Disproportionate liquidating distributions updating my blackberry curve


08-Nov-2019 14:57

Taxpayers should note that the IRS has recently added three new issues to its informal S corporation no-rule list, thus negating a taxpayer’s ability to receive a private letter ruling in these areas.At a Federal Bar Association Section of Taxation Tax Law Conference in Washington, D.Poston stated that “we really don’t consider that by itself to be something that presents a real threat to the validity of an S election.” Poston stated that although the IRS will not issue letter rulings when the S corporation has a bad return filing or when an S corporation election or consent is filed with missing or incomplete information, there is administrative relief available for some types of missing information to an S election.[2] Poston stated that relief can be obtained at the IRS Service Center level and not by contacting the IRS Office of Chief Counsel. Poston additionally stated that the IRS will not issue rulings when the S corporation filed a C corporation return in some past year or years.He specifically stated that “we don’t consider that by itself something that terminates the S election.” Poston also stated that although the IRS will continue to consider ruling requests when an “election wasn’t made at all or wasn’t signed by the necessary parties,” it would not issue rulings when the issue involved missing or incorrect information.

hot assets), the amount of any gain or loss with respect to payments under §736(b) for a retiring or deceased partner’s interest in property for each year of payment shall be determined under §731.

Some rulings cited Regulation Section 1.1362-1(l)(2)(i) and concluded that there was a termination as a result of the disproportionate distributions, while other rulings have cited Section 1362(f) and forgave an inadvertent termination if one occurred as a result of disproportionate distributions.

It should also be noted that in most, if not all of these rulings, the ruling was contingent on the taxpayer making equalizing distributions so that all distributions were proportionate.

According to Poston, this started with cases in which an S corporation had been making disproportionate distributions to shareholders despite having governing agreements that require equal distribution and liquidation rights where taxpayers approach the IRS for a fix.

The IRS has created uncertainty by providing different rulings to similarly situated taxpayers based on who was assigned the case.

The second category in which the IRS will no longer issue rulings involves the second-class of stock regulations involving tests with an objective and subjective prong, such as employment agreements, options or warrants.



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