Corporate Income Taxation,9780314043733

Corporate Income Taxation

by ;
Edition: 4th
ISBN13: 9780314043733
ISBN10: 031404373X
Format: Hardcover
Pub. Date: 1995-01-01
Publisher(s): West Group
List Price: $47.95

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Summary

Non-Liquidating Distributions to Shareholders; Liquidation of a Corporation and Taxable Sales or Corporate Businesses; Collapsible Corporations; Retention of Corporate Earnings; Small Businesses; Organization of a Corporation; Corporate Divisions; Reorganizations; Acquisition or Retention of Tax Attributes; Multiple Corporations.

Table of Contents

Preface iii
Introduction
1(70)
This Chapter
3(1)
Historical and Doctrinal Overview
Some History
4(3)
A Glance at the Structure of Current Doctrine
7(12)
The Corporation's Tax Liability
8(5)
The Shareholder's Tax Liability on Account of Distributed Corporate Earnings
13(2)
The Shareholder's Tax Liability on Account of Gain from the Sale of Corporate Stock
15(1)
Nonrecognition Treatment for Certain Formal Shifts in The Way a Business Enterprise is Conducted
16(3)
Theoretical Overview
Forms of Investment
19(4)
Incidence of the Corporate Income Tax
23(3)
The Two-Tier Tax Structure
26(4)
``Integration'' of Corporate and Shareholder Taxes
30(10)
Shareholder-Level Dividends-Received Exclusions, Deductions, and Credits
31(5)
Corporate-Level Dividends-Paid Deductions and Split-Rate Systems
36(1)
``Full'' Integration (Shareholder Allocation)
37(1)
Debates Over Integration in the United States
38(2)
Taxes, Asset Values, and Capitalization
40(3)
Realization, Lock-In Effects, and Nonrecognition
43(1)
Preferential Capital Gains Rates
44(4)
Debt and Equity
48(5)
Consequences of the Commitment to a Compromise System
53(4)
The Path-Dependency of Tax Treatment
53(2)
The Substantive Importance of Analytic Categories
55(2)
Three Important Doctrinal Categories
What Is a Corporation?
57(6)
Who Is the Owner of Property?
63(3)
What Is Debt and What Is Equity?
66(5)
Nonliquidating Distributions to Shareholders
71(180)
Generally
Introduction
74(1)
Dividend-Received Deduction for Corporate Shareholders
In General
75(4)
Potential Abuse of the Dividend-Received Deduction
79(2)
Distributions to Shareholders of Cash or Property (Other Than Stock or Stock Rights of the Distributing Corporation)
Amount Distributed
81(2)
Definition of ``Dividend''
83(5)
Disguised and Constructive Dividends
88(10)
In General
88(3)
Automatic Dividend Rule
91(4)
Below-Market Interest Loans
95(3)
Earnings and Profits
98(21)
In General
98(5)
Effect of Discharge of Indebtedness on E and P
103(1)
Computation of Depreciation for E and P Purposes
104(5)
Effect of Distributions on E and P
109(6)
Distribution of Corporation's Bonds and Debt Obligations
115(1)
Amendments to § 312
115(1)
Nonliquidating Distributions to 20 Percent Corporate Shareholder
116(3)
Distributions to Shareholders in Excess of Earnings and Profits
119(1)
Basis of Property Distributed to Shareholders
120(1)
Distributing Corporation's Recognition of Gain or Loss
General Utilities Doctrine
121(1)
Current Status of General Utilities
122(4)
Distribution in Redemption of a Shareholder's Stock
Introduction
126(3)
Attribution of One Person's or Entity's Stock Ownership to a Different Person or Entity
129(5)
Redemptions Which are Treated as a Purchase of Stock Rather Than as a Dividend
134(48)
Not Essentially Equivalent to a Dividend
135(19)
Substantially Disproportionate Redemptions
154(3)
Termination of Shareholder's Interest
157(9)
Preclusion of Family Attribution
Waiver of Attribution by an Entity
166(4)
Accrued Dividends
170(1)
Partial Liquidations---Standards Set at the Corporate Level
171(11)
Income Recognition by Distributing Corporation
182(1)
Redemption of Stock: Effect on Corporation's Earnings and Profits
182(8)
Distribution in Redemption of Stock Which was Included Within the Gross Estate of a Decedent for Federal Estate Tax Purposes
190(9)
Redemption of Stock of One Shareholder as a Dividend to Other Shareholders
199(1)
Constructive Redemption---The Sale of Corporate Stock Either to a Subsidiary Corporation or to a Sister Corporation
200(18)
Brother-Sister Corporations
201(7)
Intragroup Sales
208(1)
Mirror Subsidiaries
209(3)
Parent-Subsidiary Corporations
212(6)
Overlap with § 351
218(1)
Distributions of Stock or Stock Rights of the Distributing Corporation
Introduction
218(1)
Stock Dividends
219(10)
Historical Background Prior to the 1954 Code
219(2)
The 1954 Code
221(2)
The Status of § 305 After the 1969 Act Amendments
223(6)
Stock Dividend Equivalents
229(5)
Treatment of a Taxable Stock Dividend
234(3)
Basis of Stock Received as a Tax-Free Dividend Under § 305(a)
237(2)
Preferred Stock Bail-Outs and Section 306 Stock
239(12)
Definition of Section 306 Stock
240(4)
Disposition of Section 306 Stock
244(4)
Exemption from Section 306 Treatment
248(2)
Priority of Section 303
250(1)
Liquidation of a Corporation and Taxable Sales of Corporate Businesses
251(122)
Complete Liquidation
Introduction
253(2)
The Liquidating Corporation's Recognition of Gain or Loss
255(9)
Shareholder's Treatment in Ordinary Liquidation
264(1)
Reincorporations
265(5)
Liquidation of a Controlled Subsidiary Corporation
270(22)
Requisites for Nonrecognition for Parent Corporation
271(3)
Minority Shareholders
274(2)
Taxation of the Liquidating Subsidiary
276(3)
Partial or Full Satisfaction of Subsidiary's Indebtedness to its Parent
279(8)
Purchase of Subsidiary's Debt by Parent
287(3)
Parent's Indebtedness to its Subsidiary
290(1)
Planned Termination of Parent Corporation
291(1)
Taxable Purchase and Sale of a Corporate Business
Sale of Corporate Assets Pursuant to a Liquidation
292(7)
Nonrecognition for Asset Sales Prior to 1986
295(2)
Repeal of Nonrecognition for Liquidating Sales
297(1)
Installment Sales by Liquidating Corporations
297(2)
Allocation of Purchase Price
299(1)
Sale of Stock
299(72)
Replacement of Old § 334(b)(2) and of the Kimbell-Diamond Rule
302(1)
The Operation of § 338
303(8)
P Purchases Control of Stock of T
311(10)
§ 338 Election
321(1)
Liability for the Tax and Reporting of Gain
321(2)
Section 338(h)(10) Election
323(7)
New T's Basis in its Assets
330(10)
The Consistency Rules
340(29)
Usefulness of a § 338 Election
369(1)
Treatment of Certain Liquidations for Tax Avoidance
370(1)
Information Report Required
371(1)
Sale of Assets---Allocation of Price
371(2)
Collapsible Corporations
373(22)
Function and Operation of Collapsible Provisions
Nature of the Problem
374(2)
Effect of Collapsible Characterization
376(1)
Definition of Collapsible Corporation and Consideration Whether Subsequent to 1986 it is Possible for a Corporation to be Collapsible
377(6)
Presumption of Collapsibility
383(1)
Exceptions to Collapsible Treatment
Section 341(d)
384(1)
Section 341(e)
385(3)
Section 341(f)
388(3)
Examples
Illustrations
391(4)
Retention of Corporate Earnings
395(72)
General Statement
Generally
397(1)
Personal Holding Company Tax
Introduction
398(2)
Personal Holding Company: Definition
400(23)
Gross Income
401(1)
Ordinary Gross Income (OGI)
401(1)
Adjusted Ordinary Gross Income (AOGI)
402(2)
Personal Holding Company Income
404(17)
Stock Ownership Test
421(2)
Taxation of Personal Holding Companies
423(9)
Undistributed Personal Holding Company Income (UPHC Income)
423(2)
Dividends Paid Deduction
425(7)
Incentive to Liquidate
432(1)
Liquidation of a Personal Holding Company
432(2)
Significance of the Personal Holding Company Tax
434(1)
Accumulated Earnings Tax
Introduction
434(3)
Tax Avoidance Purpose
437(4)
Calculation of Accumulated Taxable Income
441(6)
Calculation of Accumulated Earnings Credit
447(1)
Reasonable Needs of the Business
448(12)
In General
448(3)
Working Capital
451(3)
Reasonably Anticipated Needs of the Business
454(2)
Section 303 Redemption Needs
456(1)
Excess Business Holding Redemption Needs
456(1)
Availability of Existing Capital
457(3)
Burden of Proof
460(2)
Stock Redemption Agreements
462(5)
Small Businesses
467(120)
Generally
Introduction
471(1)
Subchapter S
Introduction
472(2)
Terminology for Distinguishing Types of Corporations
474(1)
Eligibility
475(33)
In General
475(4)
Trusts as Shareholders
479(9)
Nominal Stock Ownership
488(1)
One Class of Stock Requirement
489(1)
Hybrid Stock
490(2)
Straight Debt
492(2)
Current Treatment of Hybrid Stock
494(2)
Call Options
496(2)
Convertible Debt
498(1)
Restricted Stock
499(1)
Buy-Sell Arrangements
500(3)
Differences in Amounts or Timing of Actual Distributions
503(5)
Election
508(2)
Taxable Year
510(1)
Effect of a Subchapter S Election
511(7)
In General
511(1)
Pass-Through of Tax Items
512(1)
Audits and Administrative Procedures
513(1)
Reallocation of Tax Items Among Members of a Shareholder's Family
514(1)
Adjustments of Corporation's Tax Items
514(1)
Carryforward and Carryback of Tax Items From or To an S Corporation's Taxable Year
515(1)
Characterization of Pass-Through Tax items
516(1)
Pass-Through of Built-In Gains
516(2)
Pass Through of Passive Investment Income
518(1)
Earnings and Profits
518(1)
Shareholder's Basis in S Corporation's Stock and Debt Obligation
519(9)
Adjustments to Shareholder's Basis
519(3)
Order of Adjustments and Effect on Shareholder's Deduction of Loss and Treatment of Receipt of Corporate Distributions
522(4)
Shareholder's Guaranty of Third-Party Loan to Corporation
526(2)
Limitation on Shareholders' Deductions
528(7)
In General
528(1)
Post-Termination Transition Period
529(2)
Worthless Stock
531(1)
At Risk and Passive Activity Loss Limitations
531(3)
Other Limitations
534(1)
Distributions Received From an S Corporation
535(10)
In General
535(1)
Accumulated Adjustments Account
535(4)
Post-Termination Transition Period
539(1)
Distribution of Appreciated Property
539(1)
Distribution of Pre-1983 Accumulated E and P
540(1)
Illustration
541(4)
Termination of Election
545(8)
Revocation
545(1)
New Shareholder
546(1)
Foreign Income
546(1)
Cessation of Qualification as S Corporation
546(1)
New Election After Termination
547(1)
S Termination Year
548(1)
Tax Treatment of S Termination Year
549(2)
Passive Investment Income Causing Termination of S Election
551(1)
Invalid Election
552(1)
Taxation of Passive Investment Income
553(3)
Taxation of Built-in Gains
556(20)
Fringe Benefits
576(1)
Losses on Small Business Stock (§ 1244)
Normal Treatment of Losses
577(1)
Operation of § 1244
578(2)
Qualification for § 1244 Treatment
580(2)
Repeal of Written Plan Requirement
581(1)
Definition of ``Small Business Corporation''
581(1)
Usefulness
582(1)
Gain from Qualified Small Business Stock (§ 1202)
Exclusion from Gross Income
583(1)
Limitation on Amount of Exclusion
583(1)
Qualified Small Business
584(1)
Qualified Small Business Stock
584(3)
Organization of a Corporation
587(58)
Introduction
589(1)
The Basic Rules Apart From Section 351
589(3)
An Overview of Section 351
592(2)
``Persons in Control Immediately After the Exchange''
594(7)
The Transferor Must Transfer ``Property''
601(2)
The ``Exchange'' Requirement
603(2)
Transfers ``Solely in Exchange for Stock''
605(3)
The Receipt of ``Boot,'' Part I (In General)
608(4)
Controlled Corporation's Recognition of Gain or Loss
612(1)
The Receipt of Boot, Part II (Corporate Assumption of Transferor Liability and Netting of Obligations)
612(11)
Tax-Avoidance Purpose
613(2)
Liabilities in Excess of Basis
615(8)
Controlled Corporation's Deduction When Liability Is Paid
623(1)
The Receipt of Boot, Part III (Corporate Obligation to Shareholder)
623(6)
Overriding Section 351
629(16)
Statutory Overrides
629(1)
Depreciation recapture---Section 1245 and 1250
629(1)
Related Party Transactions---Section 1239
630(1)
Reallocations by the Commissioner---Section 482
631(1)
Anti-Bailout Rule I---Section 304
632(2)
Anti-Bailout Rule II---Section 306
634(1)
Accounting Method Changes---Sections 446 & 481
635(1)
Reorganizations---Section 368
636(1)
Non-Statutory Overrides
637(1)
Assignment of Income
637(3)
The Tax Benefit Rule
640(2)
The Business Purpose Test and the Court Holding Doctrine
642(3)
Corporate Divisions
645(80)
Introduction
647(1)
Forms of Corporate Divisions
647(2)
Nonrecognition Treatment and the Potential for Tax Avoidance
649(2)
An Overview of Section 355
651(4)
``Distributes''
655(2)
``Stock or Securities''
657(2)
Distribution of a Controlling Interest
659(2)
The ``Device'' Test
661(4)
The Five-Year Active Trade or Business Requirement
665(15)
Active Conduct of a Trade or Business
666(3)
Active Conduct of a Trade or Business Through a Subsidiary
669(1)
The Five-Year Requirements
670(1)
Division of an Integrated Business and the Problem of ``Expansions''
671(1)
Division of an Old, Longstanding Business
672(3)
Division Following a Recent Expansion
675(3)
Active Business ``Immediately After the Distribution''---Corporate Divisions Followed by Corporate Acquisitions
678(2)
Nonstatutory Requirements---Business Purpose and Continuity of Interest
680(6)
Business Purpose
681(3)
Continuity of Interest
684(2)
Excess Securities Boot, Stock Boot and Interest Substitute Boot
686(6)
Excess Securities Boot
687(2)
Stock Boot
689(3)
Tax Consequences for Shareholders When Boot is Distributed
692(14)
Section 356---General Rules
692(1)
Section 356---Amount and Characterization of Gain
693(6)
Section 356---Special Problems in Split-Offs With Boot
699(3)
Section 356---Testing for Dividend Equivalency
702(4)
Basis Calculation
706(5)
Taxation of the Distributing Corporation
711(11)
Not Pursuant to a Reorganization
712(9)
Pursuant to a Reorganization
721(1)
Earnings and Profits
722(3)
Reorganizations
725(108)
Introduction
727(1)
What Is At Stake?
728(7)
Tax Consequences of Mergers and Acquisitions
That Do Not Qualify as Reorganizations
729(1)
Asset Acquisitions That Do Not Qualify as Reorganizations
730(1)
Stock Acquisitions That Do Not Qualify as Reorganizations
731(2)
Tax Consequences of Mergers and Acquisitions
That Qualify as Reorganizations
733(2)
The Historical Evolution of Reorganizations---Picturing the Development of Extrastatutory Glosses
735(15)
Continuity of Proprietary Interest
737(6)
Continuity of Business Enterprise
743(7)
Other Judicial Doctrines
750(1)
An Overview of the Statutory Requirements of Reorganizations Today---Picturing the Development of Legislative Categories
750(12)
Divisive Reorganizations
751(1)
Acquisitive Reorganizations
752(10)
Nondivisive, Nonacquisitive Reorganizations
762(1)
A Closer Look at Statutory Reorganizations
762(60)
Simple A Reorganizations: Two-Party Mergers
764(3)
Simple B Reorganizations: Two-Party Acquisitions, Solely Voting Stock for Stock
767(11)
Simple C Reorganizations: Two-Party Acquisitions, Mostly Voting Stock for Substantially All the Assets
778(8)
Post-Reorganization ``Drop-Downs'' and § 368(a)(2)(C)
786(1)
Triangular B Reorganizations
787(3)
Triangular C Reorganizations
790(3)
Triangular A Reorganizations: Forward Triangular Mergers Under 368(a)(2)(D)
793(2)
Triangular A Reorganizations: Reverse Triangular Mergers Under 368(a)(2)(E)
795(3)
Use of Contingent and Escrowed Stock, and Other Shareholder Agreements
798(2)
Acquisitive D Reorganizations
800(6)
Bankruptcy (G) Reorganizations
806(1)
Nonacquisitive Form Changes (F Reorganizations)
807(2)
Recapitalizations (E Reorganizations)
809(3)
Exchange of Stock for Stock
812(4)
Exchange of bonds for stock
816(1)
Exchange of bonds for bonds
817(1)
Exchange of stock for bonds
817(2)
The Reorganization as Sword: Combating Liquidation-Reincorporation Transactions
819(3)
Gain Recognition in Qualifying Reorganizations
822(11)
Boot in a Qualifying Reorganization
824(5)
General Utilities Repeal (The Distribution of Appreciated Assets) in the Context of a Qualifying Reorganization
829(4)
Acquisition or Retention of Tax Attributes
833(94)
Generally
Introduction
835(8)
Acquisitio of Tax Attributes
Introduction
843(1)
Liquidation of Subsidiary Corporations
844(1)
Acquisitive Reorganizations
844(1)
Triangular Reorganizations
845(2)
Taxable Years and Carrybacks
847(2)
F Reorganizations
849(1)
Net Operating Losses
850(7)
Earnings and Profits
857(8)
Statutory Limitations
Introduction
865(1)
The § 382 Limitation on Net Operating Loss Carryforwards and on Built-In Losses
866(41)
The § 383 Limitation on Carryovers of Net Capital Losses and of Certain Tax Credits
907(4)
Limitation on Offsetting Preacquisition Losses and Credits of One Corporation Against Another's Built-In Gains
911(7)
Acquisitions Made to Evade or Avoid Income Tax---§ 269
918(9)
Multiple Corporations
927(72)
Generally
Introduction
929(1)
Consolidated Returns
Introduction
929(2)
Qualifications
931(3)
Acquisition of a Corporation Solely or Primarily for a Tax Purpose
934(2)
Election
936(3)
Taxable Year and Accounting Method
939(1)
Consolidated Taxable Income
940(16)
Computation
940(1)
Intercompany Transactions
941(1)
Non-Deferred Intercompany Transactions
941(2)
Deferred Intercompany Transactions
943(8)
Intercompany Distributions
951(5)
Earnings and Profits and Investment Adjustments
956(10)
Earnings and Profits
957(3)
Investment Adjustments to Stock Basis
960(6)
Excess Loss Account
966(2)
Group Structure Change
968(1)
Built-in Deductions and Loss Carryovers
969(9)
Built-in Deductions
969(5)
Consolidated Net Operating Loss Deduction
974(4)
The 1991 Proposed Changes to Limitations on Built-in and Carryover Deductions
978(2)
Limitation on Deduction of SRLY Carryover Losses
978(1)
Limitations on Built-in Deductions
979(1)
Consolidated Return Change of Ownership (CRCO) Limitation
980(1)
Application of §§ 382 and 383 to a Consolidated Group
980(2)
Limitation on Tax Benefits for Related Corporations
Introduction
982(3)
Allocation of Income and Deductions Under § 482
985(5)
Other Statutory Restrictions
990(5)
Transfers and Acquisitions Made for the Purpose of Securing a Tax Benefit
995(2)
Conclusion
997(2)
Table of Cases 999(14)
Table of Internal Revenue Code Sections 1013(12)
Index 1025

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