When moving your or your client’s business from a C corporation to an S corporation, there are many issues to consider. One of the more critical and valuable (or costly) issues is the built-in gains tax.
The May 2021 meeting of the ABA Tax Section, traditionally held in a group live format in Washington, D.C. but presented virtually this year, is always good for a few announcements about topics of relevance. This year was no exception; here are two items of interest to flow-through tax professionals.
While flow-through taxation still is generally the way to go for the closely held business, it is not uncommon for a partnership to incorporate with a view of engaging in an exit transaction after five years via a stock sale that qualifies for the 100% exclusion of gain provided by §1202. Here is a nuance of this Code that came up in our practice.
A follow-up regarding PLR 202114002 (the favorable §1202 ruling involving an insurance agent/broker), courtesy of Eide Bailly.
PLR 202114002 is a taxpayer-liberal PLR, which provides that a business referred to as an “insurance agent or broker” was a qualified trade or business for §1202 purposes.
How is an S corporation’s accumulated adjustment account (“AAA”) impacted by forgiven PPP loan proceeds? The answer is not as easy as it first may seem.