Section 351(b) Gain
76
Problem
79
D.
Assumption of Liabilities
79
Peracchi v. Commissioner
84
Note
94
Problems
98
E.
Incorporation of a Going Business
99
Hempt Brothers, Inc. v. United States
99
Revenue Ruling 95-74
103
Note
106
Problem
108
F.
Collateral Issues
109
1.
Contributions to Capital
109
2.
Intentional Avoidance of Section 351
110
3.
Organizational and Start-Up Expenses
112
Problem
113
ch. 3
Capital Structure
114
A.
Introduction
114
Excerpt From Joint Committee on Taxation, Federal Income Tax Aspects of Corporate Financial Structures
116
Note
120
B.
Debt vs. Equity
121
1.
Common Law Standards
121
Indmar Products Co., Inc. v. Commissioner
124
2.
Hybrid Instruments
135
Excerpt From Joint Committee on Taxation, Present Law and Background Relating to the Tax Treatment of Business Debt
136
3.
Section 385
139
Problems
142
C.
Character of Gain or Loss on Corporate Investment
143
Problem
147
ch. 4
Nonliquidating Distributions
148
A.
Introduction
148
1.
Dividends: In General
148
2.
Qualified Dividends
151
3.
Economic Impact of Dividend Rate Reductions
153
B.
Earnings and Profits
155
Problem
158
C.
Distributions of Cash
158
Revenue Ruling 74-164
159
Note
162
Problem
162
D.
Distributions of Property
163
1.
Consequences to the Distributing Corporation
163
a.
Background: The General Utilities Doctrine
163
b.
Corporate Gain or Loss
165
c.
Effect on the Distributing Corporation's Earnings and Profits
166
d.
Distributions of a Corporation's Own Obligations
167
2.
Consequences to the Shareholders
167
Problem
167
E.
Constructive Distributions
168
Nicholls, North, Buse Co. v. Commissioner
169
Note
172
F.
Anti-Avoidance Limitations on the Dividends Received Deduction
174
1.
In General
174
2.
Special Holding Period Requirements
175
3.
Extraordinary Dividends: Basis Reduction
176
4.
Debt-Financed Portfolio Stock
178
5.
Section 301(e)
179
Problem
181
G.
Use of Dividends in Bootstrap Sales
181
TSN Liquidating Corp. v. United States
181
Note
190
Problem
193
ch. 5
Redemptions and Partial Liquidations
194
A.
Introduction
194
B.
Constructive Ownership of Stock
198
Problems
200
C.
Redemptions Tested at the Shareholder Level
200
1.
Substantially Disproportionate Redemptions
200
Revenue Ruling 85-14
202
Problems
204
2.
Complete Termination of a Shareholder's Interest
205
a.
Waiver of Family Attribution
205
Lynch v. Commissioner
206
Revenue Ruling 59-119
213
Revenue Riling 77-293
215
Note
217
b.
Waiver of Attribution by Entities
220
Problems
221
3.
Redemptions Not Essentially Equivalent to a Dividend
223
United States v. Davis
223
Revenue Ruling 85-106
229
Note
232
Problems
235
D.
Redemptions Tested at the Corporate Level: Partial Liquidations
236
Revenue Ruling 79-184
238
Problem
240
E.
Consequences to the Distributing Corporation
240
1.
Distributions of Appreciated Property in Redemption
240
2.
Effect on Earnings and Profits
241
Revenue Ruling 74-338
243
Problem
246
3.
Stock Reacquisition Expenses
247
F.
Redemption Planning Techniques
249
1.
Bootstrap Acquisitions
249
Revenue Ruling 75-447
249
Note
250
Problem
251
2.
Buy-Sell Agreements
251
a.
In General
251
b.
Constructive Dividend Issues
254
Revenue Ruling 69-608
254
Problem
257
c.
Redemptions Incident to Divorce
258
Arnes v. United States
258
Note
262
Problem
266
3.
Charitable Contribution and Redemption
266
Grove v. Commissioner
266
Note
273
Problems
274
G, Redemptions Through Related Corporations
274
Niedermeyer v. Commissioner
279
Problems
286
H.
Redemptions to Pay Death Taxes
287
Problems
289
ch. 6
Stock Dividends and Section 306 Stock
290
A.
Introduction
290
B.
Taxation of Stock Dividends Under Section 305
292
Excerpt From Senate Finance Committee Report on Tax Reform Act of 1969
295
Revenue Ruling 78-60
299
Note
302
Problems
303
C.
Section 306 Stock
304
1.
The Preferred Stock Bailout
304
2.
The Operation of Section 306
305
a.
Section 306 Stock Defined
305
b.
Dispositions of Section 306 Stock
308
c.
Dispositions Exempt From Section 306
309
Fireoved v. United States
310
Problems
316
ch. 7
Complete Liquidations
318
A.
Introduction
318
B.
Complete Liquidations Under Section 331
319
1.
Consequences to the Shareholders
319
Problem
322
2.
Consequences to the Liquidating Corporation
323
a.
Background
323
Commissioner v. Court Holding Co.
324
United States v. Cumberland Public Service Co.
326
Note
328
b.
Liquidating Distributions and Sales
330
c.
Limitations on Recognition of Loss
331
Problem
335
C.
Liquidation of a Subsidiary
336
1.
Consequences to the Shareholders
336
George L. Riggs, Inc. v. Commissioner
338
2.
Consequences to the Liquidating Subsidiary
344
Problems
347
ch. 8
Taxable Corporate Acquisitions
349
A.
Introduction
349
B.
Asset Acquisitions
351
1.
Tax Consequences to the Parties
351
2.
Allocation of Purchase Price
352
C.
Stock Acquisitions
357
1.
Background
357
Kimbell-Diamond Milling Co. v. Commissioner
358
Note
359
2.
Operation of Section 338
361
3.
Acquisition of Stock of a Subsidiary
367
4.
Section 336(e)
369
Problem
371
D.
Comparison of Acquisition Methods
372
Problems
373
E.
Tax Treatment of Acquisition Expenses
375
F.
Policy Issues: Corporate Acquisitions and the Problem of Excessive Debt
379
Excerpt From Joint Committee on Taxation, Federal Income Tax Aspects of Corporate Financial Structures
380
Note
388
ch. 9
Acquisitive Reorganizations
392
A.
Introduction
392
1.
Historical Background
392
2.
Overview of Reorganizations
393
B.
Types of Acquisitive Reorganizations
396
1.
Type A: Statutory Mergers and Consolidations
396
a.
The Merger or Consolidation Requirement
396
b.
Continuity of Proprietary Interest: Quantity and Quality
399
Southwest Natural Gas Co, v. Commissioner
399
Revenue Ruling 66-224
401
Note
401
c.
Continuity by Historic Target Shareholders
404
J.E. Seagram Corp. v. Commissioner
404
Note
407
d.
Post-Acquisition Continuity
409
Revenue Ruling 99-58
410
e.
Continuity of Business Enterprise
411
Bentsen v. Phinney
411
Revenue Ruling 81-25
414
Note
415
f.
Exchange of Net Value Requirement
415
2.
Type B: Acquisitions of Stock Solely for Voting Stock
416
3.
Type C: Acquisitions of Assets for Voting Stock
419
Revenue Ruling 67-274
422
4.
Triangular Reorganizations
423
5.
Multi-Step Acquisitions
426
Revenue Ruling 2001-26
427
Revenue Ruling 2008-25
429
Note
434
Problems
436
C.
Treatment of the Parties to an Acquisitive Reorganization
438
1.
Consequences to Shareholders and Security Holders
438
2.
Consequences to the Target Corporation
444
3.
Consequences to the Acquiring Corporation
446
Problems
449
D.
Tax Policy Issues
450
Excerpt from Joint Committee on Taxation, Present Law and Background Relating to Selected Business Tax Issues
451
ch. 10
Corporate Divisions
455
A.
Introduction
455
1.
Types of Corporate Divisions
455
2.
Non-Tax Motives for Corporate Divisions
457
3.
Historical Background of Section 355
459
Gregory v. Helvering
459
Note
461
4.
Overview of Section 355
463
a.
Statutory and Judicial Requirements
463
b.
Taxation of the Parties
464
B.
The Active Trade or Business Requirement
465
Lockwood's Estate v. Commissioner
465
Revenue Ruling 2003-38
471
Revenue Ruling 2007-42
473
Note
476
Problems
482
C.
Judicial and Statutory Limitations
483
1.
Business Purpose
483
2.
Continuity of Interest
487
3.
The "Device" Limitation
488
a.
In General
488
b.
Device Factors
490
c.
Nondevice Factors
493
4.
Disqualified Investment Corporations
494
Problem
495
D.
Tax Treatment of the Parties to a Corporate Division
496
1.
Introduction
496
2.
Consequences to Shareholders and Security Holders
497
Revenue Ruling 93-62
500
3.
Consequences to the Distributing and Controlled Corporations
503
4.
Consequences of Failed Divisions
505
Problem
506
E.
Use of Section 355 in Corporate Acquisitions
506
1.
Limitations on Use of Section 355 in Taxable Acquisitions
506
a.
Introduction
506
b.
Dispositions of Recently Acquired Businesses
507
Problem
508
c.
Divisive Transactions in Connection With Certain Changes of Ownership
509
2.
Dispositions of Unwanted Assets in Conjunction With Tax-Free Reorganizations
513
Problem
516
ch. 11
Nonacquisitive, Nondivisive Reorganizations
518
A.
Type E: Recapitalizations
518
1.
Introduction
518
2.
Types of Recapitalizations
519
a.
Bonds Exchanged for Stock
519
b.
Bonds for Bonds
519
c.
Stock for Stock
520
Revenue Ruling 84-114
521
d.
Stock Exchanged for Bonds
524
Bazley v. Commissioner
524
Note
528
Problems
528
B.
Nondivisive Type D Reorganizations
529
Smothers v. United States
530
Note
539
Problems
541
C.
Type F: Mere Change in Identity, Form, or Place of Organization
541
Revenue Ruling 96-29
543
Problem
545
D.
Type G: Insolvency Reorganizations
546
Excerpt From Report of Senate Finance Committee on Bankruptcy Tax Bill of 1980
546
Problem
551
ch. 12
Carryovers of Corporate Tax Attributes
552
A.
Introduction
552
B.
Section 381 Carryover Rules
553
Problems
555
C.
Limitations on Net Operating Loss Carryforwards: Section 382
556
1.
Introduction
556
2.
The Ownership Change Requirements
559
Garber Industries Holding Co. v. Commissioner
563
Problems
573
3.
Results of an Ownership Change
574
4.
Section 382 Relief for Distressed Businesses
579
Problems
580
D.
Limitations on Other Tax Attributes: Section 383
581
D.
Limitations on Other Tax Attributes: Section 383
582
E.
Other Loss Limitations
582
1.
Acquisitions Made to Evade Tax: Section 269
582
2.
Limitations on Use of Preacquisition Losses to Offset Built-In Gains: Section 384
583
Problem
585
3.
Consolidated Return Rules
586
ch. 13
Affiliated Corporations
588
A.
Restrictions on Affiliated Corporations
588
1.
Introduction
588
2.
Limitations on Multiple Tax Benefits
588
3.
Section 482
592
a.
Introduction
592
b.
Statutory Elements
592
c.
Allocation Standard and Methods
594
d.
Collateral Adjustments
595
e.
Common Transactions
595
f.
Other Issues
596
B.
Consolidated Returns
598
1.
Introduction
598
2.
Eligibility and Election to File a Consolidated Return
599
a.
Eligibility
599
b.
Election and Related Matters
600
3.
Computation of Consolidated Taxable Income
601
a.
Overview
601
b.
Computation of Separate Taxable Income
602
c.
Consolidated Items
606
d.
Allocation of Tax Liability
607
4.
Stock Basis Adjustments
607
5.
Advantages and Disadvantages of Filing a Consolidated Return
608
Problems
609
ch. 14
Anti-Avoidance Rules
610
A.
Introduction
610
B.
The Economic Substance Doctrine
610
1.
Background: Corporate Tax Shelters
610
United Parcel Service of America, Inc. v. Commissioner
612
Note
618
2.
Common Law Roots
618
Excerpt From Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 111th Congress
618
3.
Codification
622
Problem
625
C.
The Accumulated Earnings Tax
626
1.
Introduction
626
2.
The Proscribed Tax Avoidance Purpose
627
3.
The Reasonable Needs of the Business
630
Myron's Enterprises v. United States
630
Note
635
Gazette Publishing Co. v. Self
639
Note
642
4.
Calculation of Accumulated Taxable Income
642
Problems
644
D.
The Personal Holding Company Tax
645
1.
Introduction
645
2.
Definition of a Personal Holding Company
646
a.
Stock Ownership Requirement
646
b.
Income Test
647
Revenue Ruling 75-67
652
Revenue Ruling 84-137
653
3.
Taxation of Personal Holding Companies
655
a.
Adjustments to Taxable Income
655
b.
Dividends Paid Deduction
656
Problems
658
pt. THREE
Taxation of S Corporations
661
ch. 15
S Corporations
662
A.
Introduction
662
B.
Eligibility for S Corporation Status
664
Problem
670
C.
Election, Revocation and Termination
671
Problem
675
D.
Treatment of the Shareholders
676
1.
Pass-Through of Income and Losses: Basic Rules
676
2.
Loss Limitations
678
a.
In General
678
Harris v. United States
679
Note
685
b.
Subchapter S Losses and Section 362(e)(2)
685
3.
Sale of S Corporation Stock
687
Problems
688
E.
Distributions to Shareholders
690
Problems
692
F.
Taxation of the S Corporation
693
Problems
698
G.
Coordination With Subchapter C
700
Problems
705
H.
Compensation Issues
705
Joseph Radtke, S.C. v. United States
706
Note
709
I.
Tax Policy Issues: Subchapter K vs. Subchapter S
710
Excerpt From Review of Selected Entity Classification and Partnership Tax Issues
710
Index
715