Taxation - small business - Congress reforms rules for S corporations. - Small Business Job Protection Act of 1996

Article Abstract:

S corporation tax law changes enacted by Congress under the Small Business Job Protection Act of 1996 will fail to effectively promote the interests of true small businesses. The law amends IRC section 1361 to increase the number of shareholders an S corporation may have, allow S corporations to have S and C corporation subsidiaries, and allow qualified retirement trusts and some tax-exempts to own S corporation stock. Congress should deepen S status benefits by eliminating stock ownership restrictions and limiting S status to businesses with 500 or fewer employees.

Small business, S corporations

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Losing control: toward a new understanding of the taxation of post-incorporation stock sales

Article Abstract:

Interpretation of the control requirement under Internal Revenue Code section 351 in the context of post-incorporation stock sales has been governed by a disposition recognition norm. However, the disposition recognition norm conflicts with the law's goal of removing tax barriers to mere changes in form of ownership. Therefore, nonrecognition treatment should be given to transactions involving transfer of assets in exchange for stock when an existing partnership or sole proprietorship is initially incorporated.

Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation), Incorporation

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Section 83 inapplicable where stock and options not transferred predominantly for services

Article Abstract:

The IRS National Office stated in technical advise memorandum 9737001 that stocks and options exchanged for transmission of the transferor's television programs on a cable system did not fall under IRC section 83. The IRS relied upon case law to find that the predominant feature of the transaction was the gaining of access to the cable system. The equities were not exchanged for services which would have provided the parties with more favorable tax treatment under section 83.

Stock options, Taxation of services, Service taxes

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