The federal income taxation of corporations, partnerships, limited liability companies, and their owners / by Jeffrey L. Kwall.
2012
KF6464 .K88 2012 (Map It)
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Details
Author
Title
The federal income taxation of corporations, partnerships, limited liability companies, and their owners / by Jeffrey L. Kwall.
Published
New York : Foundation Press Thomson/West, 2012.
Call Number
KF6464 .K88 2012
Edition
Fourth edition.
ISBN
9781599414003 (cloth)
1599414007 (cloth)
1599414007 (cloth)
Description
lviii, 810 pages ; 26 cm.
System Control No.
(OCoLC)760174425
Bibliography, etc. Note
Includes bibliographical references and index.
Series
Record Appears in
Gift
Gift of Professor Marvin A. Chirelstein
Gift
The Arthur W. Diamond Law Library
Gift of Professor Marvin A. Chirelstein
Table of Contents
Preface to Fourth Edition
v
Preface to First Edition
vii
Table of Internal Revenue Code Sections
xxvii
Table of Treasury Regulations
xlv
Table of Internal Revenue Rulings
xlix
Table of Miscellaneous Rulings
li
Table of Cases
liii
Table of Authorities
lvii
pt. ONE
INTRODUCTION
1.
Perspective
3
A.
The Business as an Entity Under State Law
3
B.
The Business as a Taxpaying Entity---The C Corporation
6
C.
The Business as a Tax Accounting Entity---The S Corporation and the Partnership
8
D.
Proposal for Uniform Taxation of All Businesses---Preview of the Future?
10
Treasury Department Report Integration of the Individual and Corporate Tax Systems
11
pt. TWO
OPERATIONS
2.
C Corporation Operations
19
A.
Corporate Income Tax
21
1.
Tax Rates
21
2.
Scope of Corporate Gross Income
22
a.
Inclusionary Aspects---Income From Services
22
Haag v. Commissioner
22
b.
Inclusionary Aspects---Gains From Property
29
General Utilities & Operating Co. v. Helvering
29
c.
Exclusionary Aspects---General
33
Castner Garage, Limited v. Commissioner Universal Motor Company v. Commissioner Island Securities, Limited, A Dissolved Corporation v. Commissioner
33
d.
Exclusionary Aspects---Corporate Specific
36
3.
Scope of Corporate Deductions
37
a.
Reducing Double Taxation
38
Elliotts, Inc. v. Commissioner
39
Thoni Service Corporation v. United States
46
Fin Hay Realty Co. v. United States
49
Maxwell v. Commissioner Hi Life Products, Inc. v. Commissioner
55
b.
Inhibiting Triple Taxation
59
Litton Industries, Inc. v. Commissioner
60
4.
Corporate Alternative Minimum Tax
65
B.
Corporate Penalty Taxes
66
1.
Accumulated Earnings Tax
66
United States v. Donruss Co
67
Snow Manufacturing Company v. Commissioner
69
2.
Personal Holding Company Tax
78
Irving Berlin Music Corporation v. United States
79
Darrow v. Commissioner
82
C.
Consequences of Operating Loss
86
D.
Distinguishing Corporation From Shareholders
89
Commissioner v. Bollinger
89
3.
S Corporation Operations
95
A.
Computation of Gross Income and Deductions
95
Revenue Ruling 93-36
98
B.
Allocation to Shareholders
100
1.
Shareholders Taxed When Income Earned
100
Knott v. Commissioner
100
2.
Rigid Allocation Rule
102
C.
Consequences of Operating Loss
106
Selfe v. United States
108
Estate of Leavitt v. Commissioner
112
Hitchins v. Commissioner
118
D.
Distinguishing S Corporation From C Corporation
121
1.
Small Business Corporation
122
a.
Not More Than 100 Shareholders
122
Revenue Ruling 94-43
122
b.
No ineligible shareholders
123
IRS Letter Ruling 9138025
123
c.
Not More Than One Class of Stock
126
Paige v. United States
126
2.
The Election
131
Leather v. Commissioner
131
E.
Transitional Problems
134
1.
Built-In Gains
135
2.
Accumulated C Earnings
138
3.
Net Operating Loss
141
Rosenberg v. Commissioner
142
4.
Partnership Operations
147
A.
Computation of Gross Income and Deductions
147
B.
Allocation to Partners
150
1.
Partners Taxed When Income Earned
150
Burke v. Commissioner
150
2.
Flexible Allocation Rule
153
a.
Introduction to Economic Effect
154
Orrisch v. Commissioner
156
b.
Introduction to Capital Accounts
161
c.
General Test for Economic Effect
163
d.
Alternate Test for Economic Effect
165
e.
Substantiality
166
f.
Partner's Interest in Partnership
172
C.
Allowance of Allocated Deduction/Loss
173
Garcia v. Commissioner
181
D.
Modifying an Allocation
184
Lipke v. Commissioner
184
E.
Distinguishing Partnership From Proprietorship
188
Revenue Ruling 75-374
188
Barron v. Commissioner
190
F.
Distinguishing Partnership from Taxpaying Entity
192
1.
Non-Publicly Traded Partnerships
192
Simplification of Entity Classification Rules
193
Revenue Ruling 99-5
196
2.
Publicly Traded Partnerships
197
pt. THREE
DISTRIBUTIONS
5.
C Corporation Distributions
201
A.
One-Side Distribution
201
1.
Dividend to the Extent of Earnings & Profits
201
a.
Conceptualizing Earnings & Profits
202
b.
Quantifying Earnings & Profits
203
Revenue Ruling 74-164
203
c.
Qualified Dividend Income
207
2.
Camouflaged One-Side Distribution
208
a.
Loan or Distribution
209
Jaques v. Commissioner
209
b.
Business or Personal Use of Corporate Property
214
Resenhoeft v. Commissioner
214
Boulware v. United States
219
c.
Discharge of Corporate or Personal Obligation
223
Sullivan v. United States
223
Revenue Ruling 69-608
225
B.
Redemption
228
1.
Distinguishing Sale From One-Side Distribution
229
a.
Not Essentially Equivalent to a Dividend
229
United States v. Davis
230
Revenue Ruling 81-289
233
b.
Attribution Rules
235
c.
Substantially Disproportionate Redemption
237
Revenue Ruling 87-88
237
Glacier State Electric Supply Company v. Commissioner
239
d.
Complete Termination of Interest
246
Zenz v. Quinlivan
247
Arnes v. United States
249
Arnes v. Commissioner
251
Lynch v. Commissioner
256
Rickey v. United States
262
IRS Notice 2001-45
268
e.
Impact on Earnings & Profits
270
2.
Sale to Related Corporation
272
Coyle v. United States
273
C.
Liquidation
280
1.
Taxable Liquidation
280
Rendina v. Commissioner
282
Ethel M. Schmidt v. Commissioner
285
Ford v. United States
289
2.
Subsidiary Liquidation
292
George L. Riggs, Inc. v. Commissioner
292
Revenue Ruling 70-106
297
D.
Special Characterization Rules
299
6.
S Corporation Distributions
301
A.
One-Side Distribution
301
1.
No Accumulated Earnings & Profits
302
2.
Accumulated Earnings & Profits
304
3.
Camouflaged One-Side Distribution
307
Joseph Radtke, S.C. v. United States
307
B.
Redemption
309
Revenue Ruling 95-14
310
C.
Liquidation
314
7.
Partnership Distributions
317
A.
Current Distribution
317
1.
Distribution of Money
318
a.
Actual Distribution
318
Revenue Ruling 66-94
319
b.
Reduction in Partnership Liabilities
321
Revenue Ruling 84-52
322
Revenue Ruling 94-4
324
IRS Technical Advice Memorandum 9739002
325
2.
Distribution of Property, Other Than Money
327
3.
Distribution of Marketable Securities
329
Partnership Distributions of Marketable Securities
330
B.
Distribution in Liquidation of Partner's Interest
332
1.
General Rules
332
2.
Identifying the Taxable Event
333
Weiss v. Commissioner
333
3.
Distinguishing Liquidation of Interest From Sale
337
Crenshaw v. United States
337
4.
Service Partnership
341
Tolmach v. Commissioner
344
5.
Impact of [§] 751 Assets
352
a.
Sale of Interest
352
b.
Liquidation of Interest
353
c.
Disposition of Distributed Property
358
6.
Partnership Level Adjustments
359
Jones v. United States
361
C.
Termination of Partnership
366
Crawford v. Commissioner
366
Revenue Ruling 99-6
368
pt. FOUR
CONTRIBUTIONS
8.
C Corporation Contributions
375
A.
Transfer of Property for Stock
375
1.
Deferral of Gain or Loss
376
Kamborian v. Commissioner
376
Intermountain Lumber Company v. Commissioner
382
James v. Commissioner Talbot v. Commissioner
386
2.
Basis as Gain/Loss Preservation Mechanism
389
3.
Assignment of Income
391
Revenue Ruling 80-198
391
B.
Transfer of Property for Other Consideration
394
1.
Receipt of Property in Addition to Stock
394
Revenue Ruling 68-55
395
2.
Relief From Liabilities
397
Lessinger v. Commissioner
399
Peracchi v. Commissioner
404
Revenue Ruling 95-74
408
C.
Contribution to Capital
411
Commissioner v. Fink
411
9.
S Corporation Contributions
415
A.
Transfer of Property for Stock
415
1.
Deferral of Gain or Loss
415
2.
Basis as Gain/Loss Preservation Mechanism
416
3.
Assignment of Income
417
4.
Characterization Issues
418
B.
Transfer of Property for Other Consideration
419
10.
Partnership Contributions
421
A.
Transfer of Property for Partnership Interest
421
1.
Deferral of Gain or Loss
422
a.
Property and Exchange Requirements
422
United States v. Stafford
422
b.
Receipt of a Profits Interest
427
Diamond v. Commissioner
427
Campbell v. Commissioner
431
Revenue Procedure 93-27
438
2.
Basis as Gain/Loss Preservation Mechanism
440
3.
Assignment of Income
442
Schneer v. Commissioner
442
a.
Allocation of Pre-Contribution Gain or Loss
448
b.
Distribution of Contributed Property
450
4.
Characterization Issues
451
B.
Transfer of Property for Other Consideration
452
Otey v. Commissioner
453
C.
Partnership Anti-Abuse Rule
458
IRS Chief Counsel Advice Memorandum 200650014
459
pt. FIVE
CORPORATE DISPOSITIONS AND ACQUISITIONS
11.
Taxable Transfers
465
A.
Perspective
467
1.
The Time Value of Money
468
2.
Achieving Collective Tax Savings
470
Davidson v. Davidson
470
B.
Asset Transfer
473
1.
Tax Consequences to Seller
473
Williams v. McGowan
473
Martin Ice Cream Company v. Commissioner
475
2.
Tax Consequences to Buyer
479
a.
Residual Method of Allocation
480
Allocation of Purchase Price in Certain Sales of Assets (New Section 1060 of the Code)
480
b.
Uniform Amortization of Intangible Assets
482
Amortization of Goodwill and Certain Other Intangibles (New Section 197 of the Code)
482
3.
Evaluating the Relative Positions of Seller and Buyer in an Asset Sale
485
4.
Contingent Liabilities
488
IRS Technical Advice Memorandum 9721002
488
C.
Stock Transfer
492
1.
Tax Consequences to Seller
492
2.
Tax Consequences to Buyer
492
a.
Historical Perspective
493
Kimbell-Diamond Milling Company v. Commissioner
493
b.
The I.R.C. [§] 338 General Election
495
3.
Evaluating the Relative Positions of Seller and Buyer in a Stock Sale (With [§] 338 Election)
497
4.
Evaluating the Relative Positions of Seller and Buyer in a Stock Sale (Without [§] 338 Election)
501
5.
The I.R.C. [§] 338(h)(10) Election
502
12.
Nontaxable Transfers
505
A.
Perspective
505
Cottage Savings Association v. Commissioner
506
1.
Common Law Doctrines
513
a.
Continuity of Proprietary Interest
514
John A. Nelson Co. v. Helvering
514
Le Tulle v. Scofield
515
b.
Continuity of Business Enterprise
518
c.
Business Purpose and Plan of Reorganization
520
2.
The Statutory Scheme
521
B.
Asset Transfer
522
1.
Transfer of "Substantially All" the Assets
523
Helvering v. Elkhorn Coal Co.
523
2.
Receipt of Solely Voting Stock
529
a.
Liabilities of The Transferor
530
United States v. Hendler
530
United States v. Hendler
533
b.
Money or Other Property
535
Revenue Ruling 73-102
535
3.
Liquidation of the Transferor
539
Revenue Procedure 89-50
539
4.
Creative Application
541
IRS Letter Ruling 200709037
541
5.
The Nondivisive D Reorganization
544
C.
Stock Transfer
545
1.
"Control" Immediately After the Acquisition
546
Revenue Ruling 56-613
546
2.
Receipt of Solely Voting Stock
547
a.
Liabilities of the Target
548
Revenue Ruling 79-89
548
b.
Money or Other Property
550
Revenue Ruling 68-285
550
Chapman v. Commissioner
552
Miscellaneous Announcement 5425
561
3.
Substance Over Form
562
Revenue Ruling 67-274
562
West Coast Marketing Corporation v. Commissioner
563
D.
Statutory Merger
566
1.
Continuity of Proprietary Interest
568
a.
Nature of Consideration
568
Roebling v. Commissioner
568
Paulsen v. Commissioner
572
b.
Pre-Merger and Post-Merger Continuity
580
Kass v. Commissioner
580
J.E. Seagram Corp. v. Commissioner
583
Continuity of Interest-Final Regulations
586
2.
Continuity of Business Enterprise
588
Honbarrier v. Commissioner
588
3.
Plan of Reorganization
594
King Enterprises, Inc. v. United States
594
4.
Scope of a Merger
600
Revenue Ruling 2000-5
600
E.
Acquisition By Subsidiary For Parent Stock
602
1.
Acquisition of Assets or Stock by Subsidiary
602
Groman v. Commissioner
602
2.
Merger Into Subsidiary
605
Revenue Ruling 67-326
605
3.
Acquisition by Parent Followed by "Drop Down"
606
Revenue Ruling 2002-85
607
F.
Reverse Triangular Merger
609
1.
Treatment as a "B" Reorganization
610
Revenue Ruling 67-448
610
Revenue Ruling 74-564
612
2.
Multi-Step Acquisitions
614
Revenue Ruling 90-95
614
Revenue Ruling 2001-46
617
Revenue Ruling 2008-25
621
G.
Bankruptcy Reorganizations
625
Senate Finance Committee Report to the Bankruptcy Tax Act of 1980
625
H.
Contingent Stock
628
Carlberg v. United States
628
Revenue Ruling 66-112
631
Revenue Procedure 84-42
633
I.
Proposal for Uniform Acquisition Scheme---Preview of the Future?
634
The Subchapter C Revision Act of 1985
634
13.
Carryovers and Carrybacks
645
A.
Restrictions on Loss Carryovers
646
1.
The Evil
646
2.
Primitive Remedies
646
Libson Shops, Inc. v. Koehler
646
Stange Company v. Commissioner
649
3.
Effective Statutory Response
655
a.
The Trigger
656
Garber Industries v. Commissioner
658
b.
The Limitation
666
B.
Restrictions on Loss Carrybacks
670
Bercy Industries, Inc. v. Commissioner
670
14.
Transfers Involving S Corporations
675
A.
Taxable Transfers
675
1.
Asset Transfer
675
IRS Letter Ruling 9218019
675
2.
Stock Transfer
677
B.
Nontaxable Transfers
679
pt. SIX
CORPORATE DIVISIONS AND REARRANGEMENTS
15.
Corporate Divisions
683
A.
Distribution of Assets---Taxable Partial Liquidation
683
1.
Shareholder Level Consequences
683
Commissioner v. Sullivan
683
Revenue Ruling 79-275
685
Revenue Ruling 90-13
687
2.
Corporate Level Consequences
689
B.
Distribution of Stock---Tax-Free Spin-Off/Split-Off
690
1.
Shareholder Level Consequences
692
a.
The Evil
692
Gregory v. Helvering
692
b.
The Defense
695
Commissioner v. Wilson
697
Revenue Ruling 2003-74
700
Revenue Ruling 2003-75
702
Pulliam v. Commissioner
705
Coady v. Commissioner
715
Revenue Ruling 2003-18
719
Revenue Ruling 2003-38
721
The Edna Louise Dunn Trust v. Commissioner
723
2.
Corporate Level Consequences
731
a.
Spin-Off After Taxable Stock Transfer
731
Revenue Ruling 74-5
731
Revenue Ruling 89-37
733
b.
Split-Off After Taxable Stock Transfer
735
Divisive Transactions in Connection with Changes in Ownership (New Section 355(d))
735
c.
Spin-Off Before Tax-Free Reorganization
737
Commissioner v. Mary Archer W. Morris Trust
738
Revenue Ruling 2005-65
741
16.
Corporate Rearrangements
747
A.
Change in Capital Structure
747
1.
Distribution of Common Stock
747
a.
The General Rule
747
Towne v. Eisner
747
b.
Exceptions to Tax-Free Treatment
750
Revenue Ruling 76-53
750
Revenue Ruling 78-60
753
Revenue Ruling 90-11
755
2.
Distribution of Preferred Stock
756
Chamberlin v. Commissioner
756
Section 306. Dispositions of Certain Stock
763
3.
Recapitalization
767
Bazley v. Commissioner
767
Revenue Ruling 86-25
772
Revenue Ruling 83-119
774
B.
Change in Operating Entity
777
1.
F Reorganization
777
Revenue Ruling 57-276
777
Revenue Ruling 66-284
778
2.
Liquidation-Reincorporation
780
Berghash v. Commissioner
780
Smothers v. United States
788
Warsaw Photographic Associates, Inc. v. Commissioner
794
3.
Conversion to Limited Liability Company
802
IRS Letter Ruling 9701029
802
IRS Letter Ruling 200236005
803
Index
807