Members of the AICPA S Corporations Taxation Technical Resource Panel have published their new article, “Current Developments in S Corporations,” in the AICPA Tax Adviser. The executive summary is as follows:
- Changes made by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, include special distribution rules for eligible terminated S corporations. Also, nonresident aliens now may be potential current beneficiaries of electing small business trusts (ESBTs), which are subject to the same charitable contribution rules as individuals.
- Other TCJA changes, while not specific to S corporations, have important implications for them, including the new qualified business income deduction and a limitation on the deductibility of business interest paid or incurred.
- Tax Court opinions issued in 2018 and late 2017 include cases addressing assignment of income and accrual of expenses to S corporation shareholders, shareholders’ stock and debt basis, and whether disproportionate distributions to shareholders create a prohibited second class of stock, among others. IRS letter rulings issued during the period addressed issues including transfers of stock from an ESBT to a voting trust, creation of an ESBT pursuant to a divorce, and several instances of inadvertent terminations of S elections.
- The IRS designated as a “no-rule” area whether a state-law limited partnership electing to be classified as an S corporation has more than one class of stock.
- A bankruptcy court in the Fourth Circuit held that a corporation’s S corporation status was not property of the corporation under federal tax law.
