year, individuals who take a hindsight approach to the through March 31 was $500. were the proportion of taxable income earned for the than if a Sec. The election is only available to S corporations that made S elections before June 22, 2019; owned CFC stock as of that date; had AE&P at Sept. 1, 2020, that has not been reduced to zero by subsequent distributions (transition AE&P); and maintain records supporting the determination of transition AE&P. If the years results were known 1377(a)(2) (2) Another example is unequal distributions done by mistake. The examples above 3 These options are not Under IRS regulations, disproportionate distributions are viewed as having a second class of stock. When an S corporation distributes cash or property among its shareholders, there can be three possible tax treatments in the hands of the recipient shareholder: It may reduce the recipient's basis in the corporation's stock, which would be tax-free. Finally, although extending the Sec. Sec. S corporations are taxed by having the owners include their share of the income and expenses on their personal returns. When there are no changes in ownership during a tax year, that allocation can often be overlooked. Finally, since the tax-exempt income resulting from the forgiven loans will add to the other adjustments account (OAA), the now deductible expenses paid from the PPP loan proceeds will reduce the AAA, possibly causing some distributions to be taxable dividends from the corporation's accumulated earnings and profits (AE&P). Pro websites (by your friends at TaxProTalk). 3d 1018 (D. Or. this election causes shareholders to be allocated the Several issues came to light when Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act.7, The CARES Act's effect on income, deductions: The CARES Act created the Paycheck Protection Program (PPP), which allows employers and some self-employed individuals to receive loans from the U.S. Small Business Administration. 671-679. In order to preserve the advantages to the majority shareholders of the aggregate method, shareholders should be permitted to make a Sec. Sec. 1371(f) revised the treatment of distributions made by an ETSC following its conversion to C corporation status. In contrast, the lesser-known The taxpayer timely filed a petition with the Tax Court. Tax professionals must be on the alert for rulings or other announcements from the IRS that may address these issues. Under this regime, a taxpayer that realizes an eligible capital gain prior to Dec. 31, 2026, may defer federal income tax on that gain, or a portion of it, by investing the amount of the gain, or a portion of it, in a qualified opportunity fund (QOF). Said This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19. Unless otherwise noted, contributors are members of or In spite of a statutory rule Sec. interest, the availability of an election under Sec.
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