Estate Planning Strategies Designed for the 'C' Corporation
| Author | : Jeffrey A. Galant |
| Publisher | : |
| Total Pages | : |
| Release | : 2006 |
| Genre | : |
| ISBN | : |
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Estate planners need to be mindful of the potential for double taxation when shares of a C corporation are transferred, and of the various strategies available to ameliorate the tax impact. The Supreme Court in 1935 in the General Utilities case laid the foundation for the 1939 and 1954 code provisions that did not tax to a distributing corporation in kind distributions to shareholders. This allowed for the disposition of a business operated in corporate form at the cost of only a single level of tax. The 1986 Tax Reform Act changed the landscape by providing that in kind liquidating distributions were taxable to the distributing corporation. Hence, the double tax.The strategies discussed include treating the corporation as a nominee of the taxpayer rather than as the taxpayer, as described in Bollinger; structuring the sale of the business so that a substantial portion of the goodwill being acquired is considered the property of a shareholder who is an individual rather than of the corporation, as explained in Martin Ice Cream; using a charitable remainder trust to facilitate succession planning for a family business, as suggested in certain IRS rulings; employing the National Starch transaction and section 351 to preserve the step up in basis of the shares of an elderly stockholder, and engaging in a leveraged ESOP transaction to defer if not eliminate the business owner's gain on the sale of the corporation's shares and allowing the corporation to facilitate the purchase of such shares by deducting 100% of the purchase price.
