Personal goodwill cuts tax on corporate sale or liquidation

Article Abstract:

Results of the Tax Court case 'Norwalk, Schilbach,' indicated the importance of considering the tax effects of intangible assets to businesses liquidating or selling their operations. DeMarta and Norwalk CPA's Inc, a public accounting firm in California, was found to have valuable intangible assets existing at the corporate level. The court treated the company's personal goodwill as a vendible asset which can be sold with a professional practice. However, the IRS argued that goodwill was worthless since the company did not support either a noncompete or employment agreement. The case gives business valuation executives a perspective on the importance of 'ownership of rights.' It also describes a way for shareholders to minimize double taxation during corporate liquidation.

Tax Law, Public Finance Activities, Accounting, auditing, & bookkeeping, Accounting & Auditing Services, Accounting, Tax Preparation, Bookkeeping, and Payroll Services, Taxation, Cases, Accounting firms, Accounting services, Intangible property, Intangible assets, Valuation, Goodwill (Business), Liquidation, Business sale, DeMarta and Norwalk CPA Inc.

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Check-the-box final regs. simplify entity classification

Article Abstract:

Final regulations contained in IRC Sec. 7701 have been issued to simplify classification of entities. These regulations can help in determining which organizations are automatically treated as corporations and offer a simple elective scheme for other business entities. The final regulations are in Regs. 301.7701-1 to 301.7701-3. Sec. 301.7701-1 discusses general rules on entity classification for income tax purposes, Sec. 301.7701-2 focuses on definitions of business entities while Sec. 301.7701-3 pertains to the classification of certain business entities. They also cover foreign entities and include effective date and transition rules that may prove to be useful to existing entities. The final regulations take effect on Jan. 1, 1997.

Business, Laws, regulations and rules, Corporations

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