Liquidating qsss qsub
With the development of e-commerce and Internet companies, as well as liberalizing federal income tax rules enacted in recent years, S corporations are experiencing a resurgence in popularity.
While still not appropriate or available in every circumstance, there are a wide variety of areas in which S corporations, and particularly Qualified Subchapter S Subsidiaries (or "QSubs") offer an important planning choice.
The transaction is a reorganization described in section 368(a)(1)(C), assuming the other conditions for reorganization treatment (e.g., continuity of business enterprise) are satisfied.
A qualified subchapter S subsidiary (QSub) is a subsidiary corporation 100% owned by an S corporation that has made a valid QSub election for the subsidiary (Sec. Because a QSub’s separate existence is ignored, transactions between the S corporation parent and QSub are not taken into account, and items of the subsidiary (including accumulated earnings and profits, passive investment income, and built-in gains) are considered items of the parent. A exception applies, it appears that the traditional organizational expenditures incurred in the process of forming or organizing a QSub continue to qualify for amortization under Sec. Amortization begins with the month each new business begins.
Although a QSub generally is treated as a disregarded entity for federal tax purposes, it will be treated separately from its S corporation parent for purposes of the following (Regs. 1.1361-4(a)(6)): A QSub is generally treated as a separate entity for purposes of federal excise taxes (Regs. The winners of The Tax Adviser’s 2016 Best Article Award are Edward Schnee, CPA, Ph.
When there is a business reason to maintain certain S corporation operations in a separate subsidiary, the use of a qualified S corporation subsidiary (“QSub”) may provide a tax planning opportunity.If it did, the S corporation's subsidiary would be a C corporation, which is not the pass-through entity treatment desired by S corporation clients.This ruling describes situations where an S corporation undergoes a reorganization pursuant to section 368(a)(1)(F) of the Code where the operating S corporation becomes a QSub of a newly formed holding company. The ruling further holds that, effective 1/1/09, the new parent will have to get its own EIN rather than take over the QSub’s EIN. Section 368(a)(1)(F) provides that a reorganization includes a mere change in identity, form, or place of organization of one corporation, however effected.Corporation X, pursuant to a plan, acquires all of the outstanding stock of corporation Y from the shareholders of Y solely in exchange for 10 percent of the voting stock of X.Prior to the transaction, Y and its shareholders are unrelated to X.
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QSub elections became available because Congress understood that there were situations in which taxpayers wished to separate different trades or businesses into different corporate entities.