S Corp Redemptions: Characterization, Tax Consequences Post-Tax Reform, Application of Sections 302 and 301

Sale or Exchange vs. Distribution, Evaluating Conversion to a C Corp, Available Tax Planning Techniques

Recording of a 90-minute premium CLE/CPE webinar with Q&A

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Conducted on Wednesday, December 19, 2018

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with a specific and practical guide to navigating the tax rules that apply to the redemption of S corporation interests. The panel will discuss characterization as a sale or exchange versus distribution, tax consequences associated with such transactions under the new tax law, application of Sections 302 and 301, and available planning techniques to structure transactions and avoid unintended tax liability.

Description

Transfer of ownership of an S corporation can be accomplished via redemption of the shareholder’s interest by the S corporation rather than a sale of the shares to a third party. Redemptions can result in significantly different tax treatment than a sale, and tax counsel and advisers must grasp an understanding of the applicable tax rules in structuring these transactions.

The enactment of new tax law has caused shareholders of S corporations to consider a variety of transactions impacting their ownership interests to take advantage of any potential tax savings, including contemplating a subsequent conversion to a C corporation. S corporations engaging in shareholder redemptions can optimize tax treatment if such transactions are structured correctly.

A redemption qualifying as a sale or exchange rather than being characterized and taxed as a dividend is one of the key concerns when structuring these transactions. Also, tax counsel and advisers must be aware of the potential pitfalls of such transactions under Sections 302 and 301 and contemplate the impact of certain provisions stemming from tax reform.

Listen as our experienced panel discusses the potential tax pitfalls of S corporation redemptions, sale or exchange versus distributions under Sections 302 and, 301 and offers best practices and tax planning techniques in structuring transactions.

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Outline

  1. S corporation redemptions and the impact of tax reform
  2. Stock redemptions under Section 302: Application, tax consequences, exceptions
  3. Section 301 and tax consequences of failing to qualify under Section 302
  4. Best practices and tax planning techniques in structuring a redemption
  5. Converting to a C corporation: Key considerations, potential tax traps

Benefits

The panel will review these and other key issues:

  • Structuring S corporation redemptions post-tax reform
  • Under what circumstances would redemption be disadvantageous to the S corporation or shareholders?
  • Application of Section 302 and meeting the requirements of a sale or exchange and exceptions
  • The application of constructive ownership under Sec. 318 about Sec. 302
  • Tax consequences of distribution under Section 301
  • Best practices and planning opportunities in structuring redemptions

Faculty

Barrie, John
John P. Barrie
Partner
Bryan Cave Leighton Paisner

Mr. Barrie specializes in federal and state tax controversy and transactional matters, and he has spoken on state...  |  Read More

Czarnecki, David
David M. Czarnecki
Member
Morse Barnes-Brown & Pendleton

With over 15 years of extensive transactional experience, Mr. Czarnecki is exceptionally proficient in guiding clients...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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