Buy-sell agreements need not restrict corporate carryovers

Article Abstract:

Section 382 provides shareholders and corporations with a means of protection against possible loss of tax benefits as resulting from the enforcement of provisions in buy-sell agreements that necessitate the sale or purchase of stock in situations marked by corporate loss. The limitations specified by Section 382 bar new stockholders from compensating for a profitable company's income through the losses of an acquired firm. Section 382, thus poses limits on the application of carryovers and specific built-in losses in situations where there is an ownership change in the corporation, whether it be through an 'ownership shift' or an 'equity structure shift.' Buy-sell agreements are bound by the scope of limits of Section 382 when the agreement is carried out in a loss year, when the agreement is in existence during a loss year that holds an added testing date, and when agreement provisions are enforced in a loss year.

Analysis, Laws, regulations and rules, Stocks, Loss deductions, Basis (Taxation), Buy-sell agreements

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Agency relationship found despite facade of independence

Article Abstract:

Agency relationships are often used in real estate transactions to overcome state usury laws limiting the interest rates of loans to unincorporated borrowers. The Tax Court, citing the Supreme Court's Bollinger decision, has set out three considerations for true agency relationships: the written agreement must establish that the corporation is an agent for its shareholders at the time an asset is acquired, the corporation must act as an agent in relation to the asset, and the corporation must at all times be represented as the agent and not the principle in dealings with third parties.

Cases, Real property tax, Real property taxes, United States. Supreme Court, Tax courts

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