#Make a pass through company registration
#Make a pass through company pro
#Make a pass through company code
#Make a pass through company series

Third, the Service may disallow Taxpayer's loss deduction under § 269 by asserting that Taxpayer acquired control of the S corporation with the principal purpose of avoiding or evading federal income tax. Under this argument, the Service would allocate all of the income and losses from the activities of the S corporation to Taxpayer. 1967) (transitory shareholders' interests not respected). Second, the Service may disregard the transitory ownership of the shareholders other than Taxpayer.

1001 (1984)(disallowing losses from straddle transactions). The Service intends to challenge the purported tax benefits from this transaction on a number of grounds.įirst, the Service may disallow Taxpayer's loss under § 165(c)(2) by asserting that the loss was not incurred in a transaction undertaken for profit. The transaction described in this notice has been designed to use a straddle, one or more transitory shareholders, and the rules of subchapter S to allow Taxpayer to claim an immediate loss while deferring an offsetting gain in Taxpayer's investment in the S corporation. Similar transactions may be structured using a partnership in the place of the S corporation. Due to the reduction in Taxpayer's basis in the S corporation's stock (and indebtedness, if any), Taxpayer will recognize gain when the corporation makes additional payments to Taxpayer or Taxpayer disposes of Taxpayer's interest in the S corporation. The loss reduces Taxpayer's basis in the stock (and indebtedness, if any) of the S corporation under § 367(a)(2). The entire loss from the loss leg of the straddle passes through to Taxpayer, the sole remaining shareholder in the S corporation, under § 1366.

For example, Taxpayer may make a loan to the S corporation. In order to maximize the allowable loss, Taxpayer also may engage in a transaction that is intended to increase Taxpayer's basis in the S corporation. After the redemption, the S corporation terminates the loss leg of the foreign currency straddle. The S corporation files an election under § 1377(a)(2) to treat the S corporation's taxable year as though it consists of two separate taxable years, with the first year ending on the date of the redemption. The S corporation redeems the stock of all of the shareholders other than Taxpayer, and the other shareholders claim a loss as a result of the redemption. The gain increases each shareholder's basis in the stock of the S corporation under § 1367(a)(1).

#Make a pass through company pro

The S corporation terminates the gain leg of a foreign currency straddle, and allocates the gain to the shareholders pro rata according to their stock ownership. The S corporation enters into straddles on foreign currencies and may acquire other assets. Taxpayer initially has a minority stock interest in the S corporation. First, Taxpayer and one or more other shareholders form a corporation that elects to be treated as an S corporation under § 1362(a) of the Internal Revenue Code.

#Make a pass through company series

This transaction involves a series of preplanned steps. This notice also alerts taxpayers, their representatives, and promoters of these transactions of certain responsibilities that may arise from participating in these transactions. This notice alerts taxpayers and their representatives that the tax benefits purportedly generated by these transactions are not allowable for federal income tax purposes. The Internal Revenue Service and the Treasury Department have become aware of a type of transaction, described below, that is being used by taxpayers for the purpose of generating deductions. Part III - Administrative, Procedural, and Miscellaneous Institutional Author: Internal Revenue ServiceĬitations: Notice 2002-65 2002-41 IRB 1 ()

#Make a pass through company registration

Section 6111 - Tax Shelter Registration Section 6707 - Tax Shelter Info. Special Rules Section 165 - Losses Section 269 - Acquisitions to Avoid Tax Passthrough Section 1367 - Basis Adjustments Section 1377 - S Corporation

#Make a pass through company code

Code Section: Section 1362 - S Corporation Elections Section 1366 - S Corp.