Tax shelters
Prior to 1983, it was possible for elected S corporations to generate earnings and profits to the extent that earnings and profits for a given year exceeded both its taxable income for the year and distributions out of that year's earnings and profits. tax shelters Oklahoma tax. 10. Carryover of Disallowed Losses and Deductions Under IRC 465 At-Risk Rules. IRC 1366(d)(3) clarifies that losses of an S corporation that are suspended under the at-risk rules are carried forward to the post-termination transition period. tax shelters 2002 federal income tax rates. 11. Adjustments to Basis of Inherited S Stock. IRC 1367(b)(4) clarifies that the step-up in basis in the stock of an S corporation acquired from a decedent is reduced by the extent to which the stock's value represents items of income in respect of a decedent ("IRD"). tax shelters California franchise tax board. This provision, which applies to decedents dying after the date of enactment, conforms to the current rules applicable to partnerships. 12. Expansion of Post-Termination Transition Period. Distributions made by a former S corporation during its "post-termination transition period" are treated by the shareholders are nontaxable to the shareholders to the extent of the corporation's AAA. Distributions made thereafter, are subject to the regular C corporation rules are treated as taxable dividends to the extent of C corporation earnings and profits. Under current law, this period begins on the day after the last day of the last taxable year as an S corporation and ends on the later of (i) a date that is one year later or (ii) the due date for filing the return for the last taxable year and the 120-day period beginning on the date of a determination that the S election had terminated for a previous year. The Act expands the scope of the post-termination transition period by including the 120-day period beginning on the date of any determination pursuant to an audit that follows the termination of the corporation's S election and that also adjusts any subchapter S item during an S period. The concept of "determination" also was expanded to include, for example, a final disposition of the taxpayer's claim for refund. C. Procedural Changes. 1. Inadvertent Terminations and Invalid Elections. IRC 1362(f) currently allows the IRS to excuse inadvertent terminations by reason of ceasing to be an S corporation or having excess passive investment income if certain requirements are met. Current law does not grant the IRS the ability to waive the effect of an "inadvertent invalid S election" or a late election. IRC 1362(f) was amended by the Act to allow the IRS to treat late S elections as being timely (even where no election in fact is filed) or to waive the effect of invalid elections if "reasonable cause" is present.
Tax shelters
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