Revoking S Corp Election to Take Advantage of Tax Reform: Converting From S Corp to C Corp

Exclusions From 20% Pass-Through Deductions, Favorable Treatment of PTTP Distributions, and More

Recording of a 110-minute CPE webinar with Q&A


Conducted on Monday, September 24, 2018

Recorded event now available

Program Materials

This webinar will provide tax advisers and compliance professionals with a thorough exploration of the potential tax benefits and hazards of revoking S-elections and converting entities to C corporations. The panel will offer tools and strategies to maximize the tax and operational advantages of making an S to C corp election. The panel will discuss steps to lower the tax cost of distributions and outline alternatives to revoking the S-election.

Description

Along with several provisions that adversely impact S corps, tax reform’s permanent reduction in C corp income tax rates is leading many S corps to evaluate their entity choice and explore whether converting to C corp status will provide more tax benefits. Tax advisers must have a solid grasp of whether, when and how to make an S corp revocation election to avoid costly tax consequences.

The law makes several changes to S corp income treatment that negatively affect some companies and their shareholders. Most notably, the 20% pass-through deduction under Section 199A does not apply to specific trades or businesses, and some S corps may benefit from spinning off certain operations into C corp status while retaining the S corp election for others.

The law also contains provisions that in many cases will allow shareholders of “eligible terminated S corporations” to treat dividends paid during the “post-termination transition period” (PTTP) as coming from the corporation’s accumulated adjustment account or E&P more favorably than a typical dividend distribution from an operating C corporation. Such distributions are tax-free to the extent of the shareholder’s basis in the S corporation stock.

Listen as our experienced panel provides thorough and practical guidance to help advisers determine whether, as well as when and how, to make a tax-efficient entity change from S corporation status to take advantage of the new tax reform law provisions.

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Outline

  1. Incentives in new tax law to consider revocation of S corp election
  2. Types of business operations that may benefit from S corp revocation
  3. Spinoff strategies
  4. Favorable treatment of distributions from “eligible terminated S corporation” during a post-termination transition period
  5. Reasons to not revoke S corp status
  6. Timing considerations

Benefits

The panel will review these and other high priority considerations:

  • Trades or businesses that derive tax benefits from revoking S corp election and electing to be taxed as a C corp
  • Mechanics of distributions for eligible terminated S corporations during the post-termination transition period
  • Spinoff strategies to maximize tax benefits for S corporations with multiple business operations or activities
  • Impact of new tax law on startup companies and incentives for startups to incorporate under Chapter C
  • Changes to ESBT and QSST treatment

Faculty

Grossman, Cindy
Cindy Grossman

Partner
Giordani Swanger Ripp and Jetel

Ms. Grossman’s practice encompasses a wide variety of corporate and partnership transactions with international,...  |  Read More

Phillips, Stephen
Stephen L. Phillips

Senior Partner / CFO
Phillips Golden

Mr. Phillips heads the firm's tax practice and has spent his career as a tax, business, and corporate partner in...  |  Read More

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