Converting an S Corporation into an LLC Tax Free! – The Drop-Down Transaction

Posted by Joseph B. Darby III on Mar 19, 2015 10:44:00 AM

LLC.jpgAssume an S corporation is owned 50-50 by two individuals, and one wants to buy out the other. This transaction will not come within the scope of the transactions where a § 338(h)(10) or §336(e) election will be applicable, so there is no “easy” path to get (mostly) capital gain to the seller and a full step-up in tax basis to the buyer. The question, therefore, is how best to implement this acquisition in a “tax efficient” manner.

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Topics: Corporate Tax, Tax Law, Partnership Tax, S Corporation

The Holy Grail: How to Get Inside Tax Basis When Buying S Stock

Posted by Joseph B. Darby III on Mar 5, 2015 11:00:00 AM

holygrail.jpgOne of the important differences between an S corporation and a partnership, and one of the drawbacks to choosing S corporation status, is the fact that if a partnership makes a § 754 election, then a purchaser of an interest in the partnership can receive the equivalent of a step-up in “inside” tax basis (meaning the tax basis of partnership assets in the hands of the partnership) and thereafter enjoy enhanced amortization or depreciation deductions.

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Topics: Corporate Tax, Tax Law, Partnership Tax, S Corporation


About the Blog

Sullivan's Tax & Sports Update provides timely updates and cutting-edge commentary on all issues affecting U.S. taxation, and, of course, an always humorous take on sports! Edited by Joseph B. Darby III, a partner in Sullivan's Tax Department.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

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