Problem 3-A: Lucy Catering Driving factors for Lucy: Earnings bailout - no double income taxes and no or low self-employment taxes Separate tax entity.

Slides:

Advertisements

Similar presentations

Principles of Taxation

Advertisements

C6 - 1 Corporations, Partnerships, Estates & Trusts Chapter 6 Corporations: Redemptions and Liquidations Corporations: Redemptions and Liquidations Copyright.

Corporate & Partnership Tax - Instructor: Dwight Drake Check The Box Game Pre – Big fear was taxable as C corp association - The 6-4 structuring.

1 Chapter 8. Consolidations – Lecture C12-Chp-08-1A-Consol-Tax-Acctg PPT Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright Howard Godfrey,

Three Tax Regimes C Corp S Corp Partnership. Check-The-Box Corporate entities are C or S. Partnerships and LLCs under Subchapter K (partnership) unless.

Forms of Business.

1 BUSINESS ORGANIZATION: THE RIGHT STRUCTURE FOR THE RIGHT IDEA Presented by: Benjamin W. Bates Jonathan Stagg Stoel Rives LLP October 30, 2010.

Structuring Foreign Investment in U. S

4-1 ©2011 Pearson Education, Inc. Publishing as Prentice Hall.

Problem 4-B: Lucy’s C Corp Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com.

Choice of Business Entity

Advising Business Owners Instructor: Dwight Drake Problem 16 Parties Objectives Jason: - Be assured control of business – not accountable to siblings.

Corporate & Partner Tax Instructor: Dwight Drake Property Sales Between Partner and Partnership General Rule: Treated as sales or exchanges between unrelated.

Module 14 Transactions Between a Corporation and Its Shareholders.

A537 - Corporate & Partnership Tax Instructor: Dwight Drake Calculating the Entity’s Taxable Income Section 63: Taxable income equals gross income minus.

Corporate & Partnership Tax - Instructor: Dwight Drake Taxation of Business Entities Law 537 University of Washington School of Law Instructor: Dwight.

Taxation of Corporations and Shareholders

From Partnership to Corp: Option 1 Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com.

Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 6-1 Objectives of Buy-Sell.

Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-2 Three Tax Regimes C.

Stock Market Game.

Check-The-Box Same analysis, more certainty Corporate entities are C or S. Partnerships and LLCs under Subchapter K (partnership) unless all consent to.

1 CHOICE OF ENTITY TAX CONSIDERATIONS Thomas F. Schnellenberger September 20,

Real Estate Investment Chapter 9 Business Organizations © 2011 Cengage Learning.

A537 - Corporate & Partnership Tax Instructor: Dwight Drake LLM Corporate Tax Instructor: Dwight Drake Calculating the Entity’s Taxable Income Taxable.

Chapter 2 Business Planning and Organization BCN 4708 Fall 2008.

Entity Types and Why it is Such an Important Decision Entity Types and Why it is Such an Important Decision Brian Miller Miller Grossbard Advisors, LLP.

Module 22 Operations of Flow- Through Entities. Menu (1) 1. Definition of a flow-through entity 2. Reporting the operations of a flow-through entity 3.

S Corporation Chapter 46 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company1 An “S” Corporation is a corporation that.

Accounting and Tax for the Small Business NOVEMBER 8, 2012.

1 Chapter 8. Consolidations and related topics C11-Chp-08-1-Consol-Tax-Acctg-2011.PPT Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright Howard.

Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com LIFO Inventory Trap.

If Section 351 Does Not Apply? Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com.

“C” Corporation Unlimited owners (shareholders) Unlimited owners (shareholders) No personal liability for shareholders No personal liability for shareholders.

Mortgage Credit Organizational Documents Wednesday, May 29, 2013 FHA Multifamily Underwriter Training 2013 SMAC Denise “Denny” Troeschel Deputy Chief Underwriter.

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000 Principles of Taxation Chapter 11 The Choice of Business Entity.

Preferred Stock Freeze Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com Family.

 Click to edit Master text styles  Second level  Third level  Fourth level  Fifth level #11-1 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies,

4-1 ©2008 Prentice Hall, Inc ©2008 Prentice Hall, Inc. NONLIQUIDATING DISTRIBUTIONS  Nonliquidating distributions in general  Earnings and profits.

Forms of Business Ownership. “C” Corporation Unlimited owners (shareholders) No personal liability for shareholders Taxed on earnings at corporate level.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

From Partnership to Corp: Option 1 Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com.

11-1 Choice of Business Entity – Tax Factors  double-taxation of regular (C) corporate earnings  single level of tax on earnings of pass-through entities,

Problem 7-A Circle Inc. Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com.

McGraw-Hill© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 11-1 Three Business Life.

Federal Income Taxation Lecture 15Slide 1 Corporate Dividend Tax  Corporate dividends are distributions of profit made by a “subchapter C” corporation.

LLM Corporate Tax Instructor: Dwight Drake Taxation of Corporations and Shareholders Law T 501 University of Washington School of Law LLM Program in Taxation.

McGraw-Hill/Irwin Copyright (c) 2002 by the McGraw-Hill Companies Inc Principles of Taxation: Advanced Strategies Chapter 8 Chapter 8 Multiple Entity.

McGraw-Hill/Irwin Copyright (c) 2002 by the McGraw-Hill Companies Inc Principles of Taxation: Advanced Strategies Chapter 3 Chapter 3 Employee Compensation.

McGraw-Hill© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 18 Corporate Taxation: Nonliquidating Distributions.

Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 6-12 Problem 6-A: Alton.

Chapter 12 The Choice of Business Entity McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin Copyright (c) 2003 by the McGraw-Hill Companies Inc Principles of Taxation: Advanced Strategies Chapter 3 Employee Compensation Strategies.

McGraw-Hill© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 17 Partnerships and S Corporations. Learning Objectives Determine the tax implications of a partnership formation Apply the operating rules for.

LLM Corporate Tax Instructor: Dwight Drake Taxation of Corporations and Shareholders Law T 501 University of Washington School of Law LLM Program in Taxation.

The Professional Personal Chef 1 Chapter 2 Forms of Ownership.

Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 10-1 Benefits of Stock Ownership.

McGraw-Hill Education Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of.

ENTREPRENEURSHIP Lecture No: 29 BY CH. SHAHZAD ANSAR.

Patterns of Entrepreneurship

Entity v. Assets: Non-Tax Agenda

The Choice of Business Entity

Coni S. Rathbone Creative Structuring Coni S. Rathbone

Problem 11-A: Adoft Inc Issues for Jane, Lewis and Peter

The Organizational Plan

Business Partnerships

©2010 Pearson Education, Inc. Publishing as Prentice Hall

Presentation transcript:

Problem 3-A: Lucy Catering Driving factors for Lucy: Earnings bailout - no double income taxes and no or low self-employment taxes Separate tax entity - single owner LLC would be disregarded entity Passive income potential for Lucy, possibly sheltered by passive losses from other ventures Limited liability - trucks on road and 10 employees No need for owner/employee fringe benefits Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-18 Recommendation: S Corp

Problem 3-B: Management Consulting Firm Driving factors for Sam, Larry, and Joe: Fringe benefits for themselves Earnings all bailed as compensation income Limited liability from negligence of other owners and employees Business service income vehicle - not likely sale candidate Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-19 Recommendation: C Corp

Problem 3-C: Roger Specialized Shop Driving factors for Roger: Maximum control (Board control) - no hassles from minority owners Income bailout to minority owners - no double income taxes or self-employment taxes Protected compensation contract and bonus program Limited liability - machines, employees and contracts Passive income to minority owners Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-20 Recommendation: S Corp

Problem 3-D: Roger Revised Plan Driving factors for Roger: Losses passed through to investors Beat basis and at-risk hurdles for investors Maximum control - no hassles from minority owners Income bailout to minority owners when turn profitable - no double income taxes or self-employment taxes, preferably passive income Protected compensation contract and bonus program Limited liability - machines, employees and contracts Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-21 Recommendation: LLC or Limited Partnership with Roger- owned S Corp general partner

Problem 3-E: Rhonda Flash Application Driving factor for Ronda: Ability to attract venture capital Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-22 Recommendation: C Corp

The 1561 Trap The 1561 Trap - No multiple C Corp benefits to group Only one Section 11 bracket racket Only one 250k accumulated earnings tax credit Only one 40k corporate AMTI exemption Only one $2 million Section 59 tax exemption Big Issue: What is controlled group? Three types Parent-Subsidiary controlled group Brother-Sister controlled group Combined controlled group Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-23

Parent- Sub Controlled Group Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-24 Parent C Corp Sub 1 C Corp Sub 2 C Corp Sub 3 C Corp Sub 4 C Corp 80% % of voting or total share value of each corp owned by other corps in group, and - 80% of voting or total share value of at least one corp owned by a common parent corp.

Brother- Sister Controlled Group Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com or Fewer Persons 50% or fewer individuals, estates, or trusts - Own 50% of voting or total share value of both - Consider only minimum common ownership in each entity Brother C Corp Sister C Corp 50% +

Combined Controlled Group Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com or Fewer Persons 50% or more corps part of parent-sub or brother-sister controlled group, and - At least one corp both a common parent of parent- sub group and a member of brother-sister group Brother C Corp Sister C Corp 50% + Sub 1 C Corp Sub 2 C Corp 80% +

Controlled Group Attribution (1563) Options - Deemed exercised 5% partners - proportional interests 5% trust and estate beneficiaries 5% corporate shareholder - proportional interests Spouse Minor children (under age 21), but not adult children unless If person owns more than 50%, considered owner of stock owned by parents, grandparents, grandchildren and children over age 21 Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-27

Problem 3-F: Three C Corp Plan Stock Ownership Minimum Common Ownership X Corp Y Corp Z Corp X-Y X-Z Y-Z Jim 10% 40% 30% 10% 10% 30% Linda 80% 5% 25% 5% 25% 5% Sam 10% 55% 45% 10% 10% 45% Totals 100% 100% 100% 25% 45% 80% X and Y Not Brother-Sister X and Z Not Brother-Sister Y and Z Brother-Sister Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-28

Problem 3-G: Medical Supply JV Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-29 Key factors for ABC Inc. and Smith Enterprises: Move funds with no tax impact (pass thru entity) Flexibility with income and cash distributions Contract control provisions that protect both Limited liability - separate employees S Corp not option - ineligible shareholders Recommendation: LLC

Problem 3-H: Jones 482 Trap Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-30 Jones C Corp Newco C Corp Individual Shareholders Bargain Sale Imputed Income Imputed Dividend Imputed Contribution Income imputed at both corporate and shareholder levels

Problem 3-H: Jones Industries Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-31 Key factors for Jones Industries: Avoid 482 trap risks Separate offshore buying entity Common control No tax hassles on dealings between entities Pricing flexibility between entities Recommendation: Consolidated Group with C Corp Holding Company Parent

Problem 3-I: Jerry Yacht Company Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-32 Key factors for Jerry: Preferred cash flow to investors Special and different profit and loss allocations (30%-70% profits and 99%-1% losses) Jerry in complete control No double tax or self-employment tax hassles Pass thru of profits and losses Limited liability - yacht building and sales Recommendation: LP with S Corp General or LLC

Problem 3-J: Golfer Grow and Sell Company Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-33 Key factors for five Golfer owners: Basis build-up on income accumulations No double tax on sell-out Tax-free corporate reorg potential No ordinary income on entity ownership sale Limited liability exposure Equal control Recommendation: S Corp

Problem 3-K: Wharton Subs Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 3-34 Key factors for Wharton Enterprises Multiple separate entities Wharton parent owner of all entities Consolidated operations for tax purposes Preserve pass thru benefits Minimize or eliminate conversion hassles Recommendation: Maintain existing S Corp with new corporations being Qualified Subchapter S Subs under 1361(a)(3)